Pumping the brakes on commercial auto risks

Record date: 09/13/24
Air date: 10/23/24

In the third episode of the “Market in Transition” miniseries, guests Toby Cushing, Technical Director of Casualty at Zurich North America, and David Strickland, Head of Casualty Risk Engineering with Zurich Resilience Solutions, discuss the rising frequency and severity of auto accidents and what is being done to address the concerning risk trends. This episode delves into key issues such as driver speed and distractions and the positive impact that technological and infrastructure investments could have on road safety. Cushing and Strickland also emphasize the importance of driver qualifications and safety standards.

Guests:

Toby Cushing
Director of Casualty Technical Underwriting
Zurich North America

Toby Cushing joined Zurich in March 2022 as Head of Construction Casualty, then moved to Zurich’s Technical Underwriting group in September 2023 as Head of Motor. Earlier this year he was promoted to Director of Casualty in Technical Underwriting, where he collaborates on underwriting strategy and analysis for Zurich North America’s casualty lines of business, including auto/motor. Prior to joining Zurich, Cushing held a number of leadership positions in his nearly 12 years at The Hartford. Those included Head of Construction for middle market and large commercial customers and Chief Underwriting Officer for Construction. He also has insurance litigation experience, having previously worked for Saxe Doernberger & Vita, P.C. Cushing holds a Bachelor of Science in Biology from Houghton College in New York. He received his Juris Doctor from Quinnipiac University School of Law in North Haven, Connecticut, and a Master of Insurance Law from the University of Connecticut School of Law in Hartford.

David Strickland
VP – Head of Casualty Risk Engineering
Zurich Resilience Solutions

David Strickland brings nearly four decades of Zurich tenure to his role as Head of Casualty Risk Engineering for Zurich Resilience Solutions. He joined Zurich in 1987 as a Risk Engineering consultant, advancing through roles of increasing responsibility before being promoted to Head of Casualty for ZRS in 2021. He started his career as a junior high school teacher and moved into insurance loss control with Fireman’s Fund. He has a Bachelor of Science degree in Chemical Engineering from the University of Maine and is a Certified Safety Professional (CSP). He is based in San Diego. 

 Host:

Al Orendorff
Chief Communications Officer
Zurich North America

Al Orendorff is Chief Communications Officer at Zurich North America, where he is a member of Chief Executive Officer Kristof Terryn’s senior leadership team. Orendorff previously held communications leadership positions at Allstate Insurance, Aon Corp., Genworth Financial and Choose Chicago. He began his career as a journalist working in television and radio news, including stints at NBC-TV in Peoria, Illinois, Black Entertainment Television, and WBEZ and WGN radio in Chicago. He is based in Chicago.

(PLEASE NOTE: This is an edited podcast transcript, capturing speakers with natural speech patterns that may include incomplete sentences and/or asides, grammatical errors, verbal shorthand and some statements that may be less clear in print.)

Episode transcript:

AL ORENDORFF: The frequency and severity of auto accidents have increased in recent years. This is worrisome to all of us who drive, of course, but it's a concern for businesses, too.

Welcome to Future of Risk presented by Zurich North America. We explore the changing risk and resilience landscape and share insights on the challenges that face businesses to help you meet tomorrow prepared.

This is our “Market in Transition” miniseries, where we look at the shifting dynamics of the insurance market. Today we’re looking at how your business can improve your auto risk profile. I'm Al Orendorff and today I’m speaking with Toby Cushing, Technical Director of Casualty at Zurich North America, and David Strickland, Head of Casualty at Zurich Resilience Solutions. Toby, David, welcome to the podcast.

DAVID STRICKLAND: Thank you.

TOBY CUSHING: Hello.

Auto accident trends

ORENDORFF: All right, let’s dive right in. How and why has the frequency and severity of auto accidents changed in recent years?

CUSHING: We've really had kind of a tumultuous roller coaster ride the last 10 years. So, prior to 2007, 2008, you really had things like speed and driver experience influencing auto accidents. But, really with the advent of smartphones, you had a slow deterioration of the auto experience while distraction got mixed in with lack of experience and speed and other attributes like age or driver experience that could cause accidents. So, we saw a very large deterioration of motor until about 2015 when the market really hardened up.

