Hard Road Ahead for Commercial Auto Insurance

Dangerous Distractions

Distracted driving is nothing new. Whether it’s putting on make-up, eating, dealing with small children, talking on the phone or sending a text message, drivers are often distracted from their primary focus of driving a vehicle. Hartford CEO Christopher Swift has stressed the issue and implored the public to educate friends and family about this issue that is “causing real pain for society in general.” Often it occurs while people are driving to and from work, but it also happens when driving on the job, adding to the list of factors that is wreaking havoc in the world of commercial auto insurance.

Roads in the US are seeing more automobile traffic now than ever. According to the Federal Highway Administration, the US saw a record 3.17 trillion miles traveled by vehicles in 2016, and much of this traffic comes from commercial vehicles making deliveries, service calls and transporting cargo. Unfortunately, these on-the-job drivers are not immune to the common distractions that make drivers more likely to have an accident. In fact, one study suggests that people who drive for work might be more prone to distracted driving as they’re on the phone or in a hurry to reach their destination. While many employers are implementing policies to reduce these distractions and make their drivers safer, it’s not been enough to slow this trend.

If you’re a commercial auto insurer, you’ve probably already seen the results of this bad habit, in the form of more frequent and severe claims. In a recent report,  A.M. Best cited distracted driving as one of the causes for increased severity of commercial auto liability claims that contributed to an underwriting loss in the P&C industry in 2016.  In this soft market, it’s hard to adjust your pricing to make sure you’re getting the right rate for the risk, without losing share.  What’s more, it can be extremely difficult for an insurer to know which of the risks they write is a good risk, and which is a bad risk. Looking at your own data will show a part of the picture, but if you’re falling victim to adverse selection or have limited data, you may be finding more questions than answers.  Is it possible that some of those policies you’re concerned about losing due to a rate increase are bad risks that you should be aiming to avoid? This and other questions are paving a rough road ahead for this line of business.

There may not be a magic bullet that can solve all of these issues, but that doesn’t mean there’s nothing to be done. A good place to start is with an understanding of adverse selection and how it might be impacting your business. Next, it is helpful to recognize that there are, as Valen CEO Dax Craig put it in a recent article, “winners and losers in every vehicle class.” The key is to differentiate between the two and make yours an organization focused on smart, data-driven risk selections on this bumpy ride.

 

ABOUT THE AUTHOR:

Kirstin Marr is the chief brand advocate for Valen Analytics, paving the way for prospective clients to lead the innovation initiatives required to compete in today’s marketplace. She has a passion for building companies that invent leading-edge technologies to improve customers’ lives and solve the inefficiencies that exist in many traditional marketplaces. Kirstin also has a long-standing commitment to philanthropy and community leadership. She was most recently Board President for Colorado MESA, a non-profit that serves underrepresented and economically disadvantaged students to graduate from college and successfully pursue careers in Science, Technology, Engineering and Mathematics (STEM). She also co-founded a non-profit to benefit the Teen Lounge at Children’s Hospital Colorado.