Commercial Auto & Fleet Insurance: What’s Driving Costs and How to Take Control

Commercial auto insurance premiums continue to rise, with many businesses seeing double-digit increases year over year. If your company relies on vehicles to deliver goods, provide services, or transport employees, these rising costs can put serious pressure on your bottom line. But what’s behind the steady increase and what can you do to protect your business?

This upward trend is driven by a combination of factors, including distracted driving, escalating repair and replacement expenses, rising inflation and medical costs, and increasingly high jury verdicts. These challenges are influencing how insurers assess and price risk.

This article breaks down the key drivers behind rising commercial auto insurance costs, how your fleet’s claims history directly impacts your rates, and what strategies can reduce your risk and keep insurance costs under control. We’ll also explain how partnering with a knowledgeable insurance broker can give your business the edge when navigating today’s commercial auto market.

Why Are Commercial Auto Insurance Costs Going Up?

The increase in premiums is being driven by several compounding factors:

1. Distracted Driving

Smartphones, in-vehicle infotainment systems, and driver fatigue have caused a surge in distracted driving accidents. According to the National Highway Traffic Safety Administration (NHTSA), distracted driving caused over 3,000 deaths and countless injuries in a single year. For insurers, more accidents mean more payouts, resulting in higher premiums for everyone.

2. Rising Repair and Replacement Costs

Modern commercial vehicles come equipped with advanced electronics, sensors, and safety technology. While these features help reduce accidents, they make repairs significantly more expensive. A fender-bender that once cost $1,500 can now exceed $5,000 due to radar sensors or camera systems being damaged.

3. Inflation and Medical Costs

Inflation affects parts, labor, and rental costs – every component of a claim. Medical treatment following an accident is also more expensive, especially when injuries require hospitalization or long-term rehab.

4. Nuclear Verdicts and Social Inflation

“Nuclear verdicts” (jury awards exceeding $10 million) are increasingly common. Carriers often choose to settle quickly rather than risk a large jury award, which increases loss costs and leads to higher premiums across the board. This trend, called social inflation, is putting intense pressure on the entire commercial auto sector.

How Claims History Affects Your Insurance Rates

Fleet-related claims have a direct impact on commercial auto insurance premiums. When assessing the loss history of a fleet, the insurer analyzes the frequency and severity of claims. If both are high, it signals a larger risk, which prompts a higher premium. With a poor claim history, fleets could experience stricter underwriting, compounding interest year-over-year, and premium surcharges.

For the insurer, these factors cause higher reinsurance costs. With rising loss ratios, reinsurers are increasing rates, reducing coverage capacity, and being more selective. This cost is passed on to your business through higher premiums or reduced availability of coverage.

The Connection Between Risk and Insurance Cost

Insurers evaluate risk to determine the likelihood of a policyholder filing a claim and how costly that claim could be. The higher the risk, the higher the premium. Risk is assessed based on driving history and loss runs, the effectiveness of the organization’s safety program, vehicle types and usage, and the frequency and severity of fleet-related claims.

1. Driving history and loss runs

• Driver history is evaluated by reviewing drivers’ motor vehicle records (MVRs). How many violations, accidents, or license suspensions have there been, if any.
• Loss runs, usually from the last three to five years, show past claims activity, including frequency, severity, trends, and causes.

2. Safety programs

• Do you have a formal safety program, including comprehensive driver onboarding and training and a regular vehicle inspection cadence? In the eyes of the insurer, a well-rounded safety program is seen as lower risk.
• A lack of safety protocols can lead to higher premiums and, in some cases, a complete denial of coverage.

3. Vehicle usage

• What is the radius of operation? More time on the road increases risk exposure and, you guessed it, causes higher premiums.
• Is the fleet carrying hazardous material? The commodities that trucks carry can affect different risks levels.

