3 Trends Driving Up Commercial Auto Insurance Rates

| March 30, 2023

The commercial auto insurance market has dealt with major underwriting losses and diminished profitability for more than a decade. While difficult market conditions continue, rate increases have remained in the single digits, unlike double-digit rate jumps in prior years. Nevertheless, several cost-driving trends are concerning, pushing frequency of claims to pre-pandemic levels and increasing overall loss severity in this segment. This points to higher rates for policyholders across industries and vehicle classes in 2023. 

Trends to Watch in 2023: 

  1. Social inflation and nuclear verdicts driving up commercial auto claim costs—While social inflation has impacted many lines of commercial coverage in recent years, the auto insurance market has been hit hard. This is mainly due to trends in the trucking industry, where there has been an increase in lawsuits and large settlements. Nuclear verdicts, or jury awards exceeding $10 million, have been on the rise. According to an analysis by the Insurance Information Institute and the Casualty Actuarial Society, nuclear verdicts and social inflation concerns have driven up commercial auto claim costs by $20 billion throughout the last decade.
  2. Increased accident frequency and severity—The National Highway Traffic Safety Administration confirmed that more deaths have occurred on the road since the start of the COVID-19 pandemic, with 2020 recording the highest number of driver fatalities since 2007. These fatalities jumped by an additional 10.5% in 2021 and another 0.5% in the first half of 2022 alone. Apart from increased fatal crash rates, road incidents that result in severe injuries have also contributed to increased accident expenses. In addition, certain technological advancements have made vehicles increasingly expensive to repair following accidents, further driving up commercial auto claim costs. These issues—combined with various car part shortages, rising labor expenses and inflated used and new vehicle prices—have led to prolonged vehicle repair times and, in turn, surging overall claim costs.
  3. Driver shortages and lower driver standards—The nation’s driver shortage reached a historic high of more than 80,000 open positions in 2021, according to American Trucking Associations. While this shortage didn’t increase in 2022, it remained near the previous year’s record at 78,000 open positions. In response to this, many businesses have lowered their driver applicant standards to fill open positions which led to more drivers with fewer years of experience and shorter driving records. These new employees are more likely to be involved in accidents on the road, contributing to an increase in commercial auto claims

Tips for Insurance Buyers

  • Examine loss control practices: Enhance your driver safety programs by implementing or modifying policies on safe driving and distracted driving.
  • Design your driver training programs to fit your needs and specific exposures: Regularly retrain drivers on safe driving techniques.
  • Do your homework when hiring drivers: Ensure you hire qualified drivers by using motor vehicle records to vet drivers’ past experience and moving violations.
  • Talk to DiNicola Insurance Services: Determine whether you should make structural changes to your commercial auto policies by speaking with trusted insurance professionals.