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6 Surprising Factors Affecting the Cost of Commercial Auto Insurance

Your commercial auto premiums can increase for unexpected reasons, regardless of your driving habits.
By: | May 2, 2017 • 6 min read


Accidents happen.

And when they do, people expect their auto insurance premiums to rise. That cause and effect relationship is easy to understand.

But even safe drivers are noticing their coverage is becoming more expensive. Owners of large commercial fleets are especially hit hard when rates rise. The truth is that accident history is just a small part of a much bigger picture, created by the confluence of several macro trends.

Here are six unexpected reasons why your commercial auto premiums may be increasing:

1. More Miles Driven

David Nelson, 2nd Vice President of Auto in Commercial Accounts

When the recession hit, companies naturally scaled back. Manufacturers produced less; there were fewer sales calls and deliveries to be made. Drivers were laid off as demand dropped.

Since the economy’s been improving, activity is picking up again.

“The need to receive component parts and deliver goods is back up,” said David Nelson, 2nd Vice President of Auto in Commercial Accounts, Travelers.

But rather than hiring more drivers and buying new vehicles right off the bat, companies are instead relying on their core workforce to pick up more work.

“Trucks are being driven more miles, but there aren’t necessarily more trucks. Owners would rather get the most out of their current vehicles before they start adding more,” Nelson said. “The increased risk of more miles per truck will be compounded as the economy continues to improve and companies eventually do need to add vehicles to keep up with demand.”

2. Inexperienced Drivers

The commercial driver shortage continues to increase risks on the road.

Driving long distances is a hard job, so recruiting has never been easy. Now, many experienced drivers are approaching retirement age.

“The lingering question is, where is the next group of truck drivers going to come from? Will they have the same skills and capacity as the generation that’s retiring?” said Chris Hayes, 2nd Vice President of Transportation Risk Control, Travelers.

New regulations may make recruiting drivers even harder. For example, electronic time logs and tracking sheets will replace paper formats by December, 2017.

“Drivers perceive this change as more oversight, and it also means they may have to be more accurate or inclusive in their reporting. The new system will require a level of electronic engagement not all drivers are comfortable with,” Hayes said.

Stricter safety standards and less independence might turn off potential new drivers. While an improving economy means transportation companies are hiring, it also means the talent pool likely has options in other types of service jobs, like factory or construction work.

Those that do get behind the wheel with less experience present a larger risk.

3. Lower Fuel Prices

Chris Hayes, 2nd Vice President of Transportation Risk Control

“There’s a direct correlation between fuel prices and national accident frequency,” Hayes said.

The number of accidents per year has dropped steadily since the early 2000s.

“According to the Department of Transportation’s Fatality Analysis Reporting System, in 2005, there were roughly 43,000 people killed in motor vehicle accidents. By 2014, it dropped to about 32,000,” Hayes said. Some attribute the decrease to safer cars and more awareness around the dangers of drunk driving. But price at the pump played an even bigger role.

When gas is expensive, people limit their time on the road, which leads to a lower accident frequency.

“We saw the least accidents when gas hit its peak at $4 per gallon, and accidents started increasing when it dropped back to $2 per gallon,” Nelson said.

The relatively stable gas prices may mean more cars on the road both for business and personal use. And more cars equal more accidents.

4. Distracted Driving

Screens are drawing a bigger share of drivers’ attention.

“Driving has always had an element of distraction, with texting being a notable recent example, but now dashboard ‘infotainment’ centers are an increasing concern,” Hayes said. “With their radio, GPS, Bluetooth and internet search functions, these systems require a lot of visual engagement.”

Texting, however, has also become a dangerous distraction for those traveling on foot.

“In some of our delivery zones, we were seeing an increased frequency of pedestrian strikes, and we spent some time investigating what drivers were doing differently,” Nelson said. “We found that the drivers weren’t necessarily doing anything wrong; it was the people around the vehicles who were less attentive.”

Semi-autonomous driving also creates opportunities for drivers’ minds to wander.

“As you move into what’s called ‘level two’ autonomous driving, you have multiple safety systems linked together, and there’s a risk that you’ll pay less attention to your driving because you assume your vehicle will take over those functions for you,” Hayes said.

“In other words, the safety benefits of these systems may be somewhat offset by the false sense of security that they provide and less driver attention.”

5. Aggressive Attorneys

In the past, larger claims for amounts of $100,000 or more would have an attorney involved roughly 70 percent of the time. “Now, we are seeing attorneys getting involved in claims as small as $25,000,” Nelson said.

One theory behind the shift is that many law school graduates entering the workforce during the recession had to forge their own paths while firms weren’t hiring, so they went after smaller claims aggressively to generate revenue from an untapped source.

“Some attorneys are specializing in leveraging all of the information available about drivers or operations of a vehicle to prove negligence on the part of the transportation company, often with a good deal of success,” Nelson said.

“The Federal Motor Carrier Safety Administration’s Safety and Fitness Electronic Records System, also known as SAFER, includes number of accidents for a given company, frequency of inspections and violations as a result of those inspections,” Hayes said. “The publicly available data was originally intended for state troopers, federal motor carrier enforcement officers and other people involved in trucking safety to better engage with trucking companies.”

