In August, an Arizona court found a truck driver guilty of negligent homicide for his role in a fiery construction zone wreck on I-10 that caused five deaths. GPS data showed that the driver had accessed four separate TikTok videos within seconds of the crash. Tragedies like this illustrate why the commercial auto market is so difficult to manage.

For insurers, the space is chronically unprofitable, driving up the cost of premiums for their insureds. Simultaneously, clients face increasing fleet safety risks, propelled in part by a worsening driver shortage and the plague of distracted driving.

But there is a better road ahead. While your clients can't insulate themselves completely from commercial auto losses, they can take steps right now to lower their risks. Here are some market trends impacting the commercial auto market, as well as technology and communication techniques agents can offer to help their clients.

Market Snapshot: More Trouble Ahead

If you feel like we've been talking about a hard market in commercial auto for more than a decade, you're right. Commercial auto has generated a statutory combined ratio above 100 for 12 of the last 13 years, including an eye-popping loss ratio of 109 in 2023, according to Fitch Ratings. This long-term trend creates enormous profitability pressures for carriers and agents in the segment. AM Best estimates that the 2023 combined loss ratio of 109.2 represented a staggering $5.2 billion in underwriting losses alone.

Simultaneously, claims are getting more expensive. While our team at Pennsylvania Lumbermens Mutual Insurance Company (PLM) hasn't seen a dramatic increase in the number of claims this year, we've seen the costs of claims skyrocket.

The reasons behind the increased costs are numerous. For one, cars today are built with intricate and expensive technology, creating higher replacement values. For another, global inflationary trends and supply-chain pressures have driven up the cost of almost every automotive part imaginable. An increase in nuclear verdicts—$10 million or more—is yet another factor. In 2023, these verdicts reached a record $14.5 billion and show no signs of slowing down, according to an analysis by Marathon Strategies.

Driver Shortages Create Pressure

While rising repair costs and financial pressures have created challenges for agents and carriers, your clients feel the squeeze, too—and not just in higher premiums. The top issue for almost all businesses is a lack of qualified drivers nationwide.

In 2023, the American Trucking Association (ATA) estimated that roughly 60,000 jobs went unfulfilled. Here again, no relief is in sight. ATA believes the industry could face a shortage of 160,000 drivers by 2030. It is a labor crisis fueled by increasing freight demand and a rapidly aging workforce.

With so many available positions, professional drivers are job-hopping as they seek a higher salary, better benefits and an optimal work environment. As a result, your clients are in constant recruitment mode.

And if they can't find highly qualified drivers, they may take risky shortcuts, such as hiring less-experienced drivers or letting other employees assume driving responsibilities, which can lead to more accidents and even costlier claims.

Engaging Your Clients

Now more than ever, clients are looking for smart ways to break the cycle and manage all their fleet-related risks. This is the greatest challenge—and biggest opportunity—for independent agents.

What's the hardest part of connecting with insureds? For many agents, it's starting the conversation—and honesty is the best way to open the discussion and build trust with clients. Start by explaining that factors like rising claim costs and worker shortages are industrywide paradigms that extend far beyond your clients' niche.

They may not be happy to learn their premiums are increasing, but most clients will feel at least a little better after understanding the reasons for the increases and knowing that even the industry's biggest fleets are experiencing similar pressures.

Next, educate your clients on ways they can mitigate risks. Customers should know that they can't control the behaviors of other drivers or the rise of nuclear verdicts, but they can control the prevention efforts to protect their drivers and equipment. Agents can explain that the more steps customers take to reduce their loss exposure and limit their risks of costly claims, the more attractive they'll be to an insurance carrier—and the more insulated they'll be from potential premium increases.

Safety First

Which clients need the most help with reducing commercial auto risks? At PLM, we find that small-to-midsize accounts have the greatest needs. Larger fleets may have outside consultants or dedicated safety professionals on-site, but small-to-midsize fleet managers don't have that luxury. Often, they may not even know where to start when it comes to improving fleet safety.

This allows independent agents to provide expert guidance on best practices for accident prevention and claims handling.

When the manager of a small-to-midsize fleet asks for your best advice, encourage them to create a written and thorough fleet safety program. It should include clear guidelines for proper vehicle use and maintenance. Additionally, fleets should embed all their safety guidelines in the plan, including their company's drug and alcohol policies. Also, they should provide detailed, step-by-step instructions that drivers can follow when reporting an accident, including at-the-scene accident documentation and post-accident claims filing procedures.