The market, unfortunately, started taking a lot of rate on premiums. The environment did not get better. So even though people started charging more money for auto insurance, that didn't mean that the speed and distraction, and some of the lack of good infrastructure we had in the transportation sector, really, the condition of our roads, didn't get better.

And it really kind of peaked in 2019. Then we had this huge falloff in 2020, which was the pandemic, right? Friday, March 13, 2020, which was, I know, my last day at work for a while [laughs]. Since the shutdown, which really was only about three to nine months. So, you had some muting of the miles driven for a short period of time. Really, in '21, you saw a roaring back of miles driven within the United States.

Unfortunately, during the pandemic, we had people get used to driving on roads that weren't as cluttered. So, we perceived that this average speed on the road increased. But you still had the distraction of things like cell phones. Then on top of that, we saw less enforcement and less ticketing, so that there was less of a curb of that bad behavior.

Now in ’24, we've seen the severity, as we look back from ’21, ’24, increase significantly. But we've also seen the frequency come back. So, not all industries have fully recovered from COVID from a payroll perspective, but the economy has recovered.

So, really, today we're dealing with a severity landscape like we've never seen before, where we see a lot of catastrophic losses to life and injuries, both for workers on the road. Which is really what we're concerned about in our comp and auto books, is the workers we insure, but we've now seen the frequency catch up. So, we really have, we're at all-time highs and we have not calmed down relative to the pre-COVID periods. I don't know, David, if that jives with your experience. You you've lived through these ups and downs, too.

STRICKLAND: I think you're spot on with a lot of your comments, Toby and [I would like to] add some context to it too. Going into the pandemic and coming out of it, there was a lot of drivers transitioned to other jobs. They had to in order to sustain a livelihood.

So, coming out of the pandemic, we have a driver shortage. So, there were organizations and companies that had to stay in business. So and oftentimes they relaxed their standards to put people behind the wheel in order to function and operate.

And so, we have a new driver pool that we didn't have before with less experience and less capability, really. But it was necessitated out of just being a viable business. So, I think that also contributed to what we're seeing now in terms in of increased crashes, deteriorating experience, etc.

The causes of increased accident rates

ORENDORFF: You touched on this both of you, but I want to drill down a little bit into what's behind these increases. Toby, you mentioned speed and distraction, which on its face sounds like a really bad combination. What are some of the other reasons that are behind these increases?

CUSHING: Yes, we generally see auto accidents arise out of four fact patterns. So, if you look through the serious accidents where people get injured, typically it's where somebody is going very fast on a highway and they make a mistake or they cause an accident.

And so, it's just pure speed… and obviously, if somebody's weaving in and out of traffic — and we've all seen that sort of reckless behavior before — and something goes wrong or they're going that fast, it usually ends up in a very bad place.

Sometimes even it's just speed — someone going around a corner all by themselves— but it's just pure speed. Where we really see the speed and distraction come into play is with regard to the second fact pattern, which is people hitting a stopped car in front of them.

So, [there are] stop signs [and] stop-and-go traffic. You're looking down at your phone in stop-and-go traffic and you're looking down when your car's moving and the person in front of you stops. So, we see a lot of stop-and-go traffic and intersection, whether it's a stoplight or a stop sign.

The third fact pattern is left-hand turns at intersections when you take a lefthand turn and there's someone else coming the other way. I think with increased speeds and then people being distracted, sometimes they're looking up literally right before they turn. I think everyone can kind of think of themselves as looking down at their cell phone while they're waiting to turn left and then they pick their head up and think it's good to go. But, they haven't quite gauged the speed of the car coming or they've just missed it.

Then the fourth fact pattern is cyclists and pedestrians. So, especially when you have large trucks in condensed suburban or urban areas, the interactions with cars and trucks with pedestrians and cyclists is just not good.

So, to your point, it's about speed and distraction in two of them. But in the others it's really just about, the interaction with, I would really call it almost a vulnerable person. Because a car versus a human being is just not a good interaction.

