Commercial auto insurance market facing 'unprecedented' challenges

The market has shifted numerous times in 2019, says expert

Commercial auto insurance market facing 'unprecedented' challenges

Motor & Fleet

By Bethan Moorcraft

The US commercial auto insurance market is a shapeshifting beast. In 2019 alone, the market has gone through multiple transformations as insurers attempt the challenging task of pricing risks appropriately, while also limiting the exposure on their balance sheets.  

The volatility in the marketplace – both primary and excess - is “unprecedented,” according to Matt Domitrovich, senior vice president and transportation team leader at Worldwide Facilities, LLC. The increasing severity of claims has driven rates up to “all-time highs” and profitability for many carriers is down. As a result, capacity in the commercial auto marketplace has shrunk, especially among domestic markets.

Domitrovich pointed out: “A claim that used to be considered a working layer at a $500,000 to $750,000 loss two-years-ago is now penetrating that $1 million excess layer on a regular basis. That’s resulted in a reduction of capacity in the excess marketplace. Carriers are putting up less limits, and they’re wanting more money for it. It’s an unprecedented and challenging marketplace.”

Pretty much all commercial auto classes of business are challenging. The same issues that exist in the personal auto space – distracted driving, inflated cost of repairs, and the nuclear plaintiff’s bar – are all prevalent in the commercial auto space. The key difference is the money at play behind the wheels.

“One of the most difficult classes of business in the commercial auto space is trucking for hire,” Domitrovich told Insurance Business. “These drivers are usually driving the most miles-per-vehicle, and they’re on the road more than contractors or other types of commercial vehicles. The gross vehicle weight is very heavy, so, if they have a collision, there will likely be a higher extent of bodily injury.

“Commercial auto companies are also up against a challenging legal environment. There are attorneys in law firms today that specialize in auto claims, and they know exactly what to look for to best present their cases. For instance, if you have a driver safety issue or a vehicle maintenance issue and your brakes blow out, and you’ve been in alert status for quite some time, they’re going to pull you in for negligence. These are not run-of-the-mill attorneys. They’re specialized in auto claims, and that’s causing some of the settlements and the verdicts to be higher than they’ve ever been before.”

One positive change to impact the commercial auto industry is the influx of technology. Trucks are probably safer now than they’ve ever been in the past. Technology like lane assist, automatic braking, and automatic transition have been “game changers,” according to Domitrovich, in reducing the frequency of commercial auto claims. As a result, insurers are starting to offer credits for vehicles equipped with the newest technology packages, and insureds are starting to see cost benefits.

“This is a tough marketplace. When it gets hard like this, there are not as many generalists playing in the transportation space, especially in the excess transportation space, so it eliminates a lot of the players that only have three or four accounts that are excess wheels, and really focuses on the wholesale markets that have a niche specialization in it,” Domitrovich commented. “I look at this marketplace as an opportunity, because not everyone knows how to navigate the excess space like we do.

“Truckers, especially in the excess space, typically run pretty thin margins. We want to make their insurance as affordable as possible, so they can protect themselves and protect their assets. We also want to make sure that our partners – our carriers – are still writing excess truck in five-years, so they need adequate rate and we need to make sure people continue to buy it. So, it’s a challenging balance act, but one that we’re looking forward to. We think 2020 is going to be a very challenging, but very rewarding year.”     

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