7 Factors That Jack Up Your Commercial Auto Insurance Rates

This blog post is dedicated to the clients and prospects I talked to in the last couple weeks about auto insurance.

The program that wants to transport at risk youth to and from after school events, has a bus, and is trying to figure out how much it will cost to insure.

The IDD service provider that sat with me on the phone for an hour with the underwriting of an unnamed insurance company that wanted to classify their vehicles as “Non-Emergency Medical Transport” and cancel them.

The Behavioral service organization that is not yet my client but is fighting the same exact fight with the unnamed insurance company in another state.

When you don’t know the rules of the game, it can feel like the game is designed for you to lose.?

Here are 6 ways your auto insurance program can get really messed up

1.Your vehicles are improperly classified.

Insurance companies determine your auto insurance rates based on the type of work you do.? They collect a massive amount of information based on those operations, then predict the future based on that data.

A plumber is different from a group home who is different from a taxicab service.

It can mean the difference between affordable insurance, unaffordable insurance, and not being able to buy insurance at all.

In the example I alluded to above, a service provider bought insurance for themselves directly through the insurance company first.? They classified themselves as a Taxi service.? Not surprisingly, this was very expensive.

When they bought the insurance through me, we described them as a social service organization.? Much more affordable.

But then the insurance company reviewed the file and thought that they should be non-emergency medical transport.? This classification is ineligible.

It got straightened out, but this illustrates the point – classifications matter.

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2. Radius of Operations is changed to a longer distance

Insurance companies generally break this down into 3 categories:

Under 50 miles, between 50-300, and over 300 miles.

A wider radius dictates a higher level of risk.? This can be very trick if your organization does 1 road trip very year across the country with your youth group.

I recommend you stick with the description that is for 99% of your operations.

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3. Drivers have terrible driving history

Side bar – your drivers will be the biggest factor in how much you pay for auto insurance.? Their driving records will impact underwriting.? And it’s your drivers that will wreck your car and get into accidents.

Every company's a little bit different on how they underwrite your drivers.

Some companies are going to run the driving records of your drivers and they're going to change the pricing based on the driving record.

Others are just going to give you a list of driving requirements.? They’ll say your drivers can't have any major accidents, they can't have any major moving violations, something of that nature.

But if your insurance company goes through your drivers list and finds multiple drivers with spotty driving history, they’re going to factor that into the pricing they offer your organization.

4. The Type of Vehicle is Improperly Described

The insurance company will look at the type of vehicles that they're insuring.

If they are looking at a box truck, that's different than say a 15-passenger van, which is different from a school bus, which is different from a minibus.

As a result, it's important that when you are having an insurance company look at your business, that you make sure that they are treating your vehicles correctly.

Make sure they have the correct weight and body style.? If it’s shown to be more risky, you’ll be asked to pay more.

5. You Drive into places like the District of Columbia

This is a really important factor because it's very different to drive in Washington DC than it is to drive in Indianapolis.

In Indianapolis, the roads are wider, the people are nicer, and they wave each other on.

And in DC, well, we just like to cut each other off around here.

Insurance companies know that, so insurance companies are going to look at where you garage your vehicles.? They're going to look at where you drive and that's going to impact the pricing substantially.

6. You have lapses in coverage, lots of claims, or big claims

Insurance is all about using the past to predict the future.? Your previous insurance buying history and claims history are an indication of the way you run your business operations.

Do you have a frequency of claims?

Do you have any severe claims?

Do you frequently change insurance companies or brokers?

If you have a frequency of claims, those can be indications of drivers that are either behaving poorly, not poorly, not well trained, not well taught on how to drive the vehicles, not being corrected like.

If you have a severe claim, that can be a shock loss, or it can be seen as the natural outcome of bad behavior.

If you bounce around between providers, underwriters view that as a business owner that may be erratic in how they manage their business.

The best history is one with clean losses and no change.

The worst ones show claims, lapses in coverage, and frequent change between companies.

7. You’re buying the commercial Auto insurance all by itself.

In commercial auto insurance, there's not usually a direct discount for you for the auto insurance by also buying liability insurance.

But as a rule of thumb, if you buy general liability insurance and auto insurance from the same insurance company, you can generally get better pricing that way.

So it's a good idea that when you are trying to get your costs down on auto insurance, make sure that you're looking at all the options to have your liability and auto insurance with the same insurance company.

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Conclusion:

Commercial Auto insurance isn’t cheap.? Especially when transporting people is part of your operations.? But it doesn’t have to be more expensive than necessary.? Avoid these 7 mistakes that jack up your auto insurance.