So, it's part of the reason why we really want people to start thinking about their driving the same way they think about lifting a bunch of steel into place and doing what we might call a critical lift. Where you're using… where a contractor client of ours might be using more than 50% of the crane capacity that day to lift up a bunch of big I-beams. That that sort of activity, really great contractors will preplan that activity and they'll literally choreograph it out before they do it, because it's dangerous.

We really have a high level of respect for our policy holders who are starting to treat trips on the road, especially if it's delivery or if it's long haul, to pre-task plan, everything from fatigue and cell phone use to routes and turns.

David, you work with policyholders a lot more closely than I do in the risk engineering space, but I think, people are starting to up their game there. But that's the mentality we need to have.

STRICKLAND: Again, spot on and I think it's, as we look at speed and distractions in combination with one another… let's attach some numbers to it. If you're going 60 miles an hour in a vehicle that's 88 feet per second. That's a lot of distance in a short period of time. So, you factor in the distraction piece of that. And if your attention goes away just for one second, it alters your ability to…

CUSHING: <crosstalk> You cover a lot of ground, right, in that one second.

STRICKLAND: Yes, exactly. And so, when you start to think about it like that and attach it to something that we all are familiar with — like a football field — you're by, the three seconds, by the time you recognize the situation, by the time your body responds, by the time you brake, braking distance and everything else, you've traveled a football field.

We've all been probably associated or seen accidents or near misses, that people come to a screeching halt, barely miss an accident. Well, you value factor in distractions with increased speed, and they're no longer missing, right? They're crashing. So, as we look at things and kind of put things in perspective, it becomes obvious that the speed in conjunction with distractions creates real issues that are manifesting in what we're seeing right now.

Driver behavioral changes and costs

ORENDORFF: Yes. I remember driving to work on an expressway many years ago, this is before the advent of cell phones really came into came into play. Some guy was shaving in his car in stop-and-go traffic in the rearview mirror — an electric razor — and so distracted driving is not anything new necessarily.

But what you're saying is that it has become much more pervasive and the end result of this level of distraction, coupled with speed and some skill issues, is a really bad combination. It sounds like this is all mostly behavior-based. So the question should be posed, I guess, how do you change behavior, and what does it cost to businesses?

STRICKLAND: Well, I'll jump in here. I do think that and the modifying behaviors is nothing new either. But, to your point, Al, earlier about distractions, it's nothing new. But, with smartphone and cell phones, the frequency of the distraction is, your phone's always pinging, it's always getting texts, calls, emails, etc. Sometimes there's not a willingness to wait to, to kind of see… there's a curiousness, I guess.

And so, the frequency of distraction, I think has increased. Not the fact that distractions didn't ever exist. So, I think that contributes to it as well. But modifying behavior, telematics is a really a critical part of managing fleets and modifying behaviors and well understanding behavior first of all and then looking to modify it.

So, I mean, telematics has several different components to it, but it can monitor speed, hard stops and any number of things that are precursors to accidents and reflective of driving behaviors. And so, organizations that do this well can affect behavior in a very substantive way.

But just having telematics it can be just a data dump for a lot of organizations too, unless you're doing something proactively with it.

So, it's one of the things that the consultants on our ZRS team try to do is try to clearly understand what data's being captured, how it's being used and then how it's being monitored and measured going forward as well. So, it becomes almost table stakes right now for large fleets to have a telematics program.

ORENDORFF: Toby, what do you think?

CUSHING: Yes, I mean, so when we underwrite a file, we take in the exposures, which is their vehicle lists, and we take in their losses, and we also take in their driver lists. So, there's really kind of three parts of a submission for an automobile policy.

One of the first things we look at is the motor vehicle record of some of the drivers. What we're looking for when we run a sampling of the driver record of the thousand drivers that a company may have, is that company following their own standards with driver prequalification?

So, if they say someone with a DUI in the last year, someone with three speeding tickets in the last year is not allowed to have driving privileges with the corporate vehicles that we're insuring, we expect them to enforce that.

And to David's point, a lot of behavior is a feedback loop, right? If somebody engages in a behavior, they're either given negative feedback or they engage in the behavior and they're given positive feedback.

Telematics are really nice because they pick up that behavior before they might get ticketed for it, because by the time someone's gotten a DUI or gotten three speeding tickets, it's probably habitual or it's probably a higher likelihood of them getting involved in an accident.

