Over the past few years, we have seen a steady increase in the costs of commercial auto insurance and most insurance agents are saying the same thing. "Inflation has caused all of our carriers to increase their rates." While this is true, it doesn't solve your issue or really explain the story behind it all, it moves the blame to something or someone else. Furthermore, they aren't telling you about social inflation. Social inflation is loosely defined as: when the cost of litigation as well as insurance claims increase at a faster rate than economic inflation.?
On the commercial side of insurance, we have seen the worst of those rate increases. I'm talking upwards of 25-30%. Unfortunately, when we price these out with other carriers, we often find that even after these price increases, the other carriers are sitting around the same spot. Moreover, if we do price it out and another carrier is lower, we can't move the coverage because our customer will lose the package discount they have, and the other carrier has probably tightened up on their property guidelines, meaning we can't move it anywhere else.?
Instead of telling someone it is inflation, my team and I have taken a stance of risk management instead of just passing the blame on to someone else.?
First, let's list a few of the reasons we have seen these rate increases:
- Distractions - According to a report done by Travelers, "64% of companies surveyed worry that employees driving while distracted could cause liabilities, representing a five-year high. Technology is one of the primary causes of distracted driving, with 25% of employees reporting crashes or collisions while driving for work due to distractions from a mobile device or tech (1). Just like when we are driving, our employees are distracted every time their phone rings and they answer a call, every time someone texts them, and they text them back while driving. There are so many distractions in today's world of driving. What can you as an owner do about it? Fleet safety programs. You can track where drivers are, how fast they are going, dash cams to see if they were texting and driving, brake monitoring so you can see if they are slamming on brakes or not. With this, you can hold them and yourself accountable. In turn, making your business less apt to claims that are your fault and decrease possibly a large part of your overhead cost - insurance.
- Cost of bodily injury claims - "Both the severity and frequency of claims, including severe auto physical damage and bodily injury, have increased since 2020. Bodily injury severity has increased 20% in the post-pandemic years" (2). The United States Department of Transportation reports "Twenty-eight percent of fatal crashes, 12 percent of injury crashes, and 8 percent of property-damage-only crashes in 2022 were speeding-related traffic crashes" (3). "Among speeding drivers involved in fatal traffic crashes in 2022, there were 29 percent who did not have valid driver licenses at the time of the crashes, compared to 15 percent of non-speeding drivers" (3). "In fatal traffic crashes in 2022 more than half (52%) of speeding drivers of passenger vehicles were unrestrained at the time of crashes, compared to 22 percent of non-speeding passenger vehicle drivers" (3). I am sure we are all guilty of speeding at some point or another, but when you take a look at these staggering numbers, it puts slowing down into a whole new perspective.
- Driver selection - From truck drivers to your main street retail shop, experienced drivers with a clean driving record are hard to come by. Employers should always view MVRs before hiring employees that they want to add as a driver to their policy. Unfortunately, many employers hire employees and plan for them to be a driver without ever thinking about the effect that driver could have on their commercial auto insurance. This is why it is important to have a new employee checklist when hiring to make sure you check not only the boxes that apply to day-to-day operations, but those boxes that apply to your sometimes forgotten about overhead expenses like commercial auto insurance. It is easy to forget about this when you are in a pinch and need to hire a new employee to earn more revenue; however, that revenue could be significantly reduced if that driver causes your rate to increase.
- Increase in cost of repair and replacement - Think back to 2017, the price of Yukon Denali was about $71,000, in 2025 the GMC Yukon Denali's are selling for about $97,000. Furthermore, RSM reports: "the consumer price index (CPI) for motor vehicle maintenance and repair—accounting for both parts and labor—climbed by approximately 10% from 2023 to 2024" (4). A 10% increase in one year seems astronomical but when we think about the cost of four of five years, the numbers have increased drastically.
Unfortunately, these are only a few factors that business owners are facing. There are many others that I did not touch on that could be discussed. Ultimately, my team and I are looking at these stats and are making a concerted effort to inform those who are interested in lowering the costs of their insurance through risk management, and we are putting these plans into action. Employees and even some employers at first may be frustrated with changes in common practice; however, when employers are able to put more money in the pockets of their employees because they saved on their insurance, everyone is happier and work is done in a safer and more effective manner.
If you are interested in ways we can help, reach out to me and let's see what we can organize for you and your team. We've been in business since 1866, we know a thing or two about how to protect you.