4. Claims frequency/severity

• What is your claims history? A high frequency of claims, especially those involving significant losses, is a major red flag for insurers. It may indicate that the risk is too great to underwrite.
  If the insurer deems the risk is high, expect a high insurance cost.

Best Practices for Fleet Risk Management

1. Build a Culture of Safety

Getting ahead of fleet risk is essential for reducing costs and ensuring the safety of employees. One of the most effective strategies is to implement a strong driver safety program. Reinforcing safe driving practices through a comprehensive onboarding and annual training workshop can ensure drivers are committed to safeguarding both themselves and the fleet. The program should address common incidents such as distracted driving, speed, and driving fatigue. To further promote accountability and improvement, organizations can use driver scorecards or implement reward systems that recognize and incentivize safe driving behavior. A safe driver is an effective driver.

2. Use Telematics to Monitor Behavior

Using telematics and GPS tracking is a powerful way to enhance fleet safety and reduce risk. These modern systems allow fleet managers to monitor, in real-time, speed, location, harsh braking, and excessive idling. By proactively tracking these driving behaviors, accidents can be prevented before they happen. The data collected from these technologies can serve as a valuable resource for coaching drivers and improving overall performance. It also plays a crucial role in resolving insurance claims by offering clear, objective evidence of events, helping to protect both the driver and the organization.

3. Implement a Strict Vehicle Maintenance Program

Enforcing a strong vehicle maintenance schedule can reduce potential mechanical failures and roadside incidents by staying ahead of the fleet’s needs. To achieve a strong schedule, ensure you are doing regular inspections and timely servicing, so the fleet stays in top condition. It may help to keep digital logs of all maintenance activities, which provides a reliable record for compliance, audits, and warranty claims.

4. Hire Carefully and Re-Evaluate Annually

The hiring process should include proper screening of applicants, so you can be confident your fleet is controlled by quality drivers. A thorough background check, including an MVR review can mean the difference between a good employee and a high-risk driver. You should immediately disqualify any drivers that are considered high-risk. Not only should this process take place during hiring, but you should also reevaluate drivers annually to ensure your organization stays safe and protected.

5. Create and Enforce a Written Fleet Policy

Setting and enforcing a clear fleet policy is essential for maintaining safety, consistency, and accountability across your organization. A well-defined policy should include expectations surrounding seatbelts, mobile phone use, and accident reporting. Setting expectations upfront can enforce the priority of safety within the organization. Once you have a comprehensive fleet policy in place, the next crucial step is to ensure all drivers review and formally acknowledge the guidelines, helping protect your organization and reinforce accountability.

6. Evaluate Your Vehicle Mix

Reviewing your vehicle mix is a key strategy in managing fleet risk and improving operational efficiency. Start by reviewing our fleet to ensure you have the appropriate number and types of vehicles to meet business needs. This not only reduces unnecessary costs but can also reduce exposure to risk. Have you considered newer, safer, and fuel-efficient models? The modern vehicles are equipped with technologies that keep driver safety at top of mind. New models can be a smart investment for long-term risk reduction and overall safety.

How Insurance Brokers Help You Save

After exploring proactive strategies, industry best practices, and the key factors driving the rise in commercial auto insurance costs, you might be asking: How can your broker help you control expenses while keeping your drivers safe? That’s where the expertise and support of AssuredPartners comes in.
With AssuredPartners, you gain:

• Access to multiple carriers with competitive options tailored to your needs.
• Customized coverage for protection that fits your operations.
• Risk management guidance from seasoned professionals to reduce exposure and improve safety.
• Claims advocacy support to help you manage the claims process, minimize disruptions, and resolve disputes quickly.
• Policy reviews and adjustments to help make sure your coverage keeps pace as your business evolves
• Regulatory support for compliance with DOT, FMCSA, and state regulations.

Our brokers take a personalized, strategic approach to ensure your organization is properly protected and aligned with your needs. We serve as your risk management partner, helping you protect your assets while keeping insurance costs under control.