Taking the wheel on commercial auto claims
Review the external factors affecting claims and ways to ease some of those pressures.
The insurance industry has seen an increase in the number of commercial auto claims, the costs of those claims and a subsequent rise in premiums. Given the variety of factors at play including supply chain delays, labor shortages, an increase in weather events, and more, this trend will likely continue, making risk mitigation strategies a top priority for business owners across a number of industries.
To best assist policyholders with commercial auto fleets, agents and brokers need to make sure they understand the factors influencing their insureds’ rates, and what their insureds can do to mitigate their risks.
External forces: Breaking it down
Economic pressures
Weighing on the global economy as a whole, rapidly rising inflation and supply chain delays have largely contributed to the increase in commercial auto claims costs. The supply chain at times has been unable to keep up with the demand for parts, resulting in a surge in the price of those parts and often more time needed to complete a repair. As reported by the American Trucking Associations’ Technology & Maintenance Council and Decisiv Inc, maintenance costs rose 3.7 percent in the fourth quarter of 2021 and were up more than 10 percent from 2020 in 2021. At the end of June, the annual inflation rate had risen to 9.1 percent for the past 12 months, the highest it had been in more than 40 years, and the figure stayed high at the end of July at 8.5 percent.
Another problem plaguing supply chains is material shortages. Most recently, the auto industry experienced a chip shortage due to shifting supply chain demand, resulting in an inability to fulfill orders.
Finally, auto parts are produced differently than they were twenty years ago. For example, a bumper that consisted of very few components in 2002 could now consist of 15 components, meaning repairs are more complex and could require more parts.
Labor shortages
Due to a multitude of factors including the Great Resignation, employee retirements, and record growth for a number of business sectors including manufacturing and lumber and building material suppliers, the labor shortage is also wreaking havoc on business owners. As a result, employers looking to hire drivers may feel pressured to settle on new hires and bring on untrained or less experienced drivers.
Though it may be tempting to hire based on the company’s immediate need alone, hiring inexperienced drivers can prove a costly mistake. Driving larger vehicles, commercial drivers often have limited space to maneuver on the road. Taking even a moment to check the GPS or a cell phone could lead to an accident. Inexperienced, untrained drivers or those with compromised backgrounds may be more likely to exhibit unsafe behaviors and succumb to distractions.
Weather
Commercial auto vehicle drivers often fall victim to the same claims scenarios that apply to any drivers, including severe and sporadic weather events. High winds, precipitation and related poor pavement conditions pose risks to commercial auto operators, as well as to their fellow drivers along their routes.
As severe weather events seem to be more of a regular occurrence across the country, risk exposure for all drivers, including commercial vehicle operators, can increase. Just this past July, Eastern Kentucky experienced severe weather that caused deadly flash flooding and led to 37 deaths and several auto car pileups.
Recommending risk mitigation methods that work
Modern technology and a few additional management measures can help alleviate the risks commercial vehicles can bring to businesses. Consider these tips to offer insureds when discussing their commercial vehicle operations:
- Telematics: Technology offers insurance professionals a very effective tool in understanding driver behaviors and providing rates that reflect them. A small transmitter that gathers and reports data is placed inside the vehicle sending updates to the business owner and insurance company on various dangerous behaviors including hard breaking, speeding and more. Though telematics can have an adverse effect on premiums when operators do not have a keen handle on best driving practices, the benefits should outweigh the negatives here. The data offers business owners the chance to address unsafe driving behaviors and to work toward recovering a safe driver reputation. When considering telematics, agents and brokers should talk to business owners about partnering with a telematics company that understand their needs. Azuga, for example, a partner of Pennsylvania Lumbermens Mutual Insurance Company (PLM), offers a wide range of fleet management solutions, designed to help promote safety, increase efficiency and better understand a fleet’s specific risk exposure.
- Train and keep training: Training is the most important tool in ensuring drivers are prepared for any potential situations while on their route. Most businesses have a training program for when employees start a new position, but commercial auto operators should undergo regular training modules and refresher courses. Business owners should consider requiring rotating training sessions on emergency protocol, general rules of the road, defensive driving strategies and more. For example, when driving through a storm, drivers should be equipped with best practices such as increasing their following distance, turning on their headlights and hazard lights and knowing when to pull over and wait it out.
- Communicate: Though telematics can be valuable for reporting driver data, the driver must understand how to interpret the data to see how they can make improvements. Business owners need to have a clear line of communication with their drivers about driving habits, discuss both their strengths and weaknesses and allow drivers to express where they may need assistance or better understanding. Open communication can not only limit the chance of a potential claim, it will also help business owners trust that their drivers know how to stay safe.
Finally, just as business owners need to communicate with their drivers, agents and brokers need to ensure they are talking to their policyholders with commercial vehicles and commercial auto fleets about safety, risk mitigation and more.
Agents and brokers might want to bring to their clients’ attention that the same rise in costs and increased time needed to complete work that they are seeing from their vendors and along the supply chain, could also impact their business in the event of a claim. Consider using this time to add value to the client relationship, discuss market changes that may have an impact on their operations and strengthen their risk mitigation efforts.
At the end of the day, business owners need to have a solid foundation of trust with their drivers. While business owners can’t control the weather, they can control who they put on the road on behalf of their company. Hiring smart, training employees, conducting motor vehicle record checks and more can go a long way toward keeping the roads safer for everyone while keeping their business protected from costly claims and litigation.
Mike Zdrojewski is a loss control consultant with Pennsylvania Lumbermens Mutual Insurance Company. He can be reached at (267) 825-9152 or at mzdrojewski@plmins.com.
Opinions expressed here are the author’s own.
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