Technology, Transparency and Improving the Industry

Commercial automobile insurance as a segment of the insurance industry has been consistently unprofitable for around a decade. It’s a triple-whammy:

1. Increasing frequency - due in part to distracted driving
2. Higher loss costs (driven up by increased prices and complexity of the vehicles themselves)
3. Plaintiffs’ attorneys using reptilian theory tactics to secure ‘nuclear’ verdicts

It all results in a veritable explosion of operating costs for truckers.

Crash costs mounting

Data from DriveSafe Online pegs the average cost per accident at $74,000. That, says DriveSafe staff, is the average cost for a driver involved in a collision. The figure jumps to $500,000 - often more - if the crash causes a fatality. Lost trucking revenue, unhappy shippers and other lost opportunities due to the drain on corporate resources all increase the pain of an accident for the fleet operator.

Occupational Safety and Health Administration (OSHA) data shows there is a motor vehicle accident on U.S. roads every five seconds, and a fatal one every 12 minutes. Further, these collisions are draining as much as $60 Billion from the productive economy each year in legal and medical expenses, property damage and lost employee productivity among other significant losses.

“Insurtech” to the rescue?

Most in the industry recognize that none of this is sustainable. It is obvious the commercial environment for commercial vehicle insurance is making it increasingly difficult for fleets to find cost-effective coverage beyond minimum liability protection. The excess insurance market has suffered contractions in capacity which have cause the premiums for higher limits to increase dramatically. Something has got to give.

From the perspective of one insurer and the company’s prominent investors “insurtech” is the answer. The term “insurtech” says Aaron Huff in a recentCommercial Carrier Journal article, is used to describe “technology innovations that are being used to squeeze out savings from the traditional insurance model.”

Chuck Wallace, co-founder and chief executive of High Definition Vehicle Insurance (HDVI) notes that the technology and data are available to address present and emerging risks, but traditional insurance companies are not taking advantage of how this technology can be applied to lower their rates.

But new transparency might help solve old issues

The intent of HDVI’s technology and insurance model is to create transparency between fleets and the insurer. Certainly, any boost in transparency might help shape program structure and set rates according to harder, more actionable, data. But pertinent telematics and ELD data is available to fleet operators to leverage with or without an integrated system from their insurance carrier. Regardless, the data is increasingly important to help insurers and their fleet customers understand risk exposure and how to lower it to positively impact insurance costs and business profitability.

Setting competitive and sustainable premium rates in an environment of increasing risk and liability is making it tough on trucking insurers to provide a product at a price point fleets can live with. Its effect has been a significant challenge for both industries. Nevertheless, together we must persevere. And even though technology solutions may indeed be capable of building a better insurance mousetrap through telematics and vehicle operating data, it’s what you do with it once it’s captured that counts. Many observers feel that limiting the occurrence of claims themselves through better risk management is where the rubber meets the road in reducing insurance costs.

If you have questions or concerns regarding the use of technology to protect your trucking operation, contact the AssuredPartners Transportation specialists.