Commercial auto insurance rates continue to rise sharply, with this upward trend expected to persist through 2026. Across the U.S., premium increases have ranged from 10% to 30%, depending on the carrier and state. In Pennsylvania specifically, base rates have surged by more than 20%, impacting budgeting and coverage planning for many businesses.
What is driving this hard market?
Several factors are contributing to this challenging environment:
- Driver shortages – A lack of qualified drivers is straining operations and increasing risk.
- Nuclear Verdicts and Social Inflation – Legal environments are becoming more plaintiff friendly, leading to more claims exceeding $10-million.
- According to the Insurance Information Institute, these trends have added a staggering $30-billion to commercial auto claims since 2012!
- Attorneys are increasingly pushing for trials over settlements, emboldened by favorable outcomes.
- Third party litigation funding is occurring where external investors actually bankroll lawsuits in exchange for a share of the settlement.
- Inflation – Rising costs across the board for things like vehicle repairs and medical expenses are inflating claim values.
- Distracted Driving – The use of mobile devices and in-cab technology is contributing to more frequent accidents.
These factors have led to a spike in both claims frequency and loss severity, cutting into insurance carrier profitability.
As a result, we are seeing a tightening of underwriting by carriers. It is becoming increasingly difficult to secure excess layers of coverage. Insurers are implementing stricter controls, scrutinizing factors such as fleet size, vehicle types, operating radius and driver history. This means insureds must be more diligent than ever in presenting a clean and well-managed risk profile.
Tips for Insureds on How to Stay Ahead
Businesses should take proactive steps to strengthen their risk management strategies:
- Regularly review and update policies related to vehicle maintenance and driver behavior.
- Invest in driver training and create programs that reward safe driving and reinforce best practices.
- Implement hiring practices that include close scrutiny of Motor Vehicle Reports (MVRs). Implement strong criteria to evaluate driver histories and prioritize experienced, qualified drivers.
- Incorporate technology into your program considering the use of GPS tracking, dash cameras and telematics to monitor and improve driver performance.
- Ensure your accident investigation process is working to quickly and thoroughly investigate incidents to reduce future risk and improve claim outcomes.
As the commercial auto industry market continues to evolve, staying informed and agile is key. By understanding the market and implementing smart strategies, businesses can protect their bottom line and position themselves for long-term success.
Reach out to your EHD representative today if you would like to further discuss options for improving your auto insurance program.
