The sharply rising cost of fleet insurance over the past several years has placed a heavy burden on fleet owners.
Last year, the American Transportation Research Institute reported that insurance costs rose 12% from 2017 to 2018, the second fastest year-over-year growth rate. Greatly outpacing inflation, the increased rate of insurance costs for fleets among all other costs – repair and maintenance, permits and licenses, tolls and driver wages – was second only to increases in fuel costs.
On the other side of this equation are insurance companies scrambling to find a balance between the industry’s rising costs, protecting clients and maintaining profitability.
There are three principal drivers of these cost increases: high-cost legal cases that can result in huge payouts, traffic accidents and the overall cost of vehicles.
Over the past several years, there has been a steady rise of multimillion-dollar legal cases involving fleet collision. Along with an increase in the number of these so-called “nuclear verdicts” has come an increase in the size of verdicts and settlements. This trend leaves insurance companies exposed to considerable losses, forcing them to increase costs.
Additionally, fleet vehicles are always at high risk for being involved in severe accidents and carry high liability limits due to their size and the length of time spent on the road, even if the fleet driver is not at fault. Factors such as weather, heavy traffic and the driving habits of others are unpredictable and unavoidable.
The National Safety Council reported 13.5 million crashes in 2018 with 4.5 million medically consulted injuries.
Those accidents can be expensive. According to a 2019 Motus Driver Safety Report, vehicle crashes cost businesses $57.9 billion in 2018, compared to $47.4 billion in 2013. These trends lead to greater costs for insurance companies, which in turn, result in the increasing rates we’re seeing across the industry regardless of sector or fleet size.
And while overall traffic flow lessened a bit during the first few months of the pandemic this year thanks to public health guidelines restricting travel and gatherings, traffic is now back up to about 90% of what it was before COVID-19 struck.
Finally, the increasing value of all vehicles also contributes to rising insurance costs. More expensive vehicles can mean higher claims related to physical damage. Of course, the larger the vehicle, the higher the cost to buy, own, operate and insure it.
Ultimately, all of these cost-drivers are beyond the control of fleet owners and insurance companies. However, there are some proactive measures fleet owners can implement to mitigate risk and lessen potential damages.
First, promoting safety and best practices that lower risk accidents is the most direct way to help offset rising insurance costs. This means implementing sound driver recruitment, selection and retainment processes to ensure a fleet is being operated by the best personnel available.
Additionally, investing in and leveraging the latest safety technology and telematics can go a long way to lowering risk of accidents. The extensive GPS, vehicle sensor and engine data that telematics provide are invaluable not only to managing fleet maintenance and avoiding collisions proactively, but also in the event of an accident to defend drivers and document that safety rules and best practices were followed.
Another important step fleet owners can take to meet expectations of insurers and help reduce premiums is to build and maintain detailed safety records. This includes documenting all safety policies, including documentation that drivers have been fully trained and meet appropriate qualifications. Safety records should also be maintained with updated analytical measurements, such as through telematic data, goals and results.
It is also helpful to include a disaster plan that outlines how a fleet will be managed in the event of a natural disaster or crisis situation like a global pandemic, floods, wildfires and civil disobedience. New research shows that amid the pandemic, almost 80% of owner-operators and small fleets do not have any plan in place for managing operations during times of crisis.
While the drivers of cost increases to fleet insurance plans may be uncontrollable, fleet owners and managers can take steps to mitigate the risk of accidents that can ultimately help save on costs.
Schaufenbuel, PhD, CSP, is assistant vice president, loss control, at Argent, a division of West Bend Mutual Insurance Company.
Was this article valuable?
Here are more articles you may enjoy.