Michael Miller, the Cleveland-based director of regional marketing at Progressive Insurance, foresees problems for independent, single-truck owners and operators. He says some insurers are pulling back their capacity for those risks, including dirt and gravel haulers, while other insurers are boosting rates around 10%. Miller expects that dynamic to continue for the next year.

Businesses and contractors can expect to see rate hikes of 5% or lower over the past year, Miller says, thanks to new players from the Property market, which is even softer than Commercial Auto. These newcomers are looking to deploy their unused capital by offering Auto coverage to their Property accounts in a package policy.

While Auto insurers are committed to responsibly underwriting accounts, some risks that decide to market their businesses might generate some competition if their loss histories are good and if they have outstanding loss controls in place, market executives note.

ACCOUNT AND INDUSTRY-SEGMENT LOSSES

With Auto insurers looking for ways to use their capital, why aren't they competing on every account, which typically leads to heated competition and lower rates, even for risks with spotty experience?

Insurers have little opportunity to generate significant investment income, so they must address account and industry-segment losses through underwriting, market executives explain.

Auto insurers face claim-frequency and severity issues in some segments of their portfolios, especially long-haul trucking and large fleets, market executives say.

Insurers are suffering a modest deterioration in both frequency and severity experience, says Benedikt Sander, a Boston-based senior vice president and the product manager for Commercial Auto and Commercial Multi-perils for Liberty Mutual. The improving economy is driving up frequency, as improved business conditions have led to more vehicles on the road and more opportunities for accidents.

Medical care inflation is the root cause of the increase in severity, he says. A recent reduction in the medical inflation rate certainly helps insurers, but that rate remains higher than the general inflation rate, Sander says.

The year-to-date health care inflation rate is 2%, which is considerably lower than the long-term average of 5.47%, according to YCharts.com, a research and financial analytics website. Yet, it still exceeds the U.S. Personal Consumption Expenditure Inflation rate of 1.04% for the first 10 months of 2014 and the long-term average of 3.44%.

Meanwhile, vehicle damage claim severity has been rising for independent truckers, because those small outfits are operating older trucks with higher replacement costs for spare parts.

Some claims severity issues also can be traced to large jury verdicts, Payne says.

LOSS MITIGATION

At most Auto insurers “we're seeing frequency decreases,” Payne says. Much of that is attributable to improved technology, including rearview monitors in the driver's cabin, lane-changing devices that alert drivers when vehicles are in blind spots, and safe-distance technology that triggers the vehicle's braking system if the driver is following another vehicle too closely.

In addition, a couple of factors have reduced accidents attributable to driver fatigue, Payne says. One is the new federal regulation limiting the number of hours that drivers can be on the road. The other is that many trucking companies have been early adopters of electronic driver login technology, which makes skirting those regulations nearly impossible, Payne says.

Commercial insurers, however, are still trying to determine how to incorporate telematics—driver behavioral information that can be transmitted directly to insurers from devices built into the vehicles—into their underwriting, Sander notes. This will likely increase during the next 10 years, especially in Personal Auto, but for now, the limitations are pricing and as-yet unanswered questions on the type of information that should be evaluated, how often the data should be transmitted and on the data's evaluation.