Commercial auto insurance plays an essential role in protecting an organization’s drivers and vehicles, providing coverage for property damage, bodily injuries and liability concerns stemming from accidents on the road. However, the commercial auto insurance segment has consistently hardened over the past decade, evidenced by ongoing rate increases, limited capacity and other difficult market conditions. As such, it’s crucial for businesses to stay up to date on current developments impacting this line of coverage and work with their insurance professionals to secure the right policies. Here are some of the latest trends affecting the commercial auto insurance space.
Technological advancements have made vehicles safer and more efficient. However, as commercial vehicles are outfitted with a variety of sophisticated features, they are becoming increasingly expensive to repair. Further, ongoing supply chain issues and increased demand for certain components have led to inflated prices for vehicle parts. Auto repair shops are also facing staff shortages for skilled positions, thus exacerbating labor costs for vehicle repairs.
The market for new and used vehicles, especially commercial vehicles, has seen sharp price increases in recent years. Despite some softening, the costs of new and used vehicles are still near record highs. In fact, according to automotive research company Kelley Blue Book, the price of new vehicles has risen by 28% since the beginning of 2020. These factors impact the overall cost of insurance claims when vehicles need to be fully replaced.
Nuclear verdicts refer to exceptionally high jury awards—generally, those exceeding $10 million. Such verdicts have climbed over the past decade. The Insurance Information Institute recently reported that the culmination of social inflation and nuclear verdicts has led to a $30 billion surge in commercial auto claim costs since 2012. Consequently, insurers have to factor in nuclear verdicts when they price commercial auto insurance policies, prompting higher rates.
The nation’s commercial driver shortage is forecast to reach a record high of 82,000 in 2024, according to the American Trucking Associations. To minimize this shortage, some businesses have adjusted their driver attraction strategies. Yet, many businesses have had to lower their applicant standards to fill open positions. These drivers often have less experience, making them more likely to be involved in accidents and compounding commercial auto losses.
While many factors can lead to accidents on the road, distracted driving is one of the most common concerns. As these incidents have become more frequent, commercial auto insurance rates have climbed in tandem, creating risk management challenges for policyholders and posing profitability issues for insurers across the market.
Medical costs have been increasing for some time. According to industry data, losses for bodily injury claims have jumped by 10% over a five-year period alone. These rising costs have affected multiple lines of insurance, including the commercial auto sector. It’s not uncommon for the injuries of those involved in accidents to require multiple doctor visits or even surgeries, which can extend recovery time and influence the costs of related claims. These surging liability expenses have been incorporated within the price of commercial auto insurance.
We are here to provide much-needed market expertise. Contact us today for additional risk management guidance and help navigating the evolving commercial auto insurance market.
