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Report cites problems in commercial auto insurance
/ Categories: Risks, Trends

Report cites problems in commercial auto insurance

Despite rising rates, commercial automobile lags the overall commercial lines group and continues to under perform the Property/Casualty market as a whole, according to a recent market segment report by A.M. Best. The report notes that:

Average rates increased by 5.4 percent, 6.1 percent, and 7.3 percent in the first three quarters of 2017—the largest quarterly consecutive increases—as insurers worked to offset the rise in losses and improve profitability. A.M. Best noted that “whether the increases will be enough to reverse the trend in underwriting losses is still too early to tell.”

And as the sector's loss costs continue to rise, insurers continue trying to catch up. The report warns:

"[T]here will be more pain — owing to factors such as distracted driving and attorney involvement — before insurers realize any long-term gains from focused underwriting and pricing efforts."

Here are some contributing factors to cite when your clients complain about rising rates.

Claim frequency is rising. This is partly due to more vehicles on the road and more miles being logged as the economy booms. Distracted driving is cited as another significant contributor to accident frequency. A study by Cambridge Mobile Telematics revealed that phone distraction occurred in 52% of trips that resulted in crashes.

Claim severity is also trending up. Some of the factors contributing to this increase:

-- Advanced technologies are increasing the costs for vehicular repairs. As more and more autos are equipped with Advanced Driver Assistance Systems (ADAS), repair costs rise, according to a recent report by AAA. That would have an impact on fleets. In addition, maintenance and repair for trucks have been rising significantly in recent years, due to emissions-control components and other technologies.

-- Vehicle-related fatalities are on the rise generally and continue to be a significant cause of work-related deaths. The National Safety Council says that fatalities on U.S. roads rose by 14%, the largest two-year increase in five decades. Plus, work-related accidents involving transportation incidents were the most common fatal event in 2016, accounting for 2,083 incidents and 40% of work-related fatalities, according to the most recent report from the Bureau of Labor Statistics.

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