The data was originally meant to improve safety by informing drivers and transportation companies of what they were doing wrong, assuming that if they can measure their performance, they can improve it.

Attorneys now are latching onto that data as evidence that if a particular company or driver has more accidents than the national average, they are more likely to be the negligent party.

“It’s definitely something that can be used to try to influence a jury,” Nelson said.

6. Increasing Medical Costs

An increase in the frequency and cost of soft tissue surgical procedures is another factor making auto claims more expensive.

“There’s a broad cost to deliver care in America. That trend isn’t going away any time soon, and the auto insurance market is impacted by that,” Nelson said. Injuries from auto accidents can run the gamut in terms of severity, but soft tissue injuries in the form of strains and sprains are prevalent. Injuries involving surgery often take longer to heal and require follow-up treatments as well.

All of these factors can drive up the cost of claims, which in turn can lead to higher premiums for insureds. Owners of large commercial fleets have the most exposure, but any company utilizing vehicles for business purposes – even if those vehicles are employees’ personal cars – can feel the impact of rising auto insurance premiums. Keeping an eye on these larger market and economic trends can help insureds not only understand their premium costs, but also anticipate what’s to come.

To learn more, visit https://www.travelers.com/business-insurance/commercial-auto.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Travelers. The editorial staff of Risk & Insurance had no role in its preparation.




The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business. A component of the Dow Jones Industrial Average, Travelers has approximately 30,000 employees and generated revenues of approximately $28 billion in 2016. For more information, visit www.travelers.com.

Risk Management

The Profession

Maila Aganon is the personification of the American dream. The vice president of treasury and risk for Caesars Entertainment Corp. immigrated from the Philippines and worked her way to the top.
By: | October 12, 2017 • 4 min read


R&I: What was your first job?

I actually had three first jobs at the same time at the age of 16. I worked as a cashier in a fast-food restaurant, a bank teller and a debt collector for an immigration law firm.

R&I: Who is your mentor and why?

I have a few. The first one would be the first risk manager I reported to. He taught me the technical part of the job, risk financing, captives and insurance. I am also privileged to be mentored by Lori Goltermann (CEO of U.S. Retail for Aon Risk Solutions).  From her I learned to be resilient and optimize life/work balance. Then of course I also have a circle of ladies at work who I lean in to!

R&I: How did you come to work in this industry?

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I was once a bank teller and had a client who was an insurance agent. He would come in every day to make deposits. One day, he offered me a job. He said, “How would you like to have your own desk, your own phone and your own computer?” And I said, “When do I start?” I worked for this personal lines insurance company for six years.

R&I: Did you take to it immediately?

Yes, I did sales, claims and insurance accounting. I left for a couple years and that is when AAA came calling, which was my first introduction to risk management. I didn’t know there was such a thing as commercial insurance. They called me and the pitch was “how would you like to run a captive insurance company?”

R&I: What have you accomplished that you are proudest of?

It is not so much the job but I say that I am the true product of the American Dream. I came to the U.S. when I was 16. I worked three jobs because I didn’t want to go to high school (She’d already graduated high school in the Philippines.) I spoke very little English, and due to hard work, grit and a great smile I’m now here working with all of you!

R&I: What is your favorite book or movie?

In movies, it is a toss-up between Gone with the Wind and Big Daddy.

R&I: What is your favorite drink?

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I like anything sweet. If you liquify a dessert that’s my perfect drink.

R&I: What is the most unusual/interesting place you have ever visited?

This is easy because I just got back from Barcelona on a side trip. I visited the Montserrat Monastery, which is a thousand-year old monastery. It was raining and foggy. I hiked for three hours and I didn’t see a single soul. It was a very peaceful place.

R&I: What is the riskiest activity you ever engaged in?

This is going back to working at a fast food chain when I was young. I worked in a very undesirable location in San Francisco. At 16 I used to negotiate with gang members so they wouldn’t rob me during my shift. I had to give them chicken so they wouldn’t rob me.

Maila Aganon, VP, Treasury and Risk, Caesars Entertainment Corp.

R&I: If the world has a modern hero, who is it and why? 

I can’t say me. They have to be my kids Kyle and Hailey. They can make me laugh and cry within a half-minute of each other. Kyle is 10, a perfect Mama’s boy. Hailey is seven going on 18.

R&I: What about this work do you find the most fulfilling or rewarding?

I think the most fulfilling part is how you build relationships with people and then after a while they become your friends.

R&I: What is the risk management community doing right?

Risk managers do a great job of networking. They are number one. Which is not a surprise because the pillar of our work is building a relationship with underwriters, clients and brokers.

R&I: What could the risk management community be doing a better job of? 

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I am experiencing that right now; talent.  We need to a better job in attracting and retaining talent. Nobody knows about what we do. You tell someone ‘I’m as risk manager’ and they give you a blank look. What does that mean?

We’re great marketers and we should use this skill set in attracting talent. We should engage our universities, our communities, even our yoga groups and talk to them about the exciting world of risk. It is an exciting career because there is nothing like it.

R&I: What emerging commercial risk most concerns you? 

It would have to be the increasing cyber risk and the interdependency of systems.

R&I: What does your family think you do? 

I took my seven year old daughter once to an insurance event that had live music, dancing and drinks. She thinks that whenever I go to an insurance meeting, I’m heading to a party.




Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]