The Rising Cost of Commercial Auto Policies; Why? How to Mitigate - - PowerPoint PPT Presentation

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The Rising Cost of Commercial Auto Policies; Why? How to Mitigate - - PowerPoint PPT Presentation

Oct 18, 2023 10 likes •250 views

The Rising Cost of Commercial Auto Policies; Why? How to Mitigate Your Liability and Exposure The Rising Cost of Commercial Auto PoliciesPresenters Teresa Martin Senior Vice President, Producer Lockton Companies Darren Beard Senior Loss

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The Rising Cost of Commercial Auto Policies; Why? How to Mitigate Your Liability and Exposure

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The Rising Cost of Commercial Auto Policies

The Rising Cost of Commercial Auto Policies—Presenters

Teresa Martin

Senior Vice President, Producer Lockton Companies

Darren Beard

Senior Loss Control Consultant Lockton Companies

David Buckman

Director of Risk Management CORE Construction

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The Rising Cost of Commercial Auto Policies

Discussion Objectives

Why premiums are rising Common issues/addressing challenges How to mitigate liability and exposure

  • People
  • Vehicles
  • Technology
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The Rising Cost of Commercial Auto Policies

Why Premiums are Rising

Source: National Association of Insurance Commissioners data, sourced from S&P Global Market Intelligence; Insurance Information Institute. 96% 98% 100% 101% 101% 102% 102% 102% 102% 105% 106% 92% 94% 97% 99% 98% 104% 107% 107% 103% 109% 111%

90% 95% 100% 105% 110% 115%

Combined Ratios

US Pvt. Passenger Commercial Auto

The increase in frequency and severity of claims is driving up insurer payouts relative to premiums

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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The Rising Cost of Commercial Auto Policies

Sources: A.M. Best (1994-2009); NCCI (2010-2017) and are for private carriers only; Insurance Information Institute (2015). National Association of Insurance Commissioners data, sourced from S&P Global Market Intelligence; Insurance Information Institute.

Comparison of Commercial Auto and Workers’ Compensation Combined Ratio

103% 99% 104% 105% 111% 115% 115% 108% 101% 98% 94% 94% 92% 93% 94% 97% 100% 98% 104% 107% 107% 103% 109% 111%

80% 85% 90% 95% 100% 105% 110% 115% 120% 05 06 07 08 09 10 11 12 13 14 15 16

Combined Ratios

Workers' Compensation Commercial Auto

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The Rising Cost of Commercial Auto Policies

The Environment/Root Causes

Frequency and Severity Increasing More Miles Being Driven Distracted Driving

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The Rising Cost of Commercial Auto Policies

Frequency and Severity Increasing

3.9% 3.1% 0.1% 0.5%

  • 2.3%

2.8% 1.3% 4.2% 1.6% 4.7%

  • 1.8%
  • 3.6%

2.5%

  • 2.4%
  • 1.4%

0.9%

  • 1.4%

2.3% 4.2% 1.4%

  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

Severity Frequency Annual Percent Change

The Recession, High Fuel Prices Helped Temper Frequency and Severity, But this Trend Will Likely Be Reversed Based on Evidence from Past Recoveries

* 2015 figure is for the 4 quarters ending with 2015:Q2. Source: ISO/PCI Fast Track data; Insurance Information Institute

Collision Data 2005 through 2015*

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The Rising Cost of Commercial Auto Policies

More Miles Being Driven

Annual Percent Change, Miles Driven*

* 2000-2016: Moving 12-month total vs. prior year. Sources: Federal Highway Administration; National Bureau of Economic Research (recession dates); Insurance Information Institute.

2.5% 1.8% 2.1% 1.2% 2.5% 0.8% 0.8% 0.6%

  • 1.8%
  • 0.7%

0.4%

  • 0.5%

0.6% 0.6% 1.3% 3.4% 2.8%

2000 2002 2004 2006 2008 2010 2012 2014 2016

  • 2.5%
  • 1.5%
  • 0.5%

0.5% 1.5% 2.5% 3.5%

Fastest Growth Since 2000

In the last few years, sharp growth in miles driven. The more people drive, the more often their cars crash.

“Great Recession”

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The Rising Cost of Commercial Auto Policies

More Miles Being Driven

Sources: Seasonally Adjusted Employed from Bureau of Labor Statistics; Rolling Four-Qtr Avg. Frequency from Insurance Services Office; Insurance Information Institute.

Number Employed, Millions

128 130 132 134 136 138 140 142 144 146

2006:Q1 2006:Q3 2007:Q1 2007:Q3 2008:Q1 2008:Q3 2009:Q1 2009:Q3 2010:Q1 2010:Q3 2011:Q1 2011:Q3 2012:Q1 2012:Q3 2013:Q1 2013:Q3 2014:Q1 2014:Q3 2015:Q1 2015:Q3 2016:Q1 2016:Q3 5.5 5.6 5.7 5.8 5.9 6.0 # Employed (left axis) Collision Claim Frequency (right axis)

Overall Collision Claims Per 100 I nsured Vehicles

When people are out of work, they drive less. When they get jobs, they drive to work, helping drive claim frequency higher.

