Advanced Tech No Guarantee of Lower Truck Insurance Rates

October 29, 2018 by Cyndia Zwahlen

There is little relief ahead from steady rate hikes for truck insurance that have plagued carriers despite the advanced safety technologies featured on more new trucks, industry experts said.

Average insurance rates for commercial trucking companies continue to rise at an accelerated pace, according to the latest survey from the Council of Insurance Agents & Brokers.

A third of the insurers surveyed said they had raised rates from 10 percent to 29 percent for their commercial auto insurance customers, which include trucking companies.

The average rate increase in the second quarter was 8.2 percent, which came on top of a 7.7 percent average rise in the first three months of the year. Rates have climbed for 28 straight quarters, according to CIAB data.

“The frustration of the trucking industry is, ‘What can we do to stop or reverse these increases?’ ” said Dan Murray, vice president of research at the American Transportation Research Institute. “The best we can do over the next few years is to slow down rate hikes.”

Commercial auto coverage remains a troubled sector for insurers, who last year paid out on average $111.11 in claims for every $100 in premiums collected, according to the insurance council. That was a 16-year high. Recently, high jury awards against trucking companies also have pushed up claim amounts, and thus losses and premiums.

Can technology help?

Although insurers are beginning to consider the impact of advanced truck-safety technology, they say enough data haven’t been gathered to support rate cuts. Moreover, adoption of the technology, including automated braking systems, blind-spot alerts and other advanced driver-assistance systems, is not widespread.

“The transportation industry was optimistically hoping that just by way of implementing some of these technologies, there would be some immediate cost reduction as it relates to things like insurance,” said Bill Zenk, a principal and senior transportation specialist at TrueNorth Cos., an insurance and financial-services firm based in Cedar Rapids, Iowa.

But the tradition-bound insurance industry is not convinced the systems will drive down claims quickly, he said.

“Insurance is typically an industry slow to change and likes data to prove out that this may actually impact the frequency and severity of accidents,” Zenk told Trucks.com.

Other factors are barriers to lower truck insurance, including fewer experienced truck drivers and the expense of advanced technology.

The lack of well-trained and experienced truck drivers has hurt safety records, said Brian Schneider, senior director at Fitch Ratings Inc. in Chicago. Although technology can correct or mitigate driver mistakes like lane drift, it can also be a distraction for drivers not used to it.

And, advanced truck technologies increase truck prices, which could make them more expensive to insure.
“The adoption of new technologies is creating costs that didn’t exist before; technologies like collision mitigation systems add a new layer of equipment and technology that can break down and require expensive repair and maintenance,” according to a report on trucking operation costs by ATRI. Insurance companies are sure to weigh those higher costs against potential safety improvements.

Pros, cons for smaller companies

The ATRI report also showed that smaller trucking companies – those with fewer than five tractors – pay twice as much per mile for insurance as the largest companies – those with more than 1,000 tractors. Smaller companies also are less likely to be able to afford new safety technologies and may miss their potential insurance-cost benefits.

Progressive is giving owner-operators a break: an initial 3 percent cut in exchance for access to the data available through their electronic logging devices. A previous test program by the insurer gave truckers free ELDs if they let Progressive access their data through the ELD’s vendor.

Regulators don’t agree what role driver-assistance technologies will play in commercial trucking. They need to settle issues such as how much automation trucks will be allowed to deploy and how quickly autonomous or semi-autonomous trucks can be used for commercial transport.

Determining liability in crashes is another hurdle, since technology can cut both ways. Onboard cameras might show that a driver wasn’t responsible for a collision. But separate technology detailing that driver’s safety record might result in a carrier being held accountable for not firing or offering extra training to a driver with a poor safety record.

Data management will be a challenge.

“There is a fundamental problem of how do you manage big data,” said TrueNorth’s Zenk. Trucking companies, truck manufacturers and insurance companies are all grappling with who sees, owns and controls the massive amounts of information new truck technologies will produce.

Future tech

At least 33 vehicle-manufacturing and technology companies are working on autonomous vehicle technology, according to a 2016 ATRI report on its effects on the trucking industry.

Although fully automated trucks may not take to the roads for decades, according to the report, effects on safety and, potentially, insurance costs will be widespread. Safer trucks, fully automated or not, may shift the need for insurance away from physical-damage coverage toward more liability coverage, experts said.

New technology such as video cameras on trucks that face forward and into the cab could provide evidence that could limit the high jury awards helping to push up truck insurance costs.

Some regulators are considering giving trucking companies extra points on their federal safety ratings for adding advanced safety features to their fleets. That could encourage more trucking companies to buy advanced safety systems.

“We are starting to see a very small population of insurance companies – the physical-damage insurance companies – providing some discounts in connection with buying it and installing it,” Zenk said.

Insurers traditionally have based rates on usage. They look at how a truck has been used over the past five years or so. Performance-based pricing, which advanced technology telematics could allow, is a newer area.

“In the next three years you are going to see a lot more use of performance-based insurance tied to some of the telematics that can be pulled from a truck,” said Zenk.

Whether that will mean lower rates, or how soon those might take effect, is unclear, although Fitch’s Schneider expects advanced truck technologies to eventually have a positive effect.

“In the long run it will help the industry as well as the trucking companies to be able to lower their costs by having better risk management and better monitoring,” he said.

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