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Gulfshore Insurance is pleased to bring you this eye-opening series that explores the rise in commercial auto insurance costs; factors impacting the rise in claims; and solutions you can implement to help combat the situation. If you have any questions or concerns, don’t hesitate to contact one of our trusted advisors. Click below to read previous articles in this series:


Commercial auto insurance rates are on the rise, and you can expect this trend to continue. Why is this happening? Right now, there are industry-wide challenges with increasing loss costs in commercial auto insurance. In a recent Insurance Journal article, insurance carrier annual statement data revealed a loss ratio of 109 percent, meaning that for every $1 of premium charged, carriers were paying $1.09 in claims costs and underwriting expenses.

While the exact cause of this troubling spike is not clear, there are potential contributing factors to the increase in auto loss:

Density: We’ve entered uncharted territory in terms of the number of miles driven. Not only does exposure to accidents increase as people drive more, the exposure of more vehicles in proximity to one another also rises. Florida is the third most populated state in the U.S., with the most populated areas being Jacksonville, Miami, Tampa/St. Pete, and Orlando.

Driver Experience: A severe shortage of experienced commercial drivers —50,000 in 2015, according to the American Trucking Association — means a limited pool to choose from. Drivers completing unfamiliar routes or lacking practice behind the wheel translate into more accidents, but companies facing intense competition for experienced drivers with good driving records may be tempted to let risk management best practices slip, like proper driver screening and training.

Distracted Driving: Distracted driving has also contributed to the rise in auto losses, with mobile devices accounting for 64% of all the road accidents in the United States in 2016. One out of four car accidents in the U.S. are caused by texting while driving, and new data shows 71% of drivers are using text messaging or email in their vehicles.  In 2015 alone, there were more than 45,700 distracted driving crashes in Florida; they resulted in more than 39,000 injuries and 200-plus fatalities. As interactive technology pervades our society, the distraction it brings behind the wheel may be leading to increased frequency and severity for insurers, with a potentially greater toll for society.

Underinsured/Uninsured Motorists: Many people today are driving without enough insurance, or simply don’t have insurance altogether. When an uninsured motorist gets into an accident, the result is the insured driver ends up paying for damages even if they are not at-fault. Florida, in particular, is ranked second in the nation for uninsured motorists at nearly 25%. And although Florida requires drivers to carry a minimum of $10,000 for liability coverage, this is often not enough coverage to take care of commercial automobiles.

Increasing severity and frequency: Rising claims costs typically stem from either increased frequency or severity — but in the case of commercial auto, it’s both. Treating those injured in a commercial auto accident is more expensive than ever as medical costs rise at a faster rate than the overall Consumer Price Index. The average cost per paid bodily injury claim increased 32.1% from 2005 to 2013, and medical costs are on the rise. Vehicle damage-related losses are up nearly 17% since 2013, including vehicle repairs and medical claim costs. Concern over increased claim frequency and severity has recently prompted many insurance companies to raise prices in order to maintain margins and offset low returns on investments.

None of these trends show signs of slowing or reversing. Now is the time to reign in auto exposure, before the cost of claims balloons even further.

For companies with transportation exposure, costly auto losses can hinder continued growth. Organizations who partner closely with their insurance and risk management professionals to understand these risks – and the consultative support and tools available to manage them – will be better positioned to protect their employees, fleets, and businesses. Bottom line: your commercial vehicles are a growing liability to your business. At Gulfshore Insurance, we strive to share information with you to help you keep on top of important issues that may impact your business. As we continue our series on Commercial Auto, stay tuned for our next two articles where we highlight:

  • More Accidents, More Dollars – We will take a closer look at recent auto claims and the costs associated.
  • Just a Bump in the Road: Solutions & Best Practices Companies Can Use – We will discuss solutions available to you and risk management practices companies can put in place.

If you run a business that relies heavily on vehicles for your daily operations, you’ve likely been watching your commercial auto insurance premiums go up in recent years. For many, it’s getting harder to even find affordable coverage. What’s going on?

It comes as no surprise to many that driving is up, yet safety is down. The two trends go hand in hand: you can’t get in a crash if you’re not on the road to begin with. Here are a few recent statistics that speak to what we are seeing:

Recent Trends

  • The overall number of vehicle miles traveled increased to 3.2 trillion in 2016. More miles driven equal more cars on the road and a higher probability of accidents.
  • Motor vehicle deaths were up 6% in 2016. For the first time in nearly a decade, as many as 40,000 people died in motor vehicle crashes last year. That marks a 6% increase over 2015, and a 14% increase over 2014 – the most dramatic two-year escalation since 1964.
  • The preliminary estimate means 2016 may have been the deadliest year on the nation’s roads since 2007.
  • An estimated 4.6 million roadway users were injured seriously enough to require medical attention in 2016, and estimated cost to society was $432 billion, an increase of 7% from 2015.
  • Since the start of the upward trend, which occurred late in 2014, some states have been hit particularly hard. Motor vehicle deaths are up 43% in Florida.

 

 

How Do These Trends Impact Insurance?

With accident frequency at a ten-year high, auto insurers’ margins are slated to shrink in response. Auto insurance rates will likely continue to go up across the country.

A recent Insurance Information Institute (I.I.I.) white paper on personal auto insurance offered this warning: “There has been an alarming increase in crashes and claims reported. This, combined with the cost of the claims themselves, has led to a dramatic rise in the overall loss cost.”

In particular, one of the toughest lines of commercial insurance is that written on heavy, long haul tractors and trailers. Until a few years ago, insurance companies had a pretty good handle on commercial auto claims and costs arising from such heavy vehicle accidents. Claim frequency was pretty steady and predictable, and calculating damages and costs from bodily injuries was a fairly straightforward process. This made insurance for this type of exposure possible and profitable; insurers are not afraid of severe exposures as long as claim experience is predictable and allows for setting premium rates sufficient to pay claims and still make a profit.

