The commercial auto insurance market in the US has shifted up a gear in its efforts to address years of unhealthy combined ratios, sustained losses and inadequate rates. Carriers and agents alike are working hard to alleviate some of the challenges putting the brakes on pricing progression - and their efforts are slowly starting to pay off.
FCCI Insurance Group is one of many insurers battling it out in the commercial auto market. In the past three years, FCCI has managed to pass some quite “robust rate increases” thanks to a widespread market push for profitability and the hard work of its agency partners.
“The market as a whole has been working very hard and fast to try to find the right price to deal with the losses that we’re seeing come out of the commercial auto market,” said Rich Rueger, senior vice president, corporate underwriting, FCCI Insurance Group. “Our commercial auto premium writings are a small part of the overall market total, and the rate increases we have achieved clearly reflect widespread industry trends.”
Loss ratios in the commercial auto market have crept up steadily for a number of reasons. The cost of auto claims has increased as more vehicles are kitted out with modern technology like sensors and autonomous features - all of which are expensive to repair and replace. Likewise, the rate of collisions on the roads has gone up due to issues like distracted driving. Together, more collisions at higher costs of repair have forced the auto insurance industry into a tight spot.
“As rate increase momentum picked up in 2016, we did experience some push back from agents and policyholders, but there has been less resistance in the past two years. Our agents and policyholders understand the issues we all face, which will be invaluable as the industry works to solve this critical issue,” Rueger told Insurance Business. “Most business owners also have a personal auto insurance policy alongside their commercial policy, and they’re seeing rate increases on the personal level too, which shows this is not just a commercial auto issue. It’s affecting the entire automobile market. Nobody likes to pay more for their insurance coverage, but I think people are starting to understand the bigger picture.”
Insurance agents are often on the front-line when it comes to telling policyholders they need to pay more for their insurance. It can be a tough sell explaining why a client’s premium must go up even if their loss experience has been good.
“Independent agents are the life-blood of FCCI, and our agency partners have been working very hard to address the challenges in the commercial auto market,” said Rueger. “[The rising rate environment] has not been easy for them, but as agents interact with the market at large, they’ve done an excellent job in educating clients about the issues. Without our agency partners, we wouldn’t have been able to begin this healing process.”
One way agents can provide extra value to commercial auto clients is by talking them through new technology options like telematics or sensors so they can collect more valuable data on their drivers and use that to influence loss prevention. Agents can also help commercial transportation firms mitigate risk in their hiring processes and can run awareness campaigns around prevalent issues like distracted driving.
“At FCCI we have partnered with industry leading vendors so that we can provide tools and resources to our policyholders to help them mitigate losses. We’ve also produced in-house videos that deal with distracted driving and other safe driving tips,” Rueger added. “Achieving rate adequacy is part of the answer, the other critical components include driver selection, behavior and safety practices that result in fewer accidents. We’re doing everything possible to help our agents and policyholders solve this industry challenge.”