The simple answer is that the average claim payment in commercial auto liability increased by 39% between 2019 and 2023. This spike is due to five factors beyond the insurance industry’s control:
- General Inflationary Pressures
- Supply Chain Disruptions
- Increased Claim Costs
- Litigation and Legal Costs
- More Severe and Higher Frequency of Auto Loss
Here’s a look at how those market pressures drive up premiums:
- Inflation: General inflationary pressures affect the cost of everything from labor to replacement parts for vehicles. Insurers have to adjust their premiums to keep pace with inflation.
- Supply Chain Disruptions: Shortages in vehicle parts and supply chain issues have made it harder and more expensive to repair and/or replace vehicles after an accident.
- Increased Claim Costs: Insurance companies are paying out more per claim due to the rising cost of vehicle repairs and medical care. More complex technology and components within vehicles, and tariffs on imported components bump up repair costs. This forces carriers to charge more to cover potential future claims.
- Litigation and Legal Costs: More frequent litigation in transportation claims is leading to higher ultimate settlement costs and greater potential for nuclear verdicts, which drives up commercial auto loss costs.
- More Severe and Higher Frequency of Auto Loss: Complex dashboards and growing dependence on digital devices has driven up the incidents of distracted driving accidents. High-speed accidents are increasing loss severity and vehicular deaths. The uptick in road traffic post-COVID, the shortage of trained drivers, and severe weather events and natural disasters have all led to increasing auto losses.
What can Last Mile and Middle Mile Delivery professionals do to guard against higher premiums? Control what’s within your control: your risk.
There’s no question that factors beyond our control are just that, out of reach. So, focus on what you can control. Minimize your risk by instituting a robust loss control plan and sticking to it. Look for an insurance partner that supports your loss control efforts with risk management services and tools.
Quinn Hancock, CIC
Quinn Hancock is AVP of the BizCHOICE Transportation Insurance Program, focusing on program distribution and supporting relationships with our broker, aggregator, and vendor partners. Quinn has spent his entire career as a transportation insurance professional, and earned his bachelor’s degree from Ball State and his Master of Business Administration degree from Louisiana State University. He holds licenses in life and health and property and casualty insurance.