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Buckle Up: Car Insurance Rates are Rising

According to the Insurance Services Office, loss costs throughout the auto industry have increased at a cumulative pace of 20% from 2012 to 2015. There are several reasons for the increase and ways you can reduce your auto risks.

Economic Improvement
As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. Rising claims costs typically stem from either increased frequency or severity – but in the case of commercial auto, it’s both. Cumulative miles driven in February, 2016, were up 5.6% compared to February, 2015. Unfortunately, inexperienced drivers are at the helm for a good portion of those miles. Speed limit increases across the country also contribute to frequency and severity of accidents.

Distracted Driving
Whether it’s using a phone, eating, navigating, or noisy passengers, distracted driving is a major factor contributing to the number of accidents on the road. Recent findings from the National Safety Council indicate that as much as 27% of crashes involved drivers talking or texting on cell phones.

Increasing Costs – Medical Care and Repairs
Treating those injured in a commercial auto accident is more expensive than ever as medical costs rise at a faster rate than the overall Consumer Price Index. Medical inflation continues to go up by about 3%, whereas the core CPI is closer to 2%.

There are a lot of new vehicles on the road and they cost more to repair and replace. New auto technology is costly, and there’s a significant difference in repair costs for many new vehicle technologies. For example, one of the most frequently damaged auto parts is the headlight. New adaptive headlights are approximately 2.5 times more expensive to repair than non-adaptive headlights. Adaptive headlights are becoming standard equipment.

Ongoing Concern
None of these trends show signs of slowing, especially as the advent of driverless technology introduces its own risks and makes new vehicles more costly. Uninsured and underinsured motorists continue to significantly impact claims, further driving up insurance carrier losses. The nation’s largest auto insurer recently announced their worst year in the company’s 95-year history with losses of $7 billion in 2016 after losses of $4.4 billion in 2015.

Take Control
To better manage the total cost of commercial auto insurance, experts believe risk management should focus on the driver, not just the vehicle. Studies show that 94% of accidents are caused by driver factors. So focusing on driver safety will protect employers from potentially avoidable claims, promote unity in the workplace, and lower costs. For companies with transportation exposure, costly auto losses can hinder continued growth. Buyers who partner closely with their insurance agents and carriers to understand these risks – and the consultative support and tools available to manage them – are better positioned to protect their employees, fleet, and businesses.

Please click here to view a communication piece to discuss risks with your drivers and prevent auto accidents.

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