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Top 3 Reasons Impacting Commercial Insurer Profitability and What You Can Do

 

In a time where insurance claims are rising faster than ever, understanding the reasons for this trend and finding a full-proof way to reduce it is key. 

Below is an in-depth look at the three main reasons for commercial insurance loss and a solution proven to reduce dangerous driver behavior which is a key contributor to increased insurance claims.

Reason 1

Increasingly Poor Fleet Driving Behavior Resulting in Rising Claims


It has become increasingly difficult for insurers to keep up with the seemingly unstoppable rising costs of claims, loss of clients and increase in dangerous driver behavior. With one in every five drivers estimated to be involved in a traffic accident this year, the cost to insure a fleet customer is higher than ever.


Common culprits of accidents are:

Common Culprits of Accidents

Specifically, a study conducted by the National Highway Traffic Safety Administration (NHTSA) discovered that 21% of accident-related costs were a result of speeding and a study by the Federal Motor Carrier Safety Administration showed that almost half of the trucks involved in a roll-over accident had rolled over due to hard cornering. Another study by the NHTSA found that 90% of rear-end accidents were caused due to a delayed driver reaction such as, braking hard unexpectedly and not giving the person behind enough time to react and avoid an accident and also, accelerating too quickly resulting in less distance between cars, thus increasing the chances of a rear-end collision.

Reason 2

Higher Frequency Of Accidents Means Higher Costs For Insurers

In addition to poor driving behavior causing claims to increase year after year, the frequency at which accidents occur is also rising at an alarming rate. In fact, according to research conducted by ATS Fleet Solutions, “the number of fleet driving violations increased around 50% between 2007 and 2015”¹. This means that insurers not only have to pay more per accident but they also have to do so much faster than ever before.

 

Exploring the Alarming Rate of Accidents

Reason 3  

Overall Increase In Average Claims Costs and Combined Ratios 

 

In addition to poor driving behavior resulting in rising claims and the frequency of accidents occurring increasing year after year, the overall increase in average claims costs and combined ratios is another reason impacting commercial insurer profitability.

A study conducted by ISO found that for every accident the average cost to an insurer can range from $1,671 for a comprehensive claim to $17,024 for an auto liability claim for bodily injury. And, in the case of a car accident resulting in a fatality, the overall cost increases to an average of $504,408 - half of which the insurer has to pay.

Below is a chart which breaks down the various costs incurred by insurers in the case of an accident:

 

Breaking Down Insurance Costs 

Additionally, research shows that combined ratios for commercial insurers have risen to over 100% since 2010, meaning that underwriting losses have plagued commercial auto industry for over seven years.

 

Commercial Auto Loss Ratios

 

Solution: Decrease the Number of Costly Insurance Claims with Commercial Insurance Telematics

It’s evident that poor driver behavior is directly related to the severity and frequency of accidents. So how can an insurer help its fleet customers’ drivers improve their driving behavior to reduce the number of claims submitted and ultimately, save money? The answer is simple: commercial insurance telematics.

 

Commercial Insurance Telematics – A Positive Influence on your Fleets

Commercial insurance telematics solutions provide insurers with the ability to engage with fleet drivers in a way like never before and consequently help positively transform driver behaviors. Such solutions can help encourage safe, distraction-free driving behaviors by:

  • Providing real-time feedback to let drivers know when a behavior is unsafe
  • Reporting on trends so fleet managers can identify and, in time, correct unsafe driving behaviors
  • Educating drivers on how to drive in a safe manner
  • Providing positive reinforcement to drivers through effective performance programs which have a positive and lasting impact on the drivers’ behaviors.

As a result, commercial insurance telematics has become increasingly popular among commercial lines insurers all around the world due to the tool’s ability to positively transform driver behavior and increase insurers’ profits.

Below is a chart highlighting the key benefits to commercial insurers:

 

Key Benefits to Commercial Insurers

 

 

Learn More About Commercial Insurance Telematics

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¹ Spireon. 2017. https://www.spireon.com/wp-content/uploads/FAI-Fleet-Driver-Safety.pdf.