Watch The Road
Here are ways to reduce your fleet’s liability.
By Stephen Washkalavitch
In 2016, the U.S. commercial auto industry reported a combined underwriting ratio of 110.4 percent – a 15-year high according to a recently released Fitch Ratings report – and has also produced an underwriting loss for six consecutive years. With this consistent poor performance, it isn’t surprising that the industry has also seen the fastest-escalating insurance rates compared to all major commercial segments. Liability premiums grew by nearly six percent in the last year alone.
The notable hike in premiums is partly attributed to the increased frequency of claims. In 2016, Verisk Analytics reported that accident occurrences were at their highest level in decades, rising steeply throughout 2014 and 2015. Insurers are not only witnessing more claims, but also an uptick in claim severity. For instance, the cost of repairs has risen significantly over the last several years as a result of the types of automobiles on the road. Since the effects of the 2008 recession are lessening, people are beginning to purchase newer, more modern vehicles. These cars are often embedded with expensive technology like adaptive cruise control and lane-keep assist features. Accidents that damage this technology can be extremely costly to repair.
In an effort to manage escalating insurance expenditures, many distribution companies are searching for innovative solutions to lower premiums. Considering the amount of time spent on the road, the first step for many distribution companies to reduce accident risk is to minimize unsafe driving behavior. In 2010, the Insurance Institute for Highway Safety found that nearly 287 million miles were traveled in commercial trucks alone. Effective hiring practices like pre-employment screening and post-offer testing have proven to be critical, but are often not enough.
One option that is gaining popularity is the use of advanced in-vehicle safety technology, designed specifically to reduce the likelihood of an accident and, in turn, any subsequent litigation. Technology can be installed in vehicles to monitor and correct the driving habits of their operators. Vehicle diagnostics will collect data relating to an employee’s acceleration, harsh braking and even cell phone usage. By taking steps to identify drivers that have a history of hazardous behavior, additional safety education can be required to correct negligent habits – which will ultimately lower the chances of an accident.
In 2015, the Federal Motor Carrier Safety Administration named collisions as the cause of 74 percent of fatal crashes involving large trucks. Because vehicle collisions are not only dangerous, but they can often lead to multi-vehicle accidents, distribution companies can consider implementing loss control techniques such as collision-avoidance systems. This technology has an audible alarm that will sound if pedestrians, cyclists or even other vehicles are getting too close to the commercial truck. Because the truck driver is alerted to the potential danger, many collision-related accidents can be evaded.
Video-based safety features like dash cameras and dual vision windshield cameras can be installed to accurately depict a series of events should a driver or a company need proof to assist during claim litigation. Unfortunately, in the event of an accident, the trucking company is commonly named as the defendant in litigation due to their availability of high limits. According to the U.S. Department of Transportation, only 20 percent of accidents involving heavy commercial vehicles are the truck driver’s fault. By recording what happened before, during and after, the truck driver can be exonerated for an accident caused by another vehicle.
Although progressive in-vehicle safety technology considerably reduces the probability of an accident, fleet managers should not rely entirely on this approach. Thorough employee screening and ongoing driver education should also be combined with standard operating procedures and mandated vehicle safety protocols. Distribution companies should work in tandem with their insurance broker to analyze loss data and develop a proactive risk management strategy tailored to their specific operation.
Steve Washkalavitch is a producer at The Graham Company. Drawing from 13 years of insurance and consulting experience, Washkalavitch designs and implements comprehensive insurance programs and long term risk management strategies through extensive exposure analysis, financial modeling and customized service delivery.