That's why we look at their driving record that comes from both their personal driving and their commercial driving, because we're looking for behavior. The other thing that we're looking for is, when people use telematics and camera programs, to David's point, we're many times looking at it to see that they're intervening where if they see — I was talking to a broker about it — they were seeing somebody engaging in erratic driving and they sent out a supervisor to intervene and he was drunk driving, I mean, to David's point, it really is about behavior.

And to your question, you need to intervene when you have those telematics and camera programs. The other thing about telematics and cameras: A lot of our policyholders are really doing everything right, but you get into these congested areas in more difficult jurisdictions where there's a lot of plaintiff representation and backing of the plaintiff's bar, and you have really high jury verdicts, you have a lot of incentive for people to sue sometimes, even if they were the ones at fault.

So, we see a number of times where our policyholders will have had an outward-facing camera, and they will catch extremely reckless behavior that leads to an accident where the person who caused the accident is actually alleging our policyholder engaged in negligent conduct, and we just have to show them the film. A lot of times they don't even sue <laugh> once you show them the film. But certainly, we're also there to pay for their [employee’s] negligence. Someone's looking down and fussing with the radio button and they hit the car in front of them. That's what we're there for.

So, I think we are really going to try to step up and do more pilots about the behaviors and the types of telematics and cameras and how it's used and then give that information back to our policyholders. But we have an affinity towards inward and outward-facing cameras. You have to be careful of privacy laws and issues with the inward-facing [cameras].

But we really like both, especially the outward facing and the telematics, because it addresses the risky behavior of the third-party plaintiffs that are suing our policyholders and then really puts our policy holders in the best position to prove that they were not doing anything wrong. Because with the inflation of verdicts and juries really not having a lot of tolerance for large companies who don't follow the rules about who should be driving or following their own rules, like if someone does have a driver that they should have taken off the road and they cause an accident, it's almost like the large companies have the burden to show that they did nothing wrong when an accident happens. And so, we want to be there to support that.

STRICKLAND: Yes, I want to just add on real quick to that, just because I think it's really, really important. So, we see a lot of organizations with very robust programs in place on paper, but when you establish that, you have to administer that program and you have to do as you've laid out in black and white, and it's really, really important through the MVR [motor vehicle records] monitoring to have some established criteria in place so that there's a very objective process for understanding what to do if a driver is here in the spectrum or there, and how to respond in a very consistent manner. So having the need and the ability to administer that program is critical to insulate an organization from negligence.

Evolving driver standards

ORENDORFF: You mentioned, that standards have changed for drivers. How has the drivers pool evolved from what it used to be?

STRICKLAND: It's an interesting kind of thought and perspective, it certainly has changed. I remember when I turned 16, I was ready to get my license on day one and ready to hit the road. That might seem like a bad thing, but you need driving on-the-road experience. So, as young people are waiting longer to get their license, that same 21-year-old that you might be hiring for a commercial driver's license for interstate transport is not going to have the same number of years of driving experience that previous driver pool did.

Additionally, the whole migration from — I learned to drive on a stick shift; now, you don't find those in the States very often. I did that so my kids' friends couldn't drive their car. So, I did it for very selfish reasons in teaching my kids. But now it's all automatic so you don't have to concentrate as much and additionally, to get a commercial driver's license, you only have to be 18 years old as long as you operate it within the confines of a state. That is young.

There was a study done by the University of Michigan. It was cited by the Insurance Institute for Highway Safety. And it said that there was a 500% increase in injury crashes for truck drivers younger than 21 compared to truck drivers overall. Some of the things we're just talking about contribute to that really crazy number. Toby, [do] you have any thoughts on that?

CUSHING: Yes, I mean, to me the age and experience of the drivers is critical. I do anecdotally notice that I think the average age of at least the commercial drivers is younger than it used to be. And I wonder if there were retirements during COVID.

I also think it's not always also the most desirable job to be a driver. There is a shortage of what I would call really high-qualified, high-quality drivers. There's not a shortage of human beings who we can get to drive the cars.

And our economy was in a situation where they've had to backfill the losses of people retiring. And I think many of them were forced to not have as high of standards as they did before. Now, right, if you're a commercial driver, you still get put in a blood testing pool for drugs or drug testing tool.

