In 2016, the Property Casualty Insurers Association of America reported that the property and casualty industry experienced 1.7 billion in net underwriting losses from January through September alone. Commercial auto lines are frequently cited as a leading factor driving this unfavorable outlook, primarily due to an increase in both the frequency and the severity of claims.
According to Fitch Ratings, 2015 was the fifth consecutive year that the U.S. commercial auto market reported underwriting losses. Given the industry’s poor performance over the last several years, it isn’t surprising that commercial distribution fleets are facing a similar hike in insurance rates. Fitch Ratings also reported that in 2016, there was nearly a six percent growth in premiums written – the fastest growing rate compared to all major insurance market segments.
In an effort to keep escalating insurance and litigation costs down, many distribution companies are looking for innovative solutions to decrease premiums and reduce liability risks. One option gaining popularity is the required implementation of in-vehicle safety technology.
The Benefits of Safety Technology
In 2010, the Insurance Institute for Highway Safety found that nearly 287 million miles were traveled in commercial trucks. Considering the amount of time spent driving, distribution companies want to take proactive measures to ensure that their vehicles are as safe as possible to reduce the risk of dangerous accidents.
To help mitigate the risk of an incident caused by poor driving behavior, advanced technology can be installed in vehicles to monitor and correct the safety habits of operators. For example, telematics systems will provide data relating to employee’s history of speeding, harsh braking and even seat belt use. By monitoring on-road performance, managers can improve the overall safety of their fleet by providing tailored education or requiring additional training for repeat offenders. Taking steps to improve the individual safety habits of drivers will significantly decrease the chance of an accident.
In 2015, The Federal Motor Carrier Safety Administration found that 74 percent of fatal crashes involving large trucks were initiated by collision. And collisions most often occur during lane changes or result from rear-endings due to drivers following another vehicle at an unsafe proximity. Fleet managers can implement safety technology to minimize this risk by installing collision-avoidance systems that produce an audible alarm if pedestrians, cyclists, or other vehicles are too close or in harm’s way. By alerting the driver to a potential hazard, many collision-initiated incidents can be avoided.
Distribution companies have also begun installing video-based safety technology – such as dash cameras and dual vision windshield cameras – so that if an accident does occur, the footage can assist with claim settlement. According to the U.S. Department of Transportation, 80 percent of accidents involving heavy commercial vehicles are not the truck driver’s fault. Unfortunately, the trucking company is frequently named as the defendant in litigation due to the company’s availability of high limits. By recording what happened before, during and after the incident, the footage can help to determine what caused the crash, and if the commercial vehicle isn’t at fault, it can also help to exonerate the truck driver.
Although all drivers have an obligation to operate their vehicle safely in order to keep themselves – and fellow travelers – out of harm’s way, truck drivers cannot help the negligence of other motorists. Distribution managers can reduce the likelihood of an accident and the subsequent costly litigation through continued education combined with mandated safety protocols and technology for their fleets.
Given the noted surge in both the frequency and the severity of commercial auto claims, insurance policies will inevitably begin to evolve – with advanced vehicle safety equipment potentially becoming a prerequisite for renewed coverage. Distribution companies should work with their insurance broker to identify solutions that will help mitigate risk for their specific operation, while also ensuring their vehicles are in compliance with emerging insurance standards.
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