Businesses managing a fleet of drivers face many external factors that impact their bottom line, such as the staggering rise in risky driving behavior, record-high fuel costs and ongoing driver shortages.
Commercial auto insurance is not immune to these pressures, with auto premiums rising year over year as insurers face new risks such as a rise in distracted driving, a recent 12% jump in roadway fatalities and higher vehicle repair costs.
These factors will only exacerbate the continued increase in commercial auto premiums over time. According to the recent Commercial Property/Casualty Index from The Council of Insurance Agents & Brokers (CIAB), commercial auto coverage increased by 5.9% in Q1 of 2022, continuing a concerning trend of 29 consecutive quarters of premium increases.
To combat these negative trends, companies are now investing time and money into gaining better insight into the potential or likely risk that resides within their driver population. Not only does this reduce their exposure, but it puts a company’s risk profile in a better light with insurers that value the implementation of risk-reducing strategies.
Zurich, a global, multi-line insurer, is putting more focus on its customers’ safety and training policies as a measure indicative of reducing future loss probability – partnering with policyholders to mitigate risk and turn that into savings for their customers.
“There is a societal, legal and shareholder expectation that employers effectively select, train and monitor who they put behind the wheel of a company vehicle,” says David Strickland, VP of Casualty Risk Engineering, Zurich North America. “Because driving exposures are inherent in most every business operation – be it a small sedan or DOT regulated tractor-trailer – the ability to deliver on this core expectation in an efficient and effective manner becomes increasingly important in managing this ubiquitous risk.”
As more carriers collaborate with their policyholders to combat rising commercial auto premiums and increased driver risk, there are specific risk-management strategies that should be considered. We discuss these effective approaches below.
Establish a Healthy Driver Safety and Training Program
More often than not, companies still rely on self-reporting when it comes to being notified of license status changes, driver violations and crashes. Instead of taking control of their own risk, they place their trust in those who work for them in the hopes of two-way transparency and honesty. The unfortunate reality is that many drivers will be less than willing to share if they’ve incurred a negative driving violation – especially if good driving behavior is integral to keeping their job.
This common practice leaves businesses vulnerable to hidden risk that could have a compounding, negative effect on their bottom line.
Stop Relying on Static Data
Annual and quarterly MVR checks are known to be an expensive venture, especially when considering the volume of checks required and the state fees associated with procuring data. Beyond that, the visibility gap that it creates once an MVR is pulled creates major exposure for businesses – as a lot can happen until the next scheduled pull.
Instead, leveraging a monitoring service that can continuously notify risk managers of upcoming or suspended licenses, state reported violations as well as quickly interpret court and motor vehicle record data across states is an administrative godsend. With continuous MVR monitoring, the costs outweigh the risk of slow change management.
Companies that implement continuous MVR monitoring experience:
- 22% reduction in monthly violations
- Up to 14% reduction in monthly crashes
- 32% reduction in company risk profile events
Provide Frequent Training
Driver violations are profoundly predictive of future crashes and expensive claims. Seemingly harmless citations such as failing to signal a lane change present a 112.6% increased probability that the same offender will find themselves in a crash within the next 12 months.
This is where training becomes critical. Providing timely, remedial driver training is a proven and effective risk mitigation tool against the individual and collective levels of driver risk within a fleet. This also helps protect companies by ensuring they’re demonstrating institutional control after an incident.
And while some companies focus solely on remedial training, those who incorporate frequent, ongoing training and assign courses monthly have far fewer violations – 25% less than the industry average and 50% less than fleets that train twice a year. So, while remedial training is important to get drivers back on the road, adding frequent driver training is a proven method to reduce violations and ultimately, crashes and claims across a company’s fleet.
Achieving Lower Auto Premiums Requires a New Mindset
In the same way we invest a dollar today with the expectation of compounded return, we must rethink how we invest in the human capital responsible for safely representing companies out on our roads. With this new mindset, companies and their carriers can mitigate the risk drivers pose to our communities, while in turn effectively reducing commercial auto premiums.
We’d like to extend a special thank you to Zurich for their contribution to this article. You can discover more about the services offered by Zurich Resilience Solutions, by checking out the ZRS Marketplace.
To learn more about how companies can mitigate driver risk to effectively decrease their commercial auto premiums, download our guide, How to Implement a Comprehensive Driver Safety Program.