(Photo credit: Renee Gaudet.)
Commercial auto insurance is in a state of crisis with losses continuing to mount. Though price hikes have been put in place, they have not been enough to offset losses, and insurers increasingly are turning to technology to reverse the trend.
Years of deteriorating underwriting results in commercial auto lines have seen loss ratios continue to rise as a result of unhealthy combined ratios, sustained losses, and inadequate rates. According to Fitch Ratings, “The commercial auto line (liability and physical damage coverage combined) has generated seven consecutive years of underwriting losses, with the industry statutory combined ratio rising to a 16-year high of 111.1% in 2017.”
Insurers are looking to technologies such as telematics, video cameras, and cellphone blockers, as well as the data captured by these innovations, to help assess and price risk more accurately than ever before and ultimately reverse the trend of unprofitability in commercial auto.
Insurers can work with fleet owners to implement telematics programs in commercial vehicles to better understand how drivers actually perform. Cloud-based, onboard diagnostic port plug-ins allow insurers to gain insight into individual driving behavioral patterns including duration, magnitude and frequency of speeding, braking, and acceleration.
Monitoring these and other driver behaviors with telematics technology can incentivize better employee driving habits and allow insurers to more accurately assess risk and offer bundled fleet solutions at a fraction of the cost.
In-cab camera systems record driver- and road-facing video either continuously or as the result of a triggering event. These systems provide a host of insights that benefit all parties—fleet owners, drivers, and insurers.
Cameras that not only face forward but also into the cab have the potential to save fleet owners on insurance premiums and claims costs by providing evidence that potentially could limit high jury awards, a key contributor to rising insurance costs. These cameras also can help fleet owners develop the continuous improvement of their drivers by indicating those who might need additional coaching, which reduces dangerous driving behaviors such as texting, cellphone usage, and driving without a seat belt.
Distracted driving is one of the major factors in the increasing frequency of commercial vehicle accidents. In 2017 alone, more than 3,000 deaths were caused by distracted driving, according to the National Highway Traffic Safety Administration.
In-cab cameras benefit drivers as well. Recordings from an onboard video system can be used to help exonerate a driver should a lawsuit after an accident occur. In states where fraud rings are prevalent, this kind of evidence is crucial to claims reduction.
For insurers, commercial auto accidents are among the most expensive for injury claims, with the average cost reaching approximately $70,000 of a loss related to fleet vehicle accidents, almost twice the cost of the average workplace injury. Camera technology can provide the increased insight into driver behavior that insurers need to more accurately assess risk and reduce losses from these claims.
Cellphone Blocking Technologies
Cellphones are one of the major causes of distracted driving. The National Safety Council reports that cellphone use while driving leads to 1.6 million crashes each year, and according to the National Highway Traffic Safety Administration, texting while driving increases the risk of a crash by 23 times.
In an increasingly connected world, it is becoming challenging to enforce safety policies that prohibit using a cellphone while driving. To combat this issue, commercial auto insurers are encouraging fleet owners to adopt technologies that block driver phone use while the vehicle is moving.
Cellphone blocking technologies auto-activate once the vehicle is in motion, preventing texting, emailing, and browsing in order to reduce distractions for drivers who are tempted to pay more attention to their phones than oncoming traffic. It’s another technology that can help incentivize safe driving in commercial vehicles and significantly reduce the risk of accidents caused by distracted driving.
Data-driven Scoring Models and Programs
Commercial auto insurers are using analytics from telematics solutions to develop data-driven scoring models and programs that can improve driver behavior and the profitability of commercial auto.
Event data reported by telematics systems can identify risky driving behaviors, like speeding, rapid deceleration, lane departures and swerving, to help insurers develop custom scoring models and cooperative driving programs aimed at reducing high-risk driving behaviors.
Telematics-driven scoring is highly predictive of risk and provides significant improvements to underwriting practices and results. In fact, insurers are working to boost the profitability of their commercial auto lines by shifting underwriting practices to more cost-effective, usage-based insurance policies aided by telematics solutions and analytics.
Insurers are working to end the loss crisis in commercial auto lines and drive toward profitability by relying on comprehensive data and technology to more accurately assess risk and improve underwriting and pricing processes.