The past few years, however, have seen a series of very large and unexpected judgements that have toppled old calculations, and are having a negative impact on the heavy commercial auto insurance market. Ten years ago, a $10 million claim would have been considered a large commercial auto claim. Today, it’s not uncommon to see settlements of $40 million to $50 million and even higher. And rising medical costs are a huge component of those increasingly astronomical settlements. General loss costs have also increased, by as much as 8 percent in 2015.

For companies with transportation exposure, costly auto losses can hinder continued growth. Organizations who partner closely with their insurance and risk management professionals to understand these risks – and the consultative support and tools available to manage them – will be better positioned to protect their employees, fleets, and businesses. Bottom line: your commercial vehicles are a growing liability to your business. At Gulfshore Insurance, we strive to share information with you to help you keep on top of important issues that may impact your business. As we continue our series on Commercial Auto, make sure to read our next three articles where we will highlight:

  • What’s Driving Auto Loss? We will explore the contributing factors specifically impacting the rise in claims.
  • More Accidents, More Dollars – We will take a closer look at recent auto claims and the costs associated.
  • Just a Bump in the Road: Solutions & Best Practices Companies Can Use – We will discuss solutions available to you and risk management practices companies can put in place.

For the past quarter century, the amount of OSHA penalties has remained static due to an exemption contained within the Federal Civil Penalties Inflation Adjustment Act of 1990. However, new increases were recently introduced through the Bipartisan Budget Act – Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which was passed on November 2, 2015.

This bill contains a provision that eliminates the previous exemption applicable to OSHA penalties and, in addition, requires the federal agency to increase their penalties on an annual basis to keep up with inflation. Going forward, the annual increases will be based on the Consumer Price Index.  The legislation also gave OSHA the ability to implement an initial large increase of 78% to compensate for lack of inflation increases since the last adjustment in 1990. This significant increase is reflected in the difference between the existing maximum penalty and the new maximum penalty amounts in the chart below.


Violation Type Existing Maximum Penalty New Maximum Penalty
Other-Than-Serious Posting Requirements $7,000 per violation $12,471 per violation
Serious $7,000 per violation $12,471 per violation
Posting Requirement $7,000 per violation $12,471 per violation
Failure to Abate $7,000 per day beyond the abatement date $12,471 per day beyond the abatement date
Willful or Repeated $70,000 per violation $124,709 per violation

The new penalty amounts take effect and will apply towards fines imposed after August 1, 2016, which will also include any related violations that took place after November 2, 2015.

This development and the recent OSHA Recordkeeping Ruling are causes for businesses to be extra vigilant in ensuring they have an adequate safety program in place, are aware of any potential workplace hazards, and verify whether their employees are up-to-date on appropriate safety training.

For further information regarding the new increases to OSHA penalties, please see the additional resources below.

Resources and additional links:

 

Ashley Garner, CPCU, AIC, AINS is a Risk Management Associate at Gulfshore Insurance. Ashley works with a wide range of business clients to deliver strategic risk analysis and guidance. Comments and questions are welcome at agarner@gulfshoreinsurance.com

 

injured hand and work injury claim form

Promptly reporting workers’ compensation claims is a best practice, and now there’s evidence that a delay in reporting injuries can raise claims costs up to 51%.

Promptly reporting workers’ compensation claims is a best practice, and now there’s evidence that a delay in reporting injuries can raise claims costs. A new study from the National Council on Compensation Insurance, Inc. (NCCI) reports that a delayed injury report can increase compensation claim costs up to 51 percent as the condition worsens. The simple strategy of reporting claims promptly can significantly reduce claims costs.

NCCI researchers found that claims costs can climb after a delay of only seven days. A report more than 29 days after an incident may result in costs nearly 49 percent higher. One reason for the increase is that attorneys are more likely to become involved in comp cases the longer a claim is delayed. Employers are encouraged to help employees understand that prompt reporting of an accidental injury decreases the likelihood of an attorney’s involvement, according to J. Bradley Young, a partner with Harris, Dowell, Fisher & Harris, who works on compensation cases.

“I still deal with employers every day who feel that if they educate their workforce about comp laws, they’re simply telling their employees how to get more money out of comp claims, which isn’t the case,” Young told researchers.

Other obstacles to early reporting in the workplace are the perceptions that the employee who reports an injury will be doubted or considered lazy and not wanting to work. By not coming forward, some injuries can worsen, making costly measures such as surgery more likely. Employers can boost employee morale by communicating that injuries are a serious matter, and that employee well-being is a priority.

Based on the NCCI survey, employers who educate their workforce about early reporting and who demonstrate concern for all workplace injuries can significantly help create positive benefits for their employees while minimizing claims costs.

Contact the Gulfshore Insurance Risk Management Team with questions concerning claims reporting processes, as well as tools available to help mitigat workplace risks.

Tim Spear is a Client Advisor and Partner at Gulfshore Insurance. Tim works with a wide range of business clients to deliver strategic risk management and commercial property and casualty insurance guidance.

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After 3 years of workers compensation rate increases, Florida based companies may see a small decrease come 2015. The National Council on Compensation Insurance Inc. announced in a statement on Friday, August 22 that they are recommending an overall rate decrease for workers compensation in Florida. This has not happened statewide since 2010.

NCCI is the licensed rating and statistical organization that fosters a healthy workers compensation system for Florida. They suggested an average rate decrease of 2.5% with an effective date of January 1, 2015. The decrease is still pending approval from the Office of Insurance Regulation, who makes the final decision. Read more

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