The Rising Cost of Commercial Auto Insurance: Why It’s So Expensive and What You Can Do

As a business owner, you know that commercial auto insurance is a necessary cost. But over the past few years, rates have skyrocketed – leaving many wondering why it’s become so expensive.

At our blog, we want to provide some clarity around the major factors causing the rise in commercial auto premiums. We’ll also give tips for finding more affordable coverage. Keep reading to understand what’s driving the cost increases and how your company can adapt.

Key Factors Behind the Rising Rates

Commercial auto insurance rates have increased rapidly, with average premiums rising as much as 20% per year over the past 5 years. What’s behind the surge in prices? There are a few key reasons:

• Increased accidents and claims payouts – Accident frequency is up, especially from distracted driving. Higher medical costs have also increased claim settlements. This has driven up insurer losses.
• Rise in vehicle repair costs – New vehicle technology and more expensive materials have caused the average repair bill to increase substantially. This gets passed on through higher premiums.
• Inflation – General inflation has pushed the costs of parts, labor, and healthcare higher. Insurers have to raise premiums to keep pace.
• Low investment income – Insurers make income investing premiums. But with low interest rates, investment returns have dropped. Again, they’ve compensated with higher premiums.
• Increased regulations – New regulations around commercial policies have added administrative costs for insurance companies, increasing premiums.

With these mounting pressures on insurer profitability, significant rate hikes became unavoidable. But for many businesses, these rate hikes make insurance unaffordable.

How Commercial Policies Differ from Personal

To understand why commercial insurance comes at such a premium, it helps to see how commercial auto policies differ from personal ones:

• More drivers – Commercial policies cover multiple employees operating vehicles. More drivers means more risk.
• Higher mileage – Company vehicles tend to rack up significantly more miles than personal cars. More miles equals more exposure.
• Heavy vehicles – Trucks, fleet vehicles, and other heavy commercial autos are more expensive to repair and associated with more severe claims.
• Costly cargo – Commercial vehicles often transport expensive inventory or equipment that’s also covered.
• Passenger transport – Shuttles, buses, and other people-moving vehicles require pricier coverage.
• Industry risk – Some industries like construction have an inherently higher chance of accidents occurring.

Given these differences, it’s not surprising commercial auto insurance comes at a steeper rate. But there are ways businesses can reduce costs.

Tips to Get More Affordable Commercial Auto Insurance

While the general market trends are pushing rates higher across the board, you still have options to lock in savings:

• Increase deductibles – By covering smaller losses out-of-pocket, you can reduce premiums substantially.
• Cut unnecessary coverage – Drop options like rental reimbursement if you can cover temporary costs yourself.
• Limit drivers – Reduce covered drivers to only essential employees if possible.
• Ask about discounts – Taking driver safety courses and installing telematics can earn discounts.
• Maintain good driving records – Companies with clean driving histories get the best rates.
• Compare many quotes – Rates can vary dramatically between insurers, so shop around.
• Get an insurance broker – An independent broker has access to more carriers and can get you the lowest quotes.

Taking time to pursue savings opportunities and get multiple quotes gives you the best shot at affordable commercial auto insurance, even in today’s environment of rising rates.

How Different Industries Are Impacted

While all commercial auto policies have seen rates climb, some industries are facing greater challenges:

• Transport and shipping – Long haul trucking operations have been hit especially hard by rising insurance costs. Premiums have jumped as much as 30-50%.
• Rideshare – TNC insurance is facing rate hikes as frequent passenger accidents drive up claims. Costs for Uber and Lyft have skyrocketed.
• Food and grocery delivery – More accidents from distracted driving have caused insurers to increase rates significantly for delivery drivers.
• Construction – Heavy vehicles operating near vulnerable road users have increased accidents and insurance costs.
• Emergency transport – The high speeds and accident rates of ambulances and EMTs make their insurance pricing exorbitant.

While the rate hikes impact all industries relying on vehicles, these sectors grapple with the steepest price increases. But there are steps they can take to control costs.

Strategies for High-Risk Industries to Reduce Premiums

For businesses in industries with the highest commercial auto risks, getting affordable coverage is tough but still possible:

Prioritize safety – Investing in substantial driver training and implementing safety initiatives like dash cams can help reduce claims. Insurers reward safety with discounts.

Analyze risk – Look for any way to reduce mileage, passenger trips, or other exposure for the biggest impact on your rates.

Get creative with coverage – Using policies like per-mile insurance and mixing commercial with personal policies can reduce costs for some situations like deliveries.

Find specialty insurers – Some niche carriers offer competitive pricing for specific high-risk industries like medical transport.

Self-insure small risks – For companies with large fleets, self-insuring smaller liability risks rather than paying premiums for full coverage may save substantially.

While the market headwinds are strong, focusing on safety, reducing risk, and finding specialty insurers can still yield savings on commercial auto policies.

The Takeaway

• Commercial auto insurance rates have risen rapidly in recent years due to factors like increased accidents, distracted driving, more expensive vehicle repairs, inflation, and new regulations.
• Compared to personal auto policies, commercial policies cost more because they insure higher risk vehicles, drivers, and situations.
• To reduce costs, businesses can raise deductibles, cut unnecessary coverage, limit drivers, maintain clean driving records, and compare quotes.
• Transport, ridesharing, delivery, construction, and emergency transport companies have been hit especially hard by rate hikes.
• High-risk industries can improve safety, analyze exposures, find niche insurers, and self-insure smaller risks to control premium costs.

While costs are trending higher industry-wide, taking proactive steps can still allow companies relying on vehicles to secure affordable commercial auto insurance coverage.