It might not be blood testing, it might be urinalysis, but there's a drug testing pool you get put in. A lot of [companies with] drivers do a lot of great things around having exception processes to their standards. And to the point about the discussion before, having a conversation about the negligence of the driver is one part of the lawsuit against the policyholder by the injured party.

The second part is whether or not the large corporation engaged in what was called “negligent entrustment” of that vehicle to that driver. So, we see a lot of policyholders avoid these issues, though, because they have committees that may include the CFO, the general counsel and the risk manager and the head of HR. That four-part council might review any exceptions to the driver criteria.

What we look for is we look for an intentional process by which an exception is made. Then monitoring of that driver if an exception is made instead of just a changing of the standards because the more qualified drivers or drivers with less tickets and more training isn’t available.

In all of the industries, whether it's warehousing or construction, there's always going to be workers that will fill the need. But to your point, David, what experience are they coming in with? We know first-year workers just in general are a third more likely to get injured no matter what industry generally they're in. I think that plays out in driving and transportation just as much as it does in manufacturing or construction.

What are some Positive trends in auto safety

ORENDORFF: OK. We've focused on a lot of the negative trends, but there are some positives. As we wrap, let's talk about that some of the positive trends that we're seeing.

CUSHING: I could be a little off on these statistics, but you know, the all-time high of highway deaths was back in the ’70s [and] ’80s, when you really had cars that were big and could go fast and the highways had been built out in the ’50s and ’60s.

So, we are well off of the peak of the annual deaths on the highway, and deaths I think were around 38,000 deaths per year on the U.S. highways pre-pandemic. That pumped up to like 42,000. That 42 has been coming down. So, even though the economy has come back, we are seeing the number of deaths coming back down. And we are seeing policyholders take more and more investment into driver prequalification.

Some of that's driven by insurance and those needs. We also have the assistance of electronics like auto-sensing stop, and backup cameras, or what kind of gets thrown into what's called ADAS or the electronic assistance that you have on vehicles.

There's different industry organizations that see 30 to 40% reductions in incidences or crashes in the vehicles that really have all of those features. So, I don't think we're going to be in self-driving cars anytime soon.

But I think that there is a lot of investment happening in telematics and cameras. There's a lot of investment happening in pre-qual continuous MVR monitoring is a really big thing that a lot of our policyholders purchase.

So, I think that we are seeing it abate a little bit, and part of that is the ramp-up post- COVID is settling down. But I do think we're going to be in a better place and the investment in the infrastructure, even though there's accidents around construction sites, I do think everything we're investing in the infrastructure will pay off.

Because I’ve already seen projects where as soon as you go from a one-lane merge to a two-lane merge, right? When the government invests in that, we see less accidents. I don’t know, David, if you agree with some of those good trends.

STRICKLAND: Yes, I do. It's interesting in the infrastructure too, because I used to see projects that were years and years and years and every time you drive by, there's nothing going on. We've probably all seen those. Now, they're getting knocked out pretty quickly.

So, I do think that there's some infrastructure support along those lines. But I also think organizations are really wanting to do the right thing and they really are paying attention to this. And sometimes they don't have internal resources necessarily to understand maybe the nuanced parts of it.

But, I'm seeing we have a listening ear and open eyes now for companies wanting to do the right thing. And we see, to your point, Toby, the investment in telematics, in continuous MVR. So, those are really able to advance and further the safety programs and the elements that will avoid and minimize crashes. I'm excited for the future.

Again, this is an opportunity for us to help our customers and realize some of the gaps that exist. But by and large customers are very open to understanding and listening and hearing and taking action.

ORENDORFF: Toby and David, this has been a great conversation. Thank you so much to both of you for joining us today.
And thank you for listening. If you like the show, leave a comment or review wherever you get your favorite podcast, or you can drop us a note at media@zurichna.com.

Stay tuned for the final episode in our miniseries on “Market in Transition,” where we'll discuss alternate insurance options with Eric Cittadino, Head of Programs at Zurich North America, and Dawn Hiestand, Head of Captives at Zurich North America. This has been Future of Risk presented by Zurich North America.