NAVIGATING THE BUMPY COMMERCIAL AUTO ROAD

Best practices independent agents can

share with policyholders to reduce claims

By Mike Zdrojewski

The commercial auto market is similar to a time-worn highway. Each year, it seems to get bumpier, no matter how hard people work to repair the damage.

In 2021, the market experienced nearly $197 billion in incurred losses, according to Statista. That was up markedly from both 2019 ($184 billion) and the low-driving pandemic year of 2020 ($160 billion). And even though premiums jumped nearly 10% year over year in mid-2022, according to S&P Market Intelligence, commercial auto remained largely unprofitable.

Despite the rough roads ahead, savvy independent agents can find new ways to help their policyholders smooth the speedbumps, reduce the frequency and severity of their claims, and deliver exceptional service.

Traffic jam of negative forces

A look through the windshield at the commercial auto landscape for 2023 and beyond unfortunately appears just as challenging as a peek in the rearview mirror. The current hard market has raised the cost of reinsurance. As a result, carriers that rely on the reinsurance market (especially small and mid-sized carriers) have no choice but to pass those costs on to their policyholders.

At the same time, insureds and their fleets face mounting risks. Supply chain shortages have led to higher parts prices and longer repair cycles. That means fleets are paying more to maintain their owned vehicles, and they’re paying more for rentals, too.

Continued labor shortages create yet another roadblock for fleet owners. As a result, companies within sectors where business is booming—such as manufacturing and lumber and building materials—are trying to do more with less. But when a company’s drivers are overworked and their fleets are understaffed, drivers tend to take shortcuts, which raises the risk for accidents exponentially.

Familiar landmarks

While the commercial auto landscape continues to get more difficult to traverse, the mile markers along the route remain the same. The three most common types of claims have remained steady over the past decade: Rear-end accidents continue to be the most common claim, followed by accidents caused by changing lanes or sideswiping, then right-of-way violations.

But at the same time, the economic and social impacts of accidents keep growing. The most recent National Highway Traffic Safety Administration (NHTSA) data, recorded in 2019, shows that motor vehicle crashes of all types cost the U.S. a mammoth $340 billion. They also claimed more than 36,000 lives, resulted in 4.5 million injuries and damaged 23 million vehicles.

For business owners, the highest financial costs of commercial vehicle crashes often come after the accident itself. Indirect costs such as lost time for injured drivers, administration time to fill out workers compensation paperwork, and rental costs to replace damaged vehicles can add up quickly. Lost productivity, missed deliveries and poor customer service are other negative byproducts that result from accidents.

Getting back on track

Thankfully, independent agents have plenty of new tools in their toolbox that they can recommend to help their commercial clients rein in the cost and frequency of commercial auto claims. The continued sophistication of onboard technology and driver monitoring systems brings plenty of benefits to fleets.

Some of the most effective solutions include:

• Continuous motor vehicle record (MVR) monitoring. These systems save companies the hassle of manual MVR pulls and self-reporting of accidents by providing real-time notification of drivers’ safety violations. They track both the negative (speeding tickets, crashes) and the positive (commercial license renewals or DOT medical card updates).
• Telematics programs. GPS tracking, vehicle monitoring devices and onboard cameras give fleet managers information they need to provide meaningful and ongoing education to drivers. Telematics uses transmitters to gather data on poor driving behaviors, such as hard braking or harsh acceleration. Driver-facing and outward-facing cameras are proven to reduce the risk for collisions, especially when videos are used to inform driver-specific training. Cameras also provide video evidence of what happens during and after a crash, which can assist fleets in defending any liability claims.
• Distracted driving prevention tools. According to the NHTSA, distracted driving claimed more than 3,500 lives in 2021, and the problem isn’t going away anytime soon. While you can’t stop every driver distraction, you can curb your drivers’ cell phone use by implementing solutions that block the use of smartphones while a vehicle is in motion. Fleet managers should also educate their drivers on other distractions (eating, changing radio stations, etc.).
• Automatic emergency braking (AEB) systems. In my opinion, this emerging technology has the greatest potential for reducing the number of highway accidents. A 2020 Insurance Institute for Highway Safety study showed that equipping large trucks with forward collision warning and AEB systems could eliminate as many as 41% of crashes in which a large truck rear-ends another vehicle.

The more face time agents spend with insureds,

the bigger an impact they’ll have on mitigating the many

negative effects of commercial auto claims.

New rules of the road

While technology plays a role in helping policyholders reduce commercial auto claims, it’s also important for fleets to follow a few best practices. Agents should recommend that their insureds:

• Implement a comprehensive fleet safety program. All fleets should have a written plan that governs the way they’ll keep their drivers and equipment safe on the road. The most effective plans set specific safety goals, provide continuous coaching, and reward the positive behavior of their safest drivers. Sit down with your policyholders, ask if they have such a plan in place, and guide them in creating or enhancing their plan.
• Invest in driver retention. It’s increasingly difficult for fleet managers to find high-quality drivers. And the costs associated with training and retraining replacement drivers keep rising. That’s why agents should encourage their policyholders to retain their best drivers at all costs. Advise businesses to find out what motivates their safest drivers—work environment, pay rate, work-life balance—and then find ways to meet their needs and boost their workplace satisfaction levels.
• Always follow up. Implementing the best onboard vehicle monitoring technology in the world won’t help policyholders reduce their commercial auto claims unless fleet managers do the follow-up. Recommend that insureds perform defensive driver training with all of their drivers at least annually, and that they follow up on any deficiencies identified through telematics with additional training.

Keep on trucking

In the same way that fleet managers must engage their drivers in regular safety training, agents should commit to ongoing communication with their insureds. Working with a carrier who understands the specialty niche of the policyholder can also be tremendously helpful.

For example, Pennsylvania Lumbermens Mutual Insurance Company (PLM) follows a triangular relationship model including the agent, insured and PLM. Under this model, we can assist the agent by partnering with them to work directly with the policyholders in the wood niche to provide risk mitigation resources for commercial fleets, as well as comprehensive risk assessments and more.

Plan to meet with your policy-holders several times a year so you can develop a relationship that goes far deeper than just reaching out to them at policy renewal time. The more face time agents spend with insureds, the bigger an impact they’ll have on mitigating the many negative effects of commercial auto claims. n

The author

Mike Zdrojewski is a loss control consultant with Pennsylvania Lumbermens Mutual Insurance Company, the oldest and largest mutual insurance company dedicated to the wood products and materials industry. He can be reached at (267) 825-9152 or by email at mzdrojewski@plmins.com. To learn more about Pennsylvania Lumbermens Mutual Insurance Company, visit www.plmins.com.