Here are the 5 top commercial auto insurance trends to watch in 2020: Social inflation, Rate hikes, Telematics-based solutions, and Demand. Which one will you follow? And what will make your business better? Read on to discover more. If you are a business owner and have a fleet of vehicles, be sure to read this article! You will be able to make better decisions with a policy. We hope you enjoyed this article!
Social inflation
Social inflation refers to the increase in costs of insurance. Insurers’ costs have risen due to broader contract interpretations, higher jury awards, and new tort concepts. This phenomenon is well established in the US and is growing globally. It is largely a result of a decline in public trust in corporations. It is difficult to predict the exact impact of social inflation, but it is generally a concern in the insurance industry.
First, it can impact pricing and capacity offered for umbrella towers. Carriers cannot quantify societal attitudes, and these verdicts can cripple insurance companies and business owners. Furthermore, they can hurt commerce, as the trucking industry will not be able to afford higher insurance premiums. For these reasons, it’s important to understand how social inflation impacts commercial auto insurance. A consultant at AmWINS will develop a risk management strategy for your business.
As social inflation impacts data quality, it can negatively affect your insurance company’s business model and financial performance. Social inflation can affect forecasts, but it is possible to stratify data and remove this variability. You can also add additional contingency margin to your insurance company’s budget to compensate for social inflation. This type of inflation can also affect the way you calculate premiums. Insurers should consider these trends before making premium changes.
Fortunately, social inflation isn’t limited to the commercial auto insurance industry. Insurers of any type have felt its effects in recent years. This phenomenon has affected general liability, umbrella insurance, and certain other lines of business. It is likely that social inflation will continue to impact these areas. The good news is that the effects of social inflation on the commercial auto insurance industry should be mitigated by the industry’s ability to leverage relationships with business partners.
Another factor contributing to social inflation in the commercial auto insurance industry is the COVID-19 pandemic. While the COVID-19 pandemic may have decreased traffic volume, it will likely increase the amount of liability claims filed. The result is an increase in claims for D&O and professional liability coverage. While the COVID-19 pandemic will decrease the number of automobile liability claims filed, the increase in COVID claims will most likely affect the commercial auto sector.
Rate hikes
Many U.S. commercial auto insurers have sought rate increases throughout 2020. During the first quarter of 2020, almost 100 companies obtained rate hike approvals, totaling a cumulative increase of $376.1 million. In California, Progressive Corp.’s subsidiary United Financial Casualty Co. was approved to raise rates by 8.7%, a hike that is expected to boost group premiums by $35 million. Rate hikes are not always the same, and some companies may get multiple approvals.
In many lines of business, insurers’ rates will continue to rise, especially in the property and casualty industry. In addition to rising costs, the lack of capacity is forcing insurers to tighten their belts, and they are demonstrating unprecedented discipline in the underwriting process. This means double-digit rate hikes for many businesses and a corresponding decrease for many others. These increases will make buying insurance even more difficult.
In Texas, state regulators approved 199 rate hike requests during the first nine months of 2020. That would result in an overall increase of $191.5 million in premiums, resulting in the highest increase in the industry. In Georgia, regulators approved two rate hike requests in the first nine months of 2020. While those figures are not final, they are still high. Rate hikes for commercial auto insurance in 2020 are not likely to exceed that figure.
Increases in premium rates are correlated with the location of your business. Generally, businesses in high-risk areas are subject to larger rate hikes, and those in the wildfire and wind zones of California experienced 20% hikes. The increase in rebuilding costs due to materials price inflation and labor shortages increased premiums by 9%. The third quarter of 2021 and 2022, according to a report by Marketscout, is expected to continue to rise at a steady pace.
In addition to price increases, the commercial auto insurance industry is also experiencing a general decline in profitability. According to AM Best, $22 billion in underwriting losses will likely occur between 2020 and 2022. As a result, many businesses with commercial auto exposure will experience a more difficult renewal process and more premium hikes than they experienced at the end of last year. The increase may be particularly severe for larger fleets.
Telematics-based solutions
According to a report released in May by J.D. Power, telematics-based solutions for commercial auto insurance are likely to have an impact on consumers’ future driving habits. A significant share of consumers expect to drive less in the future, and almost one-third plan to take advantage of telematics-based plans in the future. While this trend could be challenging to sustain, some insurers have already taken advantage of changing consumer attitudes and preferences.
Among the benefits of telematics are increased driver responsibility. By monitoring drivers’ behavior and tracking mileage, insurers can better estimate the costs and prevent fraud. Additionally, the data collected through telematics systems can help refine UBI products. Other benefits include lowering the cost of accidents, reducing fraud, and improving safety. For example, Southern Farm Bureau Casualty Insurance Co. recently implemented a telematics program in several states, resulting in a decrease in the rate of distracted driving overall by 10%. In addition, nearly half of the drivers who exhibited most distraction decreased their distraction levels by half in the first 30 days.
Telematics-based solutions also reduce the cost of repair. By integrating telematics data into claims processes, insurers can accurately calculate repair costs within minutes. Aviva, for example, plans to use AI to guide engineers and increase the consistency of diagnosis. Telematics-based solutions for commercial auto insurance trends 2020 and beyond: How will they impact the future of insurance? For one thing, insurers must invest in telematics now.
With the introduction of mobile applications and smartphones, insurers are moving away from traditional insurance. Telematics-based solutions will be available in all 50 states and will provide insurers with valuable data about driving behavior. As a result, insurers will no longer have to pay for expensive tracking devices. They can also use this technology to identify drivers with high accident rates. However, it is important to note that the data collected will be collected anonymously, which may lead to fraud and poor customer service.
The adoption of telematics-based solutions will help insurers increase the number of policies that are priced primarily utilizing predictive factors. This approach will also allow carriers to make car insurance easier and more intuitive for consumers. The survey results also indicate that 38% of consumers are satisfied with their current policy, according to Arity. With increased adoption, carriers can improve their bottom lines and increase returns on investment.
Demand
With more businesses turning to commercial auto insurance to cover their vehicles, the demand for this coverage is on the rise. This type of insurance protects companies against financial losses that can arise from road accidents. The market for commercial auto insurance is highly fragmented, and it is split into several segments. Listed below are some of the key segments:
COVID-19 pandemic: The pandemic has affected the global commercial auto insurance market. The virus, which is highly contagious, has caused a sharp decline in the number of accidents. The virus has also slowed down the use of commercial vehicles, such as food trucks, ice cream vans, and school buses. During the pandemic, demand for commercial auto insurance decreased drastically. Fortunately, this disease is not endemic, but it is an unfortunate factor in the global economy.
Increased technological penetration: Digital transformation is expected to provide many new opportunities for commercial auto insurers. In addition to enhancing productivity, commercial auto insurers are increasingly adopting new technologies to improve their customer experience. Photo estimating tools and mobile telematics solutions are among the major technological developments used by insurers. However, the costs associated with commercial auto insurance premiums are prohibitive to market growth. These challenges are only exacerbated by the rising number of commercial vehicles.
Major shifts in the mobility ecosystem: As autonomous and controlled vehicles become more common, the industry will experience some significant changes in its dynamics. As companies adopt this new technology, insurers will be forced to reassess their current strategy and make proactive adjustments. As companies develop their CV/AV capabilities, they will become increasingly valuable to insurers. Insurers will need to work with regulators to ensure that new innovations are supported by the market.