Recession

There are not only more accidents, but accidents per 100 insured vehicles is up

  • too. This is what

matters to insurers.

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The Rising Cost of Commercial Auto Policies

Distracted Driving Statistics

 25% of crashes involve talking or texting on cell phones  47% of drivers say they are comfortable texting manually or through voice

controls while driving

 50% of the driving environment is unobservable to a driver using a cell

phone while driving (handheld or hands-free)

All statistics from National Safety Council, various publications 2015–2017

One of the top three causes of accidents In 2015

  • 3,477 deaths directly related to distracted driving
  • 391,000 people injured by distracted driving
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The Rising Cost of Commercial Auto Policies

WHO CARES?!??!

WHICH LEADS US TO THE OBVIOUS

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The Rising Cost of Commercial Auto Policies

LEADERSHIP MINDSET?

We are builders? Where do we focus our safety efforts? Cars and P/U Trucks For Most—Guaranteed Cost Program

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The Rising Cost of Commercial Auto Policies

Motivations?

Worker’s Compensation/EMR Lost Productivity Reputation/PR Excess Hits Culture

  • Integrity/Results/Zero Harm/Care for Life
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The Rising Cost of Commercial Auto Policies

Managing the Exposures

Bad Drivers Get TESLAs

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The Rising Cost of Commercial Auto Policies

Case Study

A multifaceted contractor with diverse operations throughout the United States. Over 1,000 private passenger vehicles with personal use allowed. Approximately 180 regulated commercial motor vehicles.

Extensive data analytics Review of fleet safety written program Targeted on-site review of operations and employee interviews Employee surveys

The Process

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The Rising Cost of Commercial Auto Policies Observations and Assessment

Case Study

“Safety” focus—EMOD. Regulated commercial motor vehicles were managed well. Not all field personnel were aware of fleet safety policies. Numerous collisions were occurring outside of normal business hours.

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The Rising Cost of Commercial Auto Policies

Managing the Exposure

32

34 13

22 25 24 18

21

28

7 13

22

2

7

4

16 5 12

6

11

3 2 1 3

Normal Work Hours 6 A.M. to 5 P .M. After Normal Work Hours 6 P .M. to 5 A.M.

When are your fleet accidents occurring?

Total Cost: $393,709 Total Cost: $99,918

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The Rising Cost of Commercial Auto Policies

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Managing the Exposures

Administrative Controls

Written Policy—Defines your expectations

  • Driver qualification/monitoring
  • Vehicle Maintenance
  • Personal use
  • Cell phone use
  • Accident reporting
  • Deductible sharing

Manage the policy

  • Roles
  • Accountability
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The Rising Cost of Commercial Auto Policies

Young Drivers

Waiting longer to drive 5 years = no longer “novice” 20-34 year-olds – Highest Fatal Rates*

Males 3x higher fatal rates than females* *

u:\ips master template\market update\2015\sept 2015\pc market update-Sept14.pptx

Managing the Exposures

Administrative Controls

Vehicle Familiarity

Truck vs car

* Insurance Institute for Highway Safety – Per 100,000 people by age group 2016 * * Insurance Institute for Highway Safety – per 100,000 people by age and gender 2016

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The Rising Cost of Commercial Auto Policies

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Managing the Exposures

Ongoing Fleet Management

Communication

  • Leadership involvement
  • Lessons Learned
  • Coaching opportunities
  • Keep the issue at the fore

Training

  • Defensive driving
  • Distracted driving
  • Ride alongs (too much?)
  • Securing loads
  • Post incident remediation
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The Rising Cost of Commercial Auto Policies

Managing the Exposure

Vehicles

Vehicle Selection

  • Correct Vehicle Specifications for the Task
  • Minimum Safety Requirements for POV’s

Safety technology

  • Roll Stability
  • Collision Mitigation
  • Lane Departure

Telematics / Technology

  • GPS Systems
  • Critical Event Recorders
  • Controlling Cellular Communication
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The Rising Cost of Commercial Auto Policies

Managing the Exposure

Making the Investment in Driver Behavioral Technology

The Benefits

Identify Driver Behaviors Operational Efficiencies Reduced Variable Costs Customer Relations / Transparency

Consequences

Failure to Monitor Data Liability Exposure No Impact on Driver Behavior Failure to Achieve ROI

The Challenges

Internal/Operational Perception Managing the Data Cost

ROI

Collision Reduction Non Targeted Maintenance Fuel Costs Operational Efficiencies

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The Rising Cost of Commercial Auto Policies

Summary Premiums are increasing...our industry needs to step up!

Manage the Exposures

 Sound Administrative Controls  Accountability  Technology Solutions

Leadership involvement

 Get this message through to them  Let them be your “drivers”