3 ways to improve safety in your commercial auto program
Cyber and TechnologyArticleJuly 12, 2023
No matter how quickly vehicle technology advances, human behavior remains a powerful force in risk management for commercial auto programs, whether a company provides owned or leased vehicles for employee use or whether employees use their personal vehicles on business. Human behavior is at the crux of the challenging market for securing commercial auto insurance coverage for many businesses.
Behavioral factors range from drivers being distracted by vehicle infotainment systems and mobile devices to attorneys pursuing and extending auto accident litigation.
“Commercial auto is our top concern in Large Casualty right now,” said Diana Johnson, Large Casualty Technical Director for Zurich North America. “Claim severity is the reason. Auto claim severity is not only impacting primary auto, but also the umbrella and excess liability lines of business. Claim severity is primarily driven by social inflation: If a claim goes to trial, the award can be staggering.”
A 2023 study found that auto liability claim severity for bodily injury and property damage increased 35% between 2019 and 2022, while auto physical damage collision claim severity jumped 40%.1
Trends like these, exacerbated by inflation and the rising costs of increasingly sophisticated replacement parts and vehicles, contribute to reduced availability of commercial auto insurance and higher rates for businesses. Rates for commercial auto rose approximately 7.3% in the first quarter of 2023 from fourth quarter 2022, according to a MarketScout study. That increase is second only to commercial property (up 9.3%).2
Similar loss trends are also causing personal auto rates to soar and making it more challenging to secure coverage in states such as California.
The behaviors driving the losses don’t just affect market conditions. They reflect tragic injuries and even fatalities. Distracted driving is estimated to have claimed 3,522 lives in 2021, according to the National Highway Traffic Safety Administration.
What can businesses with fleets do?
“There are many uncontrollable parameters — other drivers, weather, road conditions,” said David Strickland, Head of Casualty Risk Engineering for Zurich North America. “Who is selected to drive in the course of company business and how they’re trained and monitored are among the few parameters of safe vehicle operation that can be specifically controlled.”
Taking steps to ensure the drivers behind the wheel receive training, in addition to following other fleet safety practices, can help businesses manage these challenging trends to the best of their ability. Here are three steps that can help enhance safety, which in turn can help risk managers optimize their total cost of risk.
Implement a fleet safety program
The first step is establishing a strong fleet safety program. It should spell out policies and practices that include the following:
- Driver qualification criteria
- Driver training on topics like safe driving behaviors, distraction and fatigue
- Vehicle maintenance
- Claim reporting
- Cell phone usage
- Reporting and repairing mechanical problems.
If your fleet mix includes some electric vehicles, you may need to spell out differentiated standards and practices such as training on the rapid acceleration of these vehicles and how regenerative braking differs from a standard vehicle.
Check drivers’ motor vehicle records (MVRs)
Checking an employee’s driving record at the time of hire is not sufficient. “The best-in-class fleet programs typically employ continuous monitoring services,” Strickland said. But MVRs should be checked at least annually as part of your fleet safety program.
When concerning incidents are identified in records, appropriate responses can range from providing additional driver training all the way to probation or termination depending on the seriousness of the violation, Johnson said. “The best-in-class fleet safety programs are the ones that clearly define driver acceptability standards and take action on drivers with multiple moving violations or a substandard MVR.”
On the flip side, consider instituting a rewards program for good driving behavior, which has the potential to boost morale and reduce maintenance costs.
“Talk with your drivers about violations on their record,” Strickland said. “Not only is this a coaching opportunity and a chance to understand the driver’s perspective, but it can also help identify errors that need to be corrected.”
Monitor and leverage data from telematics and ADAS
Many commercial fleets today have some form of telematics monitoring capabilities, as well as advanced driver-assistance systems (ADAS) such as automatic braking and lane departure alerts. But not all businesses are acting on the data to the same extent.
“For fleets that utilize telematics, it’s important to understand how our customers are utilizing the data,” Johnson said. “Is the insured solely utilizing telematics for routing and fuel consumption purposes? Or are they also monitoring safety criteria such as hard braking and excessive speed?”
Underwriters are interested in how the company acts on the data, such as by providing supplemental, targeted driver training if the data indicate a high incidence of speeding.
“As more commercial fleets adopt telematics technology, this data will be utilized to distinguish between best-in-class risks and those that are average or below average,” Johnson said. “Telematics can also help mitigate claims. For drivers who are not at fault, telematics can help bolster their defense.”
Zurich Resilience Solutions has helped customers navigate telematics solutions. ZRS currently is working on an initiative with Zurich Construction customers that have large vehicle fleets, with the aim of helping them optimize their telematics programs.
“There’s increasing recognition of how these programs can enhance employers’ health and safety programs and help reduce costly accidents and painful losses,” Strickland said. “It’s about prevention and protection.”
References
2. MarketScout. “Commercial Rates Up in First Quarter 2023.” 2023.
