How Bad Driving Behaviors Raise Commercial Auto Insurance Costs

If you are a fleet manager, independent contractor, or serve a role that focuses on company vehicles, you’ve likely seen the cost of your company’s auto coverage skyrocket. Understanding the reasons behind this, and commercial auto insurance in general, is essential.

One key stat to know is this: Over the past 12 years, insurance carriers providing commercial auto coverage have seen the cost of claims exceed the amount of premiums paid for said coverage.

The commercial auto insurance sector has been and continues to be unprofitable. Several factors are to blame, but one key factor—driving behavior—can be addressed through loss control and prevention, which may help in moving the needle in the correct direction.

Driving behaviors

According to a LexisNexis Risk Solutions Auto Insurance Trends Report, in 2023, the number of miles automobiles drive has returned to pre-pandemic numbers. In turn, accidents are becoming more frequent and exceeding pre-pandemic statistics. With the rise of accidents, more auto claims are being made.

Two key factors to these findings are distracted driving and speeding:

Distracted driving

Distracted driving has a profound impact on commercial auto losses and claims. A study of commercial drivers found that distracted driving accounted for 71% of car crashes, 46% of near misses, and 60% of all critical incidents that threatened a person’s life or caused property damages.

Alarmingly, distracted driving is on the rise, particularly among younger drivers. Analysis by LexisNexus reveals a staggering 66% increase in distracted driving violations among Gen Z drivers from 2019 to 2023. As more Gen Z drivers enter the commercial workforce, this trend is likely to continue unless proactive measures are taken by business owners.  

Speeding

Speeding is a major contributor to serious auto accidents, resulting in costly insurance claims. There is a strong correlation between higher average speeds and both the likelihood and severity of crashes. Specifically, a 1% increase in average speed leads to a 4% rise in fatal crash risk and a 3% increase in serious crash risk. Furthermore, the National Safety Council reported that speeding was a factor in 29% of all traffic fatalities in 2022.

Leveraging technology

Telematics is a tool that has seen increased popularity over the past couple of years. These devices monitor and transmit data on location, vehicle speed, fuel consumption, driver behavior, and more, allowing fleet managers to pinpoint risky driving habits. Once risks are identified and quantified using telematics, customized training can be implemented to help eliminate reckless behavior.

Additionally, commercial auto insurance carriers sometimes give discounts for having telematics in place, as illustrated in one of our recent case studies.

Driver accountability

As employers leverage technology to decrease risky driving behavior, it is vital for a comprehensive vehicle policy to be in place as well.

Two important policies to implement are for employees who drive their personal vehicles for work purposes and those who drive company-owned vehicles. These policies should identify risky behaviors, such as distracted driving and speeding as unwelcome.

Additionally, companies should hold employees accountable for policy violations to maintain a safe driving culture. In extreme circumstances, companies can be sued for negligent entrustment. For example, if a motor vehicle claim involves speeding the company can be sued if there is evidence that they were aware of speeding issues with their drivers. Holding employees accountable may be difficult, but it outweighs the risks of financial exposure.

To help keep this top of mind, employers should train employees throughout the year about fleet policies, expectations, and procedures.

If you’re interested in exploring new ideas for your commercial auto coverage, a trusted advisor at The Miller Group is available to discuss your options.