How To Reduce The Cost Of Commercial Auto Insurance

If your business has owned vehicles for any period of time, then you’ve probably felt the pain of consistent increases in the cost of commercial auto insurance.

The most frustrating part is the feeling these cost increases are out of your control.

Here’s the good news, you were wrong.

You can take control of the cost of your commercial auto insurance.

This short video explains how…



Commercial auto insurance cost factors

Basic factors that influence the cost of your commercial auto insurance include:

Industry / Profession – Not all businesses carry the same level of risk. An excavating business with multiple commercial vehicles has much higher exposure than an accounting firm that occasionally uses a car for running errands.

Location – You could expect to pay more to insure a commercial vehicle driven in a large city than a vehicle driven in a rural area. Additionally, areas with above-average claims are typically priced higher.

Vehicles – Your vehicle’s year, size, and use will influence your premium. For example, an older delivery van occasionally used by a bakery will generally be less expensive to insure than a new cargo van used more frequently by a company that transports expensive cargo. And coverage choice matters. If you choose to carry physical damage coverage, your vehicle’s value will be factored into your premium.

Driving history – Most insurance companies run a motor vehicle report for all drivers with access to your listed commercial vehicles. Drivers with multiple accidents or violations will have a negative impact on your premium. It’s common for your carrier to take the past three years of your driving history into account.

Coverage needs – Your commercial auto insurance cost will increase with more coverage. For example, a $1 million liability policy will have a significantly higher premium than a policy with state minimum liability limits.

Additional rating factors include:

  • frequency and severity of crashes,
  • auto repair costs,
  • medical and hospital costs,
  • lawsuits and court judgments, and,
  • insurance fraud.

This means that while your company’s inherent level of risk is a factor that affects the premium you will pay for auto insurance, that amount is also affected by factors that are not directly controlled by the company.

This is the frustrating part of commercial auto insurance.

However, as I mentioned above, there are pricing factors that are under your control.

You might also find these factors helpful in making cost-effective business decisions including negotiating business contracts, hiring employees, and buying vehicles.

READ NEXT: 5 Ways To Reduce Your Commercial Auto Insurance Losses

Frequency vs Severity

Both accident frequency and severity of commercial auto claims affect the portion of your premium that covers losses. 

Frequency refers to how many crashes occur and how often they occur. Logically, the more claims you file with your insurance company, the higher the premium you’ll need to pay to cover those claims.

Severity refers to the size of each claim you file (with larger claims ultimately having a larger impact on annual premiums).

The make and model of your vehicles can also affect your level of risk, and therefore your premiums.

Risk Management Techniques

One of the best things you can do to control your automobile insurance premiums is implementing risk management techniques for controlling the frequency of accidents.

Improving your drivers’ performance can make a big difference: A study by the U.S. Department of Transportation revealed that 94 percent of all collisions were due to driver action, attitude, and behavior.

Making your drivers safer and purchasing dependable vehicles can affect both the frequency and severity of accidents, ultimately lowering your premiums.

Driver history has one of the largest impacts on your premium, and even a small moving violation can significantly affect your rate. Therefore, your rates could stay lower if you and your employees practice safe driving habits.

You could see your insurance rates improve over time as long as you and your employees keep your driving records free of accidents and violations.

Here are a few steps to take to reduce the number of auto accidents:

  • Select good drivers. Conduct background checks and request regular motor vehicle driving records. 
  • Provide driver safety training on a regular basis, both at hire and as a refresh, ensuring that both new and seasoned employees are properly prepared.
  • Train employees on reporting a loss immediately after a crash. 
  • Monitor drivers to ensure their best performance.

Part of our RogueRisk365® program is helping you implement a commercial auto driver safety program. Whether you have 3 vehicles or 30, periodic training reduces accidents, which reduces claims, which ultimately reduces your premiums.

Commercial Auto Discounts

While maintaining a clean driving history is always going to be the best way to keep commercial auto premiums low, there are some discounts available through many companies that can help.

Here are a few of the most common discounts:

  • Continuous auto insurance
  • Coupler discount
  • Commercial driver’s license (CDL)
  • Business owner experience
  • Pay your policy in full
  • Higher deductibles

The Rub

According to the National Council on Compensation Insurance (NCCI) data, the most costly lost-time workers’ compensation injury claims are the result of motor vehicle crashes.

This means that many commercial auto accidents also include worker’s compensation claims, driving up the cost of your worker’s comp insurance as well.

By focusing on hiring good drivers and implementing a solid training program you can take control of the cost of your commercial auto insurance.

We can help.

If your current insurance professional has never addressed issues like this with you before, then I’d encourage you to reach out to us today.

I look forward to introducing you to a new way of viewing your insurance program.

Thank you,

Ryan Hanley

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