The 2024 Auto Insurance Rate Outlook for Outfitters

The commercial auto insurance market has recently encountered formidable challenges derived from significant underwriting losses, declining profitability and persistent rate increases. Several factors have contributed to challenging market conditions, including widespread driver shortages, nuclear verdict concerns, inflation issues and distracted driving challenges.

These cost-driving trends have driven claims frequency to pre-pandemic levels, amplifying overall loss severity across the segment. Considering these developments, most insureds should anticipate ongoing premium increases in 2024.

Trends Shaping the Commercial Auto Market

Addressing Driver Shortages

Many companies have lowered applicant standards to address the staffing shortage. Limited experience and abbreviated driving records make these drivers more susceptible to accidents, contributing to an increase in commercial auto losses and related claims. Thus, businesses must prioritize new driver training.

Conflicting Marijuana Legalization

Although marijuana remains illegal at the federal level, a growing number of states have legalized its usage. The conflict between state and federal laws creates potential risks for drivers operating vehicles under the influence, possibly leading to an increase in road accidents. Despite the strict regulations and drug testing protocols set by the U.S. Department of Transportation (DOT), there’s a noticeable shift toward advocating for  loosening marijuana laws and testing policies among drivers. This presents a challenge in enforcing existing requirements and could exacerbate ongoing driver shortages and increase commercial auto exposures.

Rising Nuclear Verdicts & Social Inflation

Social inflation significantly impacts the commercial auto insurance market, particularly due to surging nuclear verdicts in the industry. Such verdicts have increased by over 50% annually for the past decade, doubling the incidence of nuclear verdicts in the sector.

Auto accidents account for 25% of all nuclear verdicts, with an average verdict of $33.8 million. Together, social inflation and nuclear verdicts have resulted in a $30 billion surge in commercial auto claim costs since 2012.

Surging Repair & Claims Inflation

General inflation issues have resulted in higher costs for auto parts and vehicle repair expenses.  Between 2022 and 2023, vehicle repair prices surged by 23%, nearly four times the average inflation rate. This rise is attributed to advancements in vehicle technology, fluctuating auto parts demand, global shipment disruptions, labor shortages and ongoing supply chain challenges. Alongside increasing repair expenses, inflation has elevated the costs of treating third-party injuries following accidents, contributing to inflated claim costs and premiums. Over the past decade, inflation-related expenses have contributed an estimated $95 to $106 billion to commercial  auto claim costs.

Tips for Outfitters Obtaining Auto Insurance Policies

Make sure you are equipped with all the necessary tools before you start your journey with commercial auto insurance coverage. The trends listed above aren’t the only criteria considered when determining your coverage costs. As a business owner, you can implement strategies within your organization to possibly impact your rate.

• Establish effective onboarding measures for new drivers. Regularly retrain drivers on safe driving techniques.
• Prioritize accident prevention initiatives and establish proper post-accident investigation protocols.
• Comply with all commercial driving legislation, particularly regarding road safety and drug testing policies.
• Determine whether you should make any coverage changes by speaking with trusted insurance professionals.

Prepare for the Road Ahead

As we anticipate the ongoing premium increases in 2024, download the  CBIZ 2024 Property & Casualty Market Outlook  for further insights into this year’s predictions to help guide your business strategy. For additional risk management guidance and insurance solutions for your business,  request a free CBIZ Adventure Sport Insurance quote  today.

This blog may contain scenarios that are provided as examples only. Coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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