Commercial auto insurance premiums have been climbing for years. A recent report from the Bureau of Labor Statistics shows a staggering 11.1% year-over-year spike in auto insurance costs, far outpacing other inflation contributors like education (+3.7%) and medical care (+2.9%). While fleets have long felt the squeeze of rising premiums, this year’s increases come at a time when claims are getting more expensive, crash severity is rising and insurers are tightening underwriting standards.
For businesses with vehicles on the road, whether they own their fleet or rely on reimbursed drivers, these trends have real financial and operational consequences. Let’s break down the key contributors to today’s fleet insurance costs and what they mean for fleet operators.
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Fleet Insurance Costs Are a Top Business Expense
According to the latest Consumer Price Index data, auto insurance is the top driver of inflation. The reasons for this sharp rise are complex, but the impacts are straightforward: companies are spending more than ever just to keep vehicles insured.
For many fleet-based businesses, that means making tough trade-offs, like reducing headcount, delaying equipment upgrades or stretching maintenance schedules. Unfortunately, cutting corners in those areas can further compound risk, leading to higher claims and even bigger premium increases down the line.
What’s Driving the Surge in Claims Severity?
Insurance costs aren’t just rising because of rate hikes. The actual cost of claims is increasing, fueled by a perfect storm of risk factors:
Distracted Driving
Despite public safety campaigns and legislation, distraction remains rampant. In 2023, there were 3,275 people killed and an estimated additional 324,819 people injured in motor vehicle traffic crashes involving distracted drivers.
“As drivers returned to the roads following the pandemic, distracted driving surged, causing higher rates of accidents, injuries and deaths, This high-risk behavior has worsened in the years since, having huge implications for the insurance industry and their policyholders.” - Dale Porfilio, Chief Insurance Officer, Triple-I
Medical Inflation
When crashes happen, the cost of care is significantly higher. Health care costs in the United States have generally grown faster than inflation. In June 2024, prices rose 3.0% across the economy from the previous year, with medical care rising 3.3%.
As medical care and equipment costs continue to spike, insurance carriers are seeing higher payouts for personal injury protection, medical expenses and bodily injury claims.
Advanced Vehicle Technology
Modern vehicles may be safer by design, but they come with a higher price tag when it comes to repairs. Even minor collisions can lead to expensive, time-consuming fixes, driven by the need to recalibrate sensors, replace lightweight parts or address intricate electrical systems. As a result, the cost of repairs is climbing faster than overall inflation. Between 2013 and 2023, motor vehicle maintenance and repair costs increased by 4.1% annually, compared to a 2.8% average rise in the Consumer Price Index.
This growing complexity is forcing insurers to rethink their pricing models. Covering the cost of these high-tech repairs while staying competitive in the market has become a delicate balancing act.
Nuclear Verdicts
The legal system is adding pressure, too. Jury awards over $10 million, known as nuclear verdicts, have become more common, especially in commercial auto cases. These payouts are reshaping how insurers assess risk and set premiums.
A 2020 study from the American Transportation Research Institute (ATRI) showed a nearly 1,000% increase in large verdicts involving truck crashes. The average verdict size for a lawsuit above $1 million involving a truck crash increased from $2.3 million to $22.3 million over nine years.
What This Means for Fleets
Truck insurance premiums have risen significantly over the past decade, increasing from 6.4 cents per mile in 2013 to 8.8 cents in 2022. Small carriers have been hit especially hard. Their per-mile insurance costs jumped from 10.2 to 13.6 cents between 2021 and 2022. This financial strain is particularly acute for small to medium-sized fleets, which may lack the financial resilience to absorb these increases.
The ripple effects of rising claims severity and premium hikes go far beyond the insurance line item. Consequently, some are considering reducing coverage levels; a strategy that could expose them to greater financial risk in the event of crashes, claims and costly litigation.
“Insurers are going to be held to the limits that they're putting up to support a certain exposure. A carrier may pay out $15 million depending on what type of limits they're providing within an umbrella liability policy, but if the award is beyond that point, then suddenly it's going to hit the financials of a commercial entity or of an individual.” - Brian Pierce, Chief Underwriting Officer, Victor US
This poses a major challenge, particularly for small and mid-sized businesses that may have limited cash flow and struggle to recover or scale after absorbing such substantial payouts.
When crashes do happen, long repair times due to part shortages and labor demands also mean more vehicle downtime and lost productivity. Moreover, the rising costs are prompting a reevaluation of fleet expansion plans and investment in newer, safer vehicles, potentially impacting long-term operational efficiency and safety.
The takeaway? Fleets can’t passively ride out the storm and expect to reduce fleet insurance costs.
What CAN You Do to Lower Fleet Insurance Costs?
While many of these forces are beyond a company’s control, some aren’t. Fleets that invest in the right resources are better positioned to reduce risk, lower claims and push back on rising premiums.
Ready to learn more about how fleets can work to reduce fleet insurance costs? Join us on May 20 for our upcoming webinar to hear from industry experts. 