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Zooming through auto insurance cost issues

April 2, 2019

 Auto insurance rates have been wreaking havoc on some business budgets in certain areas of the country for years. 2019 is following that trend.

“For the last year, the auto insurance market has been an area of concern for many insurers,” says Steve Davis, CPCU, ARM, senior vice president and director of Construction Risk Services, McGriff, Seibles & Williams. “Insurance companies have seen their largest losses in their auto liability lines. This can be attributed to distracted driving, increased litigation and the shear increased costs of fixing today’s automobiles that are now equipped with back-up cameras and other expensive-to-fix technological advances. Auto insurance was re-underwritten in 2018, and 2019 looks to be a continuation of a closer look at rates.”

Following is more information about the auto insurance market and what you can do as a business owner to navigate this unexpected increasing cost.

On the rise

During the past eight years, insurance rates have increased. There are exceptions, like in Flex-Ability Concepts’ home state of Oklahoma where rates have decreased. Montana has seen the greatest increase, but areas prone to natural disasters—Texas, Florida and Louisiana—also had a steady jump along with Michigan, Kentucky and Rhode Island.

Why do rate increases happen? Rates go up even when a claim is not filed. Insurers lump you within a demographic to create a profile for pricing. They look at your location, vehicle, age and similar factors. They also look at hurricanes, flooding, wildfires and claim losses in your area. With this information, they create profile prices. Insurers then have to determine their return on investment. Minimal ROIs for 2018 left many market watchers expecting another rate increase in 2019. 

When claims do occur, the cost to fix automobiles is higher these days because of onboard computers, cameras and technology. Gas prices also are lower, so drivers are driving more (while getting into more accidents and putting more wear and tear on their cars). In addition, a strong economy means people are buying more vehicles, so more cars are on the road, getting into more accidents. It’s a continuous cycle adding to new claims and higher rates.

Business rules

You cannot change the rates set by companies, but you can alter your actions and create company guidelines to limit claims that will definitely increase your insurance bill.  

Consider these tips from the Insurance Information Institute:

  • Mandatory seat belt use. Every state except one (New Hampshire) has a mandatory seat belt law for front seat occupants. 
  • Zero tolerance for intoxication. Employees should never drink or use other intoxicants prior to using business vehicles.
  • No cellphone use. Workers are expected to ignore all calls and texts when driving—even from you. Distracted driving is a leading cause of accidents, and cellphone use while driving is banned in some states. 
  • Limit non-business use of vehicles. While some employees use the same car for work and personal use, it is best to limit business-vehicle use to work-related travel.
  • Slow down. Don’t put so much pressure on your team to get from job to job. In addition to reducing the risk of accidents, driving the speed limit controls fuel consumption and costs.
  • Lock and secure vehicles. Employees should always lock vehicles parked at a jobsite. Whenever possible, vehicles should be parked in secure, well-lit areas.

There are ways to help keep your insurance costs down in a changing market—avoid accidents and theft and work with your insurance agent to shop around for the insurance provider that will give you the best auto insurance rate and coverage. 

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