The average cost to settle an auto
fatality has increased from nearly $1.9
million in the mid-2000s to more than
$3.5 million, Jonathon Drummond, head
of casualty brokerage for Willis Towers
Watson, writes in its “Marketplace Reali-ties 2018” report. Both calendar years
2015 and 2016 witnessed auto fatalities
grow in excess of 2,000 compared to
prior year norms, he added. Combined
with settlement growth, this has created
additional industry-projected liabilities of
“We’re seeing rate increases of 20%
or more across the board,” Drummond
tells NU. “With accounts with bad loss
histories, rate increases are 50% or
100%.” The swiftly hardening market is
keeping companies in this segment, he
notes, adding that Willis is seeing few
companies leave the space — and those
that do soon regret it once they reconsider the possibility of 100% rate increases.
Scott McCrae, executive vice president of product and technology for
Carlsbad, Calif.-based CTC Transportation Insurance Services, says that the
commercial trucking insurance segment
has experienced a combined ratio of 106
to 109 since 2016 with no relief in sight,
especially because a lot of older $50,000
trucks are being replaced with new
$150,000 models that are far more
expensive to repair.
Between that and a low inter-
est rate environment, says McCrae,
most outfits writing commercial truck-
ing coverage are currently losing money
on it. Across the market, rate increases
between 6% and 12% are normal.
Most U.S.-based, admitted domestic
carriers would love more rate, he says,
but few states will give it to them, so they
must settle for successive rate increases
year-over-year to get where they feel
their premiums need to be. In this loss
environment, McCrae says that will take
most carriers two to three years if they
haven’t started already.
“Now, if the insured is with a non-
admitted carrier or a risk-retention
group not faced with those same rate
restrictions, those carriers are much less
encumbered,” McCrae notes. “We own
two risk-retention groups, so if we want
to double our rate in one year, we can
do it. We have that greater flexibility.
We took rate over the last two years, so
we don’t have to take as much this year.
We’ve already taken it.”
It will take even longer for the cargo
segment to get the rate it needs, says
Chris Daggett, head of CTC’s cargo
practice. “There are a lot of markets out
there now that are charging roughly the
same premiums they charged 20 years
ago, and were content just to break
even,” Daggett says. At larger carriers, he
adds, cargo is usually folded into a larger
book of inland marine business, so there
is not as much sense of urgency to get
rates to a sustainable level.
Controlling losses is the other half of the
equation, and on that front the big story
is the December 2017 implementation
of a long-awaited rule from the FMCSA
that trucks must have an electronic
logging device (ELD) to accurately track
and manage a vehicle’s records of duty
status. Synchronized to the vehicle’s
engine, the ELD automatically records
driving time, enabling carriers to better
comply with federal limits on how long
drivers can safely drive in a day.
It took years for the law to overcome
industry objections, but forward-thinking firms pre-emptively installed the
ELDs and used the telematics data they
provide to monitor driving behavior,
coach inexperienced drivers, reward
safe drivers and dismiss unsafe ones.
Drummond says that self-insureds
operating up to thousands of trucks
and employing InsurTech and telematics are seeing retained losses in the $1
million to $2 million range — better
than the insurance-industry average.
Additionally, they have lower loss
ratios on their primary limits.
Elsewhere, the American Automobile
Association Foundation and the Alliance
for Driver Safety & Security (the Truck-
ing Alliance) joined forces late last year
when the Trucking Alliance announced
it would adopt the AAA Foundation’s
new Truck Safety Recommendations.
Those recommendations — which
include use of various warning, moni-
toring and braking systems — could
prevent as many as 77,000 crashes
and save up to 500 lives each year. The
Trucking Alliance also requires member
companies, which include 250 of the
largest motor truck carriers in the U.S., ISAAC INS TRUMENTS INC.
It took years for the law to overcome industry objections, but
forward-thinking firms installed the ELDs pre-emptively and used
the telematics data they provide to monitor driving behavior, coach
inexperienced drivers, reward safe drivers and dismiss unsafe ones.