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

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

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 The Rising Cost of Commercial Auto Policies 1

Discussion Objectives Why premiums are rising How to mitigate liability and exposure • People • Vehicles • Technology Common issues/addressing challenges The Rising Cost of Commercial Auto Policies 2

Why Premiums are Rising 115% 111% 110% 109% Combined Ratios 107% 107% 106% 105% 105% 104% 103% 102% 102% 102% 102% 101% 101% 100% 100% 99% 98% 98% The increase in frequency 97% and severity of claims is 95% 96% driving up insurer payouts 94% relative to premiums 92% 90% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 US Pvt. Passenger Commercial Auto Source: National Association of Insurance Commissioners data, sourced from S&P Global Market Intelligence; Insurance Information Institute. The Rising Cost of Commercial Auto Policies 3

Comparison of Commercial Auto and Workers’ Compensation Combined Ratio 120% 115% 115% 111% 111% 115% 109% 108% 107% 107% Combined Ratios 110% 105% 104% 104% 103% 103% 101% 105% 100% 99% 98% 98% 97% 100% 94% 94% 94% 93% 92% 95% 90% 85% 80% 05 06 07 08 09 10 11 12 13 14 15 16 Workers' Compensation Commercial Auto 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. The Rising Cost of Commercial Auto Policies 4

The Environment/Root Causes Frequency and Severity Increasing More Miles Being Driven Distracted Driving The Rising Cost of Commercial Auto Policies 5

Frequency and Severity Increasing Collision Data 2005 through 2015* Severity Frequency 6% 4.7% 4.2% 4.2% 3.9% Annual Percent Change 4% 3.1% 2.8% 2.3% 2.5% 1.6% 2% 1.4% 1.3% 0.9% 0.5% 0.1% 0% -2% -1.4% -1.4% -1.8% -2.4% -2.3% -4% -3.6% -6% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 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 The Rising Cost of Commercial Auto Policies 6

More Miles Being Driven 3.4% 3.5% 2.8% Annual Percent Change, Miles Driven* 2.5% 2.5% 2.5% 2.1% 1.8% “Great 1.3% 1.5% 1.2% Recession” 0.8% 0.8% 0.6% 0.6% 0.6% 0.4% 0.5% -0.5% -0.5% -0.7% Fastest -1.5% Growth Since 2000 -1.8% -2.5% 2000 2002 2004 2006 2008 2010 2012 2014 2016 In the last few years, sharp growth in miles driven. The more people drive, the more often their cars crash. * 2000-2016: Moving 12-month total vs. prior year. Sources: Federal Highway Administration; National Bureau of Economic Research (recession dates); Insurance Information Institute. The Rising Cost of Commercial Auto Policies 7

More Miles Being Driven Number Overall Collision Claims Per 100 # Employed (left axis) Collision Claim Frequency (right axis) Employed, I nsured Vehicles Millions 146 6.0 There are not only more accidents, but Recession 144 accidents per 100 5.9 142 insured vehicles is up too. This is what 140 matters to insurers. 5.8 138 136 5.7 134 132 5.6 130 128 5.5 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 When people are out of work, they drive less. When they get jobs, they drive to work, helping drive claim frequency higher. Sources: Seasonally Adjusted Employed from Bureau of Labor Statistics; Rolling Four-Qtr Avg. Frequency from Insurance Services Office; Insurance Information Institute. The Rising Cost of Commercial Auto Policies 8

Distracted Driving Statistics 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  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 The Rising Cost of Commercial Auto Policies 9

WHICH LEADS US TO THE OBVIOUS WHO CARES?!??! The Rising Cost of Commercial Auto Policies 10

LEADERSHIP MINDSET? We are builders? Where do we focus our safety efforts? Cars and P/U Trucks For Most—Guaranteed Cost Program The Rising Cost of Commercial Auto Policies 11

Motivations? Worker’s Compensation/EMR Lost Productivity Reputation/PR Excess Hits Culture • Integrity/Results/Zero Harm/Care for Life The Rising Cost of Commercial Auto Policies 12

Managing the Exposures Bad Drivers Get TESLAs The Rising Cost of Commercial Auto Policies 13

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. The Process Extensive data analytics Review of fleet safety written program Targeted on-site review of operations and employee interviews Employee surveys The Rising Cost of Commercial Auto Policies 14

Case Study Observations and Assessment “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. The Rising Cost of Commercial Auto Policies 15

Managing the Exposure Normal Work Hours After Normal Work Hours 6 A.M. to 5 P .M. 6 P .M. to 5 A.M. Total Cost: $393,709 Total Cost: $99,918 25 5 13 3 1 22 7 2 3 28 34 7 2 32 21 13 4 11 6 18 24 12 22 16 When are your fleet accidents occurring? The Rising Cost of Commercial Auto Policies 16

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 The Rising Cost of Commercial Auto Policies 17 u:\ips master template\market update\2015\sept 2015\pc market update-Sept14.pptx

Managing the Exposures Administrative Controls 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* * 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 The Rising Cost of Commercial Auto Policies 18 u:\ips master template\market update\2015\sept 2015\pc market update-Sept14.pptx

Managing the Exposures Ongoing Fleet Management Training • Defensive driving • Distracted driving • Ride alongs (too much?) • Securing loads • Post incident remediation Communication • Leadership involvement • Lessons Learned • Coaching opportunities • Keep the issue at the fore The Rising Cost of Commercial Auto Policies 19 u:\ips master template\market update\2015\sept 2015\pc market update-Sept14.pptx

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 The Rising Cost of Commercial Auto Policies 20

Managing the Exposure Making the Investment in Driver Behavioral Technology The Benefits The Challenges Identify Driver Behaviors Internal/Operational Operational Efficiencies Perception Reduced Variable Costs Managing the Data Customer Relations / Cost Transparency Consequences ROI Failure to Monitor Data Collision Reduction Liability Exposure Non Targeted Maintenance No Impact on Driver Behavior Fuel Costs Failure to Achieve ROI Operational Efficiencies The Rising Cost of Commercial Auto Policies 21

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” The Rising Cost of Commercial Auto Policies 22