Commercial auto carriers in exit “stampede”

“You have a limited pool of carriers and a large percentage of those have pulled out or severely restricted their underwriting just in the last eight months.”

Commercial auto carriers in exit “stampede”

Motor & Fleet

By Sam Boyer

Insurance carriers are “stampeding” away from commercial auto policies, making coverage difficult and expensive to place, says a specialty courier broker.

Peter Schlactus, managing director of New York-based courier insurance brokerage Brightstone Insurance Services, which was recently acquired by Risk Strategies Company, said the market for commercial auto policies for couriers is getting squeezed.

“The giant concern is with escalating commercial auto rates and limited market competition,” he said. “You have a limited pool of carriers and a large percentage of those have pulled out or severely restricted their underwriting just in the last eight months.

“In an overall insurance market that’s not hard, commercial auto … has kind of become an island of double-digit rate increases, even for successful operators. We see companies coming to us getting hit with 30, 40, 50% increases after one bad year. And that’s assuming they’re getting renewed at all.”

The big reasons the carriers are all pulling out, Schlactus said, are that prices were too low for too long, while too many vehicles clogged deteriorating roads.

“You have prices that were barely inching up since the Great Recession year over year, and meanwhile you’re not only faced with significant medical and legal cost inflation but, with economic recovery and growth [there has] has come more vehicles on the same roads – in fact roads that are worse,” he explained.

“And then layer on top of that technology which, on the one hand makes vehicles safer but on the other hand distracts the driver and creates significantly higher accidents.  And distracted driving has also fuelled this legal backlash of high judgments against carriers. And that’s driven claims costs way up, while premiums were lagging way behind.”

But, once one carrier decided enough was enough, most carriers followed suit, he said – causing the problems commercial auto brokers are now facing.

“Unfortunately as the case so often is in the insurance industry, competitive forces seem to hold back carriers from wanting to be the first to deal with that reality,” Schlactus noted. “So they all held back longer than they should until someone couldn’t take it anymore – and once they broke and ran, the herd stampeded after them. Unfortunately that’s the way the insurance market works far too often.

“So the few that have decided to stay the course know that they have less to fear from competitors so they’re trying to make up for years of questionable underwriting and pricing, all within the span of, it seems, a few months – and that just produces sticker shock.”

Related stories:
Agents struggling to find coverage for Cali couriers
GEICO to hike auto rates by 4.4% from June

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