Trucking is an undeniably precarious occupation, and can result in accidents due to long hours, regular concentration and lack of sleep. HMD Trucking provides insurance coverage for all employees of the company, you can find the terms and conditions on the company’s website, https://www.hmdtrucking.com/.
The topic of this article is the commercial auto insurance market, and how it has been affected from the increase in trucking accidents. Today insurance premium has increased by 65% in the past 10 years, going from $0.058 to $0.088 per mile. However, the number of accidents as well as other significant costs influence the cost of commercial insurance. These include reinstatement fees, CAT (catastrophic) losses, medical and legal fees, and by the lack of experienced drivers in the industry.
Insurance companies themselves have seen an increase in profits, which has been an influential aspect on pricing. The market for truck insurance is cyclical, and is currently going through what is called a “hard market” phase.
What are the differences between a hard and a soft insurance market?
The insurance market can fluctuate between hard and soft states. In a hard market, also known as a seller’s market, consumers typically must pay higher premiums for their policy. There is also generally less capacity for insurance operators, as well as stricter underwriting criteria and less competition.
In contrast, a soft market can be defined as a buyer’s market. This is where premiums tend to remain stable or even decrease, with increased capacity and wider coverage terms. There are also higher available liability limits and greater competition between insurance operators to win new business.
Why commercial auto insurance has been unprofitable for years
Business collision protection has been an unbeneficial industry for quite a while. With a combined accident year ratio of 100.5%, the property & casualty (P&C) industry experienced a net underwriting loss of $4.1 billion in 2021. This indicates that the insurance industry paid out $1.05 for each premium collected.
This combined loss ratio has been above 104 percent for 43 years, indicating poor underwriting profitability. Insurance companies manage to offset premium costs by investing in various products like stocks, bonds, mortgages, and other real estate, despite the fact that underwriting activities do not yield a significant profit.
The fact that interest rates are currently rising could help these investments earn more money. Therefore, commercial auto insurance may soon become a more profitable industry if investments with higher yields and favorable economic developments prevail.
Why the insurance industry has been so misguided for so long
The insurance industry is mired in mismanagement, and this is particularly true of commercial car insurance, which has historically been a loss-making enterprise due to inaccurate accident description and lack of seriousness.
Take one-vehicle wreck and guardrail hit accidents, for an example. Usually the vehicles in question were leaving the lane and skirting on a four degree angle from the center. Many would wrap this up as an accident and move on, but in most cases the cause of these accidents is the driver has fallen asleep. If the accurate cause of the event isn’t included in the insurance underwriter’s summaries, it won’t necessarily be understood or factored into driver risk, and this could result in a major financial loss.
In cases where the accident causes minimal damage, the driver might have made a mistake and then began to attempt righting that mistake. When the single-car case happens due to falling asleep, the outcome will never be predicted. One case might be a wrecker, while miles down the road, a building or a school bus could have been in the path of a driver who had lost control due to dozing off.
Insurers largely believe that assessment of experience, driver range, and prior accident record are big risk indicators, but time of day is just as important. When people drive while sleepy, they make errors much more likely at night, and if insurers are not factoring that kind of information in, then they cannot accurately assess the risk of their drivers’ accident severity.
It can backfire on insurance companies if details like the time of day or the actual cause of the accident are overlooked.. It’s important for them to take a comprehensive approach that factors in all the relevant information when estimating the chance of a nuclear verdict. Insurers’ bottom lines can suffer greatly and even put them out of business if they lack precise information.
Measures to be taken by carriers to diminish the cost of insurance
Fleet owners can take tangible steps to reduce the cost of their insurance coverage. To start, they need to code accidents by the cause rather than the description of what happened. By determining the cause, it is possible to address the underlying risk factors rather than simply dealing with the symptoms associated with severe accidents involving large trucks.
Managing the risk of insurance claims costs should also be considered. Insurers should focus on reducing coverage and increasing deductibles and self-insurance levels. However, this will only be effective in preventing expensive insurance payouts if the primary causes of insurance claims are addressed. The bulk of the claim costs relate to 10 to 12 per cent of road accidents, most of which are single-lane crashes, requiring efforts to identify the root causes of the incidents and take preventive action.
Fleet owners can also ensure their insurance premiums remain stable by investing in risk management processes and safety technologies. By regularly and proactively monitoring safety records and investing in safety-related technologies, such as collision avoidance and smart brakes, fleet owners can reduce the risk of accidents and subsequently their insurance premiums. Insurance companies should provide incentives to those who choose to deploy these preventative measures.
Overall, fleet owners should seek to reduce the cost of their insurance coverage by targeting the root causes of accidents. Coding accidents by causes, managing risk, and investing in safety technologies and processes can provide tangible steps that fleet owners can take to decrease their insurance costs.