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How to Beat the Trends and Apply the Brakes to Commercial Auto Insurance Rate Increases in 2021

Pressing break pedal

In this report, you will find the primary causes for rising commercial auto premiums, and in future related posts, we will provide practical advice with steps you can use to put the brakes on rate hikes.

The nearly decade-long negative market outlook on commercial automobile insurance continues in 2021. According to the AM Best rating firm, 2019 was the eighth straight year for the combined ratio for commercial auto lines to be significantly higher than the average for commercial lines and the entire P/C industry. 2020 was a “unicorn” with an 8% drop in auto combined ratio, with vastly reduced total miles due to COVID-19 as the likely cause.

Reasons Why Commercial Auto Premiums Continue to Rise

Dwindling profit margins, worsening loss history, and insurance carriers departing the segment continue to inflict the pain of rate hikes on commercial auto insurance clients.

Some of the factors contributing to current undesirable underwriting results such as nuclear jury verdicts, escalating vehicle repair, medical services costs, millions more registered vehicles on the road, are beyond any individual company’s control. However, a majority of your risk and insurance costs are within your company’s control. That’s what we’ll help you focus on for measurably better results.

Your Claims Results and Your Vehicle Management Program Drive Your Premium

Your company’s auto claim history for the last 3-5 years is the single most significant influencer of your premiums. Knowing how you stack up in vehicle claim performance and premium costs compared to your industry peers is an excellent place to start.

We work with you to review your annual broker benchmark report of your claims and premiums. You will see how your operations compare to your marketplace competitors. We inspect the business auto problem areas that add to your claims history and increase your costs. Some prime reasons given by company fleet managers surveyed that are contributing causes to poor claims experience and increased premiums include:

  • Distracted driving.
  • Shortage of quality drivers.
  • Driver training seems to be ineffective or in need of a refresh.
  • Current electronic fleet management system seems ineffective on improving results and behaviors.

What You Do and How You Do It Make All the Difference

Carriers heavily weigh what a company is doing to minimize auto risk and how it ties to your results!

Our industry experience proves an insured’s ability to evaluate and coach drivers is the single biggest issue to manage and is critical in reducing rates and claims. How you assess drivers presents your most significant potential for effective premium control solutions in the future. Strong Tower clients benefit from the unique driver evaluation & coaching programs we offer.

Because they are compelling rating factors to carriers, our meticulous marketplace presentations highlight all the risk prevention programs your company effectively uses.

In the near future, we’ll be discussing tested and effective ideas on the above issues plus the following “less obvious” premium reducing services.

How Your Broker Manages Open Claim Reserves Affects Your Annual Premium

As your broker, we’ll work with you to develop an in-depth analysis designed to identify the best ways to optimize your auto premiums. We start with a close examination of your Open Claim Reserve Program. Our experience indicates this one aspect of your commercial auto insurance program is critical in determining your premium.

The Open Claim Reserve Program manages your unresolved claims, which can unfairly inflate your commercial auto insurance pricing if not appropriately addressed. As our client, you will receive a Before & After Report that shows the decreases in your open claim values and provides an estimate of the premium it saves you.

There is a direct relation between reserves and insurance premiums, which makes routinely monitoring your claim reserves a crucial task. That’s because when you renew your insurance policies, your carrier will view all claim reserves as claims paid. They assume their estimates are close to the number they will payout. For this reason, it is imperative to review all your open claims and close them out as soon as possible for as little as possible.

Your Premiums Are Almost Always A Symptom of Your Driver Quality

Driver quality starts with your hiring standards. The qualified employee pool for your industry is probably very tough right now. The last thing it feels like you should be doing right now is “disqualifying” an otherwise good candidate over their sketchy driving record. It’s incredibly tempting to give that one issue a “pass.” There are ways to address this issue without blowing up your future premiums potentially, but it takes systems and organization.

Benefits from Instituting a Tech Review

We use industry connections, experience, and constant research to keep you informed on the technology solutions that can have a measurable positive impact on your commercial auto insurance program. For example, the continual evolution of telematics software that identifies and, more importantly, coaches away poor driving behavior gets a better ROI every year. Tech upgrades are precious when negotiating insurance company premium credits.

Getting Creative If You Want to Take Some Risk

It is essential to evaluate the different premium structures open in the marketplace. As such, we will work with you and your team to explore risk-sharing options like “Large Deductibles” and “Captives” that are available to your business. Through years of experience, we know a regular analysis of these options and actions on the best solution can create dynamic net cost improvements for your business.

We are eager to be at your service. If you are ready for a fresh set of eyes with extensive commercial auto insurance experience to review your current program, please contact us. We will put our considerable resources in gear to create a comprehensive business auto insurance review designed to improve your performance and lower your premiums.