Performance Thinking

Expert information and solutions for your business.

The Current State of Auto Coverage What you should know

Auto Coverage

Most businesses and individuals in the U.S. are experiencing considerable rate increases on auto coverage due to significant losses in the market. In 2016, carriers experienced a 13% spike in auto losses – their worst underwriting performance for the line since 2001 – and S&P projects that auto losses will increase by another nearly 7% this year, hitting a record high of approximately $154 billion. With the combined ratio at a 15-year high of 110%, it’s no surprise that carriers have been seeking rate increases into the double digits across their entire auto book.

Factors Driving Auto Coverage Increases

Accidents are easily correlated to increases; however, even businesses with an accident-free history are being hit with increases on their auto premiums. Why? Market analysts attribute these across-the-board increases to several factors:

Distracted driving – Activities including talking on the phone, viewing/responding to emails, social media updates and texting while driving are escalating at an alarming rate. This factor alone now contributes to over 30% of all reported accidents.

Amount of time on the road – With the health of the economy improving, businesses are hitting the road. Some companies are increasing utilization of their existing vehicles and workforce and others are expanding, hiring more employees and increasing the size of their fleets. In either case, more mileage driven for work-related purposes directly correlates to more accidents.

Inexperienced drivers – The aging workforce creates a shortage of skilled commercial drivers. The lack of availability often outweighs the demand, forcing companies to hire younger, less experienced drivers in an effort to fill the gap; which in turn increases the likelihood of an accident.

Rise in fatalities – According to the National Highway Traffic Safety Administration, 2016 saw the largest rise in traffic fatalities since 1996. Even more alarming, the National Safety Council stated that 2015 and 2016 showed the greatest 2-year increase in motor vehicle fatalities in over 50 years. According to data, there were approximately 40,000 motor vehicle accident fatalities in 2016; a 6% increase from 2015 and a 14% increase from 2014. Research and investigators attribute the rise to the risk factors mentioned above.

Increased costs – Costs associated with auto accidents are increasing across the board, including medical payments, auto repair costs and/or attorney fees. Attorneys have become more aggressive in seeking to prove negligence on behalf of corporations, which has driven up litigation costs. Newer vehicles include sensors, cameras and other new electronics that are more costly to repair, and medical costs are at an all-time high, rising 1.5x faster than any other cost associated with auto incidents. All of these factors play a major role in driving up commercial auto losses and, in turn, premiums.

How Should Businesses Respond To Rising Auto Coverage Costs?

While you may not have direct control over the auto market, there are things you can do internally to minimize your exposures that may help to control your future auto premiums and, more importantly, protect your employees.

Management commitment – Strong management involvement is essential to the culture of a company. Concern for employees must be evident.

Fleet safety – Implement a fleet safety program and follow proper fleet maintenance procedures. Enforce your policy for use of company vehicles (e.g., limitation on personal use, who can use company vehicles, hours of operation, distracted driving etc.)

Personal vehicle use – Be aware of the risks involved with employees using their personal vehicles on the job and limit this practice where possible.

Check driving records – Employers should regularly check employees’ driving records and take appropriate action if driving records are not acceptable.

Accident investigation – Implement formal, written processes for documenting and reporting accidents including details on results of the investigation and strategies to prevent similar accidents.

Telematic devices – Companies with large fleets may want to consider the use of these devices to monitor employee driving habits and usage of company vehicles.

Driver safety training – Important topics include, but are not limited to: distracted driving, speeding, DUI, need for rest, what to do if your vehicle breaks down, etc.

Your business’ efforts in the area of auto safety are only part of building a comprehensive safety culture specific to your needs. At Scott, we are committed to helping our clients understand and address the complex risks of operating a business in today’s ever-changing environment, including navigating this new era of auto coverage. To learn more about how we can help your business, contact a Scott Risk Advisor.

Written by Michelle Sullivan

Michelle joined Scott in 2017 with more than a decade of industry experience and a background in Management and Professional Liability. In her role as Vice President of Marketing, Michelle serves Scott clients by ensuring they have the best coverage structure and most competitive premium terms available in the market. She monitors market changes and industry trends to effectively negotiate with insurance carriers on behalf of Scott clients. Prior to joining Scott, Michelle served as a Client Executive at Marsh & McLennan Agency, LLC, where she focused on overall risk strategy and placement for large middle market accounts.

ACE-Navigator: Support for Your Workplace Injury Management Process

The once-popular television crime documentary 48 Hours got its name from a law-enforcement principle that the most critical time in solving a homicide case is the first 48 hours. In short, a case can go “cold” quickly, placing a premium on a swift, thorough and well-orchestrated response by investigators. A similar dynamic is present in worker’s compensation, although the critical window is often quite a bit shorter. The consequence of a delayed or incomplete response to a workplace injury or incident is routinely a sharp escalation in costs. 

Read Full Story

Service Interruption and Business Income … Are You Covered?

When it comes to explaining the need for various types of coverage to a client, we are often stuck using hypothetical scenarios. Recent developments in North Carolina’s Outer Banks provide a real-time example of a sometimes confusing coverage, business income.

On July 27, PCL Construction drove a steel casing through an underground cable that supplies power to parts of North Carolina’s Outer Banks. As a result, vacationers left and residents were without power for about a week. This loss of power could not have come at a worse time for the businesses in this area. Based on last year’s tourism numbers, Hatteras Island businesses could have easily lost $2 million for each day of the outage, according to Dare County officials. Some businesses may be able to withstand the loss of revenues for this time, while other businesses face the real possibility of closing the doors for good unless they have insurance coverage for the lost revenue. 

Read Full Story

Affordable Housing’s Economic Impact

Affordable Housing Apartment Building

The economic impact of affordable housing at the local level is significant. In fact, the development of affordable housing in communities has many short- and long-term economic benefits. This industry combines the investment potential of real estate development with the mission of helping low- and moderate-income individuals and families, while impacting the local economy through job creation and increased government revenue.

 Impact on Employment

One of the primary ways affordable housing positively impacts the economy is through direct and indirect job creation. In Virginia alone, it is estimated that from 1996-2016 266,135 short-term jobs and 10,245 long-term jobs were created due to affordable housing development, according to a report from the Virginia Housing Alliance. Another study released earlier this year, concluded that a total of 329,000 jobs were supported throughout New York State between 2011 and 2015 due to the construction or preservation of affordable housing units. 

Read Full Story

Run-off Insurance A Necessity in Today's Market

Today’s merger and acquisition (M&A) landscape is hyper active. In 2016 alone, there were more than 12,000 M&A deals in the U.S. These opportunities often create significant financial opportunity for the purchasing and selling entities. Alternatively, during the same period corporate bankruptcies totaled over 46,000, revealing that many companies are facing significant difficulties.

Both M&A events and bankruptcies typically lead to significant changes in a company’s corporate structure, which in turn impacts the exposures faced by its directors and officers (D&O), and their respective insurers. So, how does a D&O policy respond to changes in the structure of a business? When should management consider run-off insurance for ongoing protection?  

Read Full Story