What Six Trends are Reshaping the Commercial Sector?

Commercial auto insurance is a vital component in safeguarding an organization’s drivers and vehicles, offering protection against property damage, bodily injuries, and liability issues arising from on-road accidents. Nevertheless, the commercial auto insurance sector has experienced sustained tightening over the last decade, evident in continual rate hikes, constrained capacity, and challenging market conditions. Therefore, it is imperative for businesses to remain informed about ongoing developments influencing this coverage category and collaborate with their insurance experts to procure suitable policies. Here are some of the most recent trends impacting the commercial auto insurance domain.

Continued driver shortages

The nation’s commercial driver shortage is forecast to reach a record high of 82,000 in 2024, according to the American Trucking Associations. To minimize this shortage, some businesses have adjusted their driver attraction strategies. Yet, many businesses have had to lower their applicant standards to fill open positions. These drivers often have less experience, making them more likely to be involved in accidents and compounding commercial auto losses.

Rising vehicle replacement expenses

The market for new and used vehicles, especially commercial vehicles, has seen sharp price increases in recent years. Despite some softening, the costs of new and used vehicles are still near record highs. In fact, according to automotive research company Kelley Blue Book, the price of new vehicles has risen by 28% since the beginning of 2020. These factors impact the overall cost of insurance claims when vehicles need to be fully replaced.

Increased vehicle repair costs

Technological advancements have made vehicles safer and more efficient. However, as commercial vehicles are outfitted with a variety of sophisticated features, they are becoming increasingly expensive to repair. Further, ongoing supply chain issues and increased demand for certain components have led to inflated prices for vehicle parts. Auto repair shops are also facing staff shortages for skilled positions, thus exacerbating labor costs for vehicle repairs.

Elevated medical costs

Medical costs have been increasing for some time. According to industry data, losses for bodily injury claims have jumped by 10% over a five-year period alone. These rising costs have affected multiple lines of insurance, including the commercial auto sector. It’s not uncommon for the injuries of those involved in accidents to require multiple doctor visits or even surgeries, which can extend recovery time and influence the costs of related claims. These surging liability expenses have been incorporated within the price of commercial auto insurance.

Surging nuclear verdicts

Nuclear verdicts refer to exceptionally high jury awards—generally, those exceeding $10 million. Such verdicts have climbed over the past decade. The Insurance Information Institute recently reported that the culmination of social inflation and nuclear verdicts has led to a $30 billion surge in commercial auto claim costs since 2012. Consequently, insurers have to factor in nuclear verdicts when they price commercial auto insurance policies, prompting higher rates.

Distracted driving concerns

While many factors can lead to accidents on the road, distracted driving is one of the most common concerns. As these incidents have become more frequent, commercial auto insurance rates have climbed in tandem, creating risk management challenges for policyholders and posing profitability issues for insurers across the market.

We are here to provide much-needed market expertise. Contact us today for additional risk management guidance and help navigating the evolving commercial auto insurance market.