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Taking Control of Rising Commercial Auto Insurance Costs

The lumber industry has a problem on its hands. Commercial auto claims.

Across the industry, we’re seeing a higher frequency of accidents and consequently claims. An auto loss can prove incredibly costly for a lumber business. In the event of an incident, business owners have to contend with vehicle repair and replacement costs, loss of equipment that was being transported and possibly severe injuries to staff. Not to mention potential losses from injuries caused to the other drivers or property in the area. 

Furthermore, rates continue to rise in the industry. In the fourth quarter of 2022, auto rates experienced a 7% increase, according to Insurance Business America. As companies hit renewal season, it’s critical to have the right safety measures in place to keep the coverage they need affordable. 

What can lumber businesses do to limit their losses on the commercial auto front and make their business more insurable? A proactive approach to risk management and a companywide commitment to embracing and implementing the best practices available are essential. But first, it’s important to examine what’s causing these challenging circumstances for lumber companies. 

Influencing factors 

The term social inflation has had a resurgence recently to describe a phenomenon of rising claims costs that surpass economic inflation. While there are a few contributing factors to social inflation, litigation leading to verdicts of $10 million or more, also known as nuclear verdicts, has placed a large financial burden on the insurance industry. The median verdict in 2021 according to the National Law Journal’s Top 100 Verdicts list was approximately $40 million, five times larger than the 2020 median. On the auto liability side, the average verdict associated with transportation or motor vehicles was $154.2 million in 2021, approximately $23 million more than 2019. This increasingly aggressive litigious environment and the fact that traditional insurance policies are not designed to pay out such exorbitant amounts is causing insurance costs to skyrocket. 

These factors have led to a rise in rates, but we have also seen more accidents on the road. 

The National Safety Council reported that in 2021, there was an 18% increase in fatal accidents from 2020 and a 49% increase over the last decade with 5,700 large trucks involved in fatal accidents. This increase in fatal accidents could be due to several reasons, including the onset of less experienced drivers into the workforce. 

Combined, these contributing factors demonstrate a convergence of challenges for lumber companies that could prove problematic without proper preparation. 

Taking Control of Rising Commercial Auto Insurance Costs
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Taking control 

It is critical for lumber and building material dealers to prioritize fleet safety and give their businesses their best chance at securing cost-effective, adequate insurance coverage. Best practices to mitigate your risk include:

Evaluate your driver safety program: A drivers’ safety program should be evaluated on an annual basis to ensure all information is up to date. While completing this evaluation, lumber and building material dealers should search for gaps in the program that may impact a driver’s understanding or ability to carry out their duties. A cohesive driver safety program should be tailored to the business for which it is written complete with safety policies, expectations, a drug and alcohol policy and more. 

Properly screen employees: Before a driver is hired, they should be properly vetted and screened. This process should include but is not limited to analyzing driving records for issues such as accident history or previous DUIs, completing a cohesive background check, testing their truck driving knowledge and much more. No screening can be too thorough when it comes to building a team of experienced, safe drivers. Lumber businesses should take advantage of continuous motor vehicle record (MVR) monitoring, which can help track driver records in real time. Continuous MVR monitoring provides live reporting of any driver safety violations, including speeding tickets and crashes. This is an important tool to show your insurer that your company is only putting safe drivers on the road. 

Conduct training and require continued education: In addition to the required commercial driver’s license (CDL) training commercial drivers must complete, lumber and building material dealers should require their drivers to complete training specific to the business and lumber industry. In addition to extensive training at hire, drivers should be encouraged and required to complete continued training courses throughout their employment to provide basic rule refreshers, updates on rules or changes within the business that would impact drivers. It should never be assumed that a driver is adequately informed on safety. When it comes to fleet safety, lumber and building material dealers can never be too careful. 

Leverage technology: Technology such as telematics can be very effective in ensuring drivers are using their training in practice. Such technology allows management to receive real time data about their drivers’ behaviors such as hard braking, speeding and more. This can prove beneficial to structuring a driver’s continued training by providing management with specific areas where their drivers can improve. The data can also be used to prove a business’ track record of risk mitigation to insurers. Consider taking a look at the Pennsylvania Lumbermens Mutual Insurance Company (PLM) website for resources on fleet safety technology.  

Consult your agent: Insurance professionals can be a key resource in combatting rising insurance costs as they have their finger on the pulse of insurance. An insurance professional who specializes in the wood niche will have the expertise to advise lumber and building material dealers on their insurance portfolios as well as what risk mitigation efforts could be improved to benefit their insurance rates. At PLM, we offer insureds risk mitigation resources through the PLM Loss Control Center. Access those resources here: https://www.plmins.com/loss-control/.  

Implementing these practices is the first step towards improving insurability and protecting against commercial auto losses, but perhaps most importantly, management needs to enforce a culture founded on a commitment to safety. Having this technology or these resources available only goes so far, it needs to be ingrained across the business that regularly utilizing these resources and practicing safety training is the key to a safe workplace. Only then will lumber businesses be able to mitigate their commercial auto exposures. 

Unfortunately, the challenges plaguing the insurance industry are not solved simply. Between social and economic inflation, it is difficult to predict the future and how long these challenges will remain. In the meantime, lumber and building material dealers must heed this warning to prioritize safety and position their businesses to withstand the unexpected. When it comes to something as critical as commercial auto insurance, lumber and building material dealers must not compromise the safety of their employees or businesses. Build out a comprehensive driver safety program today and work with a partner that knows your risk.

PLM has served the lumber industry for over 127 years. We provide our insureds with customized coverage and risk management advice and resources designed to protect their businesses from the range of risks in the industry today. For more information, please visit https://www.plmins.com/ or contact us at CustServ@plmins.com or 1-800-752-1895.

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