What is it about human nature that makes us feel better when we understand why something has gone wrong? From the moment we learn to talk, we ask, “But why?” It’s no different when unexpected events affect us as adults. If you’re responsible for managing your company’s commercial insurance, you’ve likely felt that familiar frustration when reviewing your renewal proposal—especially when you see the Commercial Auto line item.
Let’s address that burning “WHY??!!” so you can move on to your next head-scratching dilemma.
1. Vehicle Repair and Replacement Costs
Remember the days when you could visit a junkyard for affordable car parts? Today’s vehicles are far more complex, often resembling computers on wheels. Even a minor collision can result in costly repairs—or even a total loss. This shift toward high-tech components has driven repair and replacement costs through the roof, directly impacting insurance premiums.
2. Decreased Competition
Gone are the days when Commercial Auto coverage was a profitable line for insurance carriers. Many insurers now require bundling with other lines of business to offset potential losses. The result? Fewer carriers are competing for your business, leading to stricter underwriting guidelines and less room for negotiation. The once-common practice of receiving multiple competitive quotes has been replaced with a “take it or leave it” approach.
3. Distracted Driving
Modern life demands multitasking, and our cars are no exception. From built-in gadgets to smartphones, drivers are more distracted than ever. This trend has significantly increased both the frequency and severity of claims, contributing to rising premiums.
4. Rising Medical Costs
Medical costs continue to climb—a reality that affects every aspect of our lives, including auto insurance. When injuries occur, whether to you or others, the rising cost of medical care adds to the overall expense of claims, directly influencing insurance rates.
5. Increased Litigation
We live in an increasingly litigious society. Claims that escalate to lawsuits—and particularly those that go to trial—are significantly more expensive. The rise of “nuclear verdicts,” or extraordinarily high court awards, has further driven up the cost of litigated claims.
6. Compliance Changes
Regulatory adjustments and compulsory coverage requirements are constantly evolving. Higher coverage limits, expanded third-party coverage, and Symbol 1 endorsements are just a few examples of mandates that can increase premiums.
Closure?
If you’ve been searching for answers, we hope this explanation provides more clarity than the classic “It’s not you, it’s me.” With this insight, you can redirect your frustration toward more pressing matters—like writing a strongly worded letter to Netflix about the disappointing finale of your favorite series.
All Is Not Lost
Stay tuned for our follow-up blog, where we’ll discuss actionable steps you can take to mitigate Commercial Auto insurance increases—or even reduce them. Remember, “no” often means “not right now,” and we’ll share strategies to help you navigate this challenging landscape.
Each month, Swarts, Manning & Associates covers relevant topics for your business. Stay tuned for more discussions about managing your insurance and industry-specific tips.
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