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Commercial auto insurance is a vital safeguard for businesses, offering protection for their drivers and vehicles against property damage, bodily injuries, and liability issues arising from accidents on the road. In recent years, the landscape of commercial auto insurance has witnessed significant changes, marked by continuous rate hikes, capacity limitations, and challenging market conditions. To adapt and thrive, businesses must stay informed about the latest developments affecting this crucial insurance segment and collaborate closely with their insurance experts to secure the most suitable coverage. Below, we explore the noteworthy trends that are shaping the commercial auto insurance sector.
1. Rising Vehicle Repair Costs
Technological advancements have undoubtedly enhanced vehicle safety and efficiency. However, the incorporation of sophisticated features in commercial vehicles has driven up the cost of repairs. Furthermore, ongoing supply chain disruptions and increased demand for specific components have resulted in inflated prices for vehicle parts. Additionally, auto repair shops are grappling with staff shortages for skilled positions, exacerbating labor costs for vehicle repairs.
2. Soaring Expenses for Vehicle Replacement
The market for both new and used vehicles, particularly in the commercial sector, has experienced substantial price hikes in recent times. Despite some minor fluctuations, the prices of new and used vehicles remain near all-time highs. Data from automotive research firm Kelley Blue Book reveals that the cost of new vehicles has surged by 28% since the beginning of 2020. These factors significantly impact the overall expense of insurance claims, especially when complete vehicle replacements are necessary.
3. Surging Nuclear Verdicts
The term "nuclear verdicts" refers to exceptionally high jury awards, often exceeding $10 million. These verdicts have been on the rise over the past decade. According to the Insurance Information Institute, the combination of social inflation and nuclear verdicts has led to a staggering $30 billion increase in commercial auto claim costs since 2012. Consequently, insurance companies must incorporate the possibility of nuclear verdicts when calculating premiums, resulting in higher rates for policyholders.
4. Ongoing Driver Shortages
The commercial driver shortage in the United States is projected to reach an unprecedented high of 82,000 in 2024, according to the American Trucking Association. To address this shortfall, some businesses have adjusted their driver recruitment strategies. Nevertheless, many companies have had to lower their applicant standards to fill vacant positions, leading to less experienced drivers who are at a higher risk of accidents, thereby compounding commercial auto losses.
5. Concerns about Distracted Driving
While various factors contribute to road accidents, distracted driving has emerged as a prevalent concern. The increasing frequency of such incidents has led to a corresponding rise in commercial auto insurance rates. This presents policyholders with risk management challenges and profitability issues for insurers across the market.
6. Escalating Medical Costs
Medical expenses have been steadily increasing over time. According to industry data, bodily injury claim costs have surged by 10% in just five years. These rising costs impact various insurance sectors, including commercial auto insurance. It is not uncommon for accident-related injuries to necessitate multiple doctor visits or even surgeries, extending recovery periods and inflating the associated claims costs. These escalating liability expenses have been factored into the pricing of commercial auto insurance policies.
At TPG, we are dedicated to providing the expertise you need to navigate the ever-evolving commercial auto insurance market. Don't hesitate to contact us today at 909.466.7876 for comprehensive risk management guidance and assistance in adapting to the changing landscape of commercial auto insurance.
Also, how can you Encourage Your Employees to Avoid Their Cellphones While Driving, or do you know how the Frequency, Severity and Your Commercial Auto Insurance Premium are connected? Learn about these topics and more by visiting our blogs/resources page!