The ideal written fleet safety program will include training guidelines. At a minimum, drivers should receive training on their hiring date followed by refresher training annually. Additionally, drivers should receive training following any incident. Fleets should ensure that distracted driving techniques are part of their annual training curriculum.

Teach your commercial auto clients that developing a written fleet safety program isn't a one-and-done exercise. Clients should review their programs annually and update them to ensure they address ongoing and emerging risks.

Identifying the Right Tools

After a client implements a fleet safety program, agents can continue to offer insights by sharing tools that can help clients reduce their risks even further. The technology that today's fleets are implementing in their safety program include:

1) Continuous motor vehicle record (MVR) monitoring. During the driver hiring process, many clients—especially small-to-midsize firms—still rely on manual processes to pull MVRs and accident reports. Continuous MVR monitoring tools empower fleets to track driver reports in real-time. With this capability, clients can receive instant notifications of crashes, speeding tickets and other safety violations. They can also be notified when a driver does something good, like renewing their commercial motor vehicle (CMV) license or Department of Transportation (DOT) medical card.

2) Phone blocking tools. Distracted driving increased by 10% across all age brackets from 2022 to 2023, according to a LexisNexis report. Still, distracted driving behavior is often underreported, and cell phone use is a top reason why drivers take their eyes off the road. Phone blocking and monitoring tools like LifeSaver prevent drivers from using smartphones while their vehicles are moving. They also track driver phone usage and score drivers on their safety efforts.

3) Forward-facing and cab-facing cameras. Video cameras offer evidence of what happens during and after a crash, helping fleets defend liability claims. If one of your clients knows their driver was at fault, they can use video evidence to achieve a speedy settlement. And if your client knows another driver was to blame, video evidence provides a powerful tool in defending that driver and preventing potential nuclear verdicts.

4) Telematics. Solutions like Azuga track a driver's behaviors, including speeding and hard braking, and send information to fleet managers in real-time. Clients can use this data to personalize follow-up training and teach drivers how to correct the behaviors they need help with the most.

5) Automatic emergency braking (AEB) systems. Rear-end collisions remain No. 1 industrywide in frequency and severity, according to PLM's claims data. AEB systems detect objects on the road and slow vehicles immediately, preventing many rear-end collisions and offering a potential path to profitability for the entire commercial auto market.

Mitigation in Action

When you recommend a written fleet safety policy to clients and back it up with proven solutions, the impact can be tremendous. To see how, here are some examples of real claims we've seen at PLM and how mitigation techniques are preventing them from happening again:

Example No. 1. A driver took his eyes off the road to look at his ringing cell phone. He swerved to avoid a rear-end collision, but his load shifted and fell onto the roadway, striking another vehicle. The claim resulted in $175,000 in damages. Now, the company reduces its risks by using the LifeSaver cellphone blocking app, conducting mandatory annual defensive driver training and implementing a strict load securement protocol.

Example No. 2. Another driver was traveling on a straight, dry road on a sunny day when he looked down at his GPS and rear-ended the vehicle in front. The collision resulted in a fatality and a claim that exceeded $1 million. The company reduced its future risk by updating its written fleet safety program, conducting defensive driver training twice a year, and installing all vehicles with AEB systems, telematics, video cameras and MVR monitoring.

Example No. 3. A driver lost control of his vehicle while changing lanes on a wet road. The trailer overturned and was struck by oncoming vehicles, resulting in more than $300,000 in damages. The driver was speeding and a review of his MVR revealed a history of speeding and moving violations. The lesson for clients: Hire only well-qualified drivers and discipline drivers for safety mistakes even when short-staffed.

Independent agents who partner with their clients and offer actionable solutions that reduce commercial auto risks will gain a considerable advantage. Where to begin? Start by asking your carrier partners for resources to help your clients improve their risk mitigation strategies. Then have frank conversations with your insureds. They'll appreciate your honesty and will look toward your agency as a true partner to help navigate the market successfully.

Mike Zdrojewski is a loss control consultant with Pennsylvania Lumbermens Mutual Insurance Company. He can be reached via email or at 267-825-9152.