In the world of package delivery, commercial vehicles play a crucial role in daily operations. The cost to buy, maintain and insure these vehicles has been steadily climbing. Specific to commercial auto insurance, do businesses have the opportunity to mitigate the impact?
Current landscape of Commercial Auto insurance
Recent data indicates that commercial auto insurance rates have surged significantly over the past 5 years. According to industry reports, the average premium for commercial auto insurance has increased by nearly 50% since 2020. This spike can be attributed to several factors, including rising repair costs, increased accident frequency, and the growing number of claims related to distracted driving. Fortunately, FedEx Service Providers have performed better than the industry, leading to minimal rate increases over the same period of time for the best performers.
4 factors driving up cost:
- Rising repair costs: As vehicles become more technologically advanced, the cost of repairs has skyrocketed. Modern vehicles are equipped with sophisticated systems that require specialized knowledge and expensive parts. When accidents occur, the repair bills can be substantial, leading insurers to raise premiums to cover these costs.
- Increased accident frequency: The number of accidents on the road has been on the rise, partly due to the increase in vehicle miles traveled. More vehicles on the road mean a higher likelihood of collisions, which translates to more claims for insurance companies.
- Distracted driving: The prevalence of smartphones and other distractions has led to a surge in accidents caused by distracted driving. Insurers are now facing a higher volume of claims related to these incidents, prompting them to adjust their rates accordingly.
- Litigation trends: The legal landscape surrounding auto accidents is also evolving. With more aggressive litigation strategies and higher jury awards, insurers are facing increased costs when defending claims. This, in turn, affects the premiums they charge to policyholders.
Strategies for managing rising costs
While the increase in commercial auto insurance costs can be daunting, there are several strategies that businesses can employ to manage these expenses:
- Regular training: Implementing regular training programs for drivers can significantly reduce the likelihood of accidents. By emphasizing safe driving practices and the importance of avoiding distractions, businesses can foster a culture of safety that ultimately lowers insurance costs. Plan for a safe route by watching our driver safety video.
- Review coverage options: Regularly reviewing your insurance policies is crucial for your business. Working with a dedicated Marsh account manager can help assess your coverage and identify cost-saving adjustments. Key opportunities to save money include reducing or rejecting uninsured/underinsured motorist coverage and increasing your deductibles to lower premiums. However, it's crucial to ensure your business can handle the higher out-of-pocket costs in the event of a claim. If you haven’t made these adjustments yet, now may be the perfect time. Schedule an account review before your renewal to discuss how Marsh can help manage your costs.
- Utilize technology: Many companies are turning to telematics and other technology solutions to monitor driver behavior. By tracking metrics such as speed, braking patterns, and route efficiency, businesses can gain insights that help improve safety and reduce claims. Learn more about AI VEDR capabilities | FedEx Service Providers | Marsh
Navigating the future of Commercial Auto insurance
The rising cost of commercial auto insurance is a challenge that many businesses are currently facing. However, by understanding the factors driving these increases and implementing proactive strategies, companies can better navigate this complex landscape.
As we move forward, it’s essential for business owners to stay informed about industry trends and to engage with Marsh regularly. By staying proactive and informed, businesses can not only survive but thrive in an ever-evolving insurance landscape.
If you have additional questions, or would like to learn more about these options to help reduce your insurance costs, reach out to a member of your regional account team today.