weaving in traffic: what lies ahead for commercial auto?
TRANSCRIPT
Weaving in Traffic: What Lies Ahead for Commercial Auto?
Introduction• I wish I could tell you:
– exactly when the market will turn,
– how much to charge, and
– what new endorsements to offer,
– but the TSA confiscated my crystal ball at the airport.
Introduction• A remarkable past 18 months:
– Economy in downturn
– Record high fuel costs
– Continued changes within the insurance industry
• Additionally we have some ongoing issues such as youthful drivers, etc.
Let’s examine each in more detail…
Economic Pressures• Change in management practices
– Safety cutbacks• Morale exposure (ignore dents, etc.)• Cutting costs (Driver Qualification/Training)
– Extending service life vs. replacing
– Uncertain supplier status for fleet replacement
Economic Pressures• Bankruptcies continue in trucking
– 480 truckers went out of business during 1Q2009 • This is roughly 1% of the trucking capacity
in the USA• Estimates predict that it would take losing
5% of market capacity to stabilize the industry (assuming freight levels don’t pick up)
Economic Pressures• Automated enforcement tools as
revenue maker for cities, states
Economic Pressures• “…[Cedar Rapids, IA] anticipates it
can raise $750,000 for the city from the [proposed] enforcement cameras.
• “Tickets go to the owners of vehicles, whether they were driving or not.”
Economic Pressures• “Arizona been expecting to raise $165
million in new revenue from speed cameras…”; however, the flip side…
• A 51-year-old technician for a traffic systems company was gunned down in Phoenix while sitting in his photo radar van on Sunday night, April 19.
Economic Pressures• “Grey Fleet” exposure on the rise:
– Many fleet managers have been “outsourcing” to their own employees
– Drive own car on company business
– No inspections, uncontrolled maintenance, simple reimbursement
– Full fleet exposure vs. hired & non-owned premiums
Economic Pressures• “Personal” driving habits:
– Drug and Alcohol Abuse
– Local communities reporting increases in traffic stop arrests for DUI
Economic Pressures• “Personal” driving habits:
– Stated commitment to proactive maintenance
– Pushing older cars longer
– Under reporting of “minor” claims
Fuel Costs & Green Goals• Fuel costs affect individuals, families
and businesses.– The unpredictability of fuel costs
undermines budgets and causes disruptions within normal operations.
Fuel Costs & Green Goals• While individuals can:
– Curtail leisure driving
– Carpool
– Move to mass transit where available
– Replace vehicle for higher efficiency
• Businesses can’t change as quickly and have fewer options.
Fuel Costs & Green Goals• Businesses might:
– Install speed limiters
– Train drivers to drive more “gently”
– Monitor tire pressure closely
– Test new technology to change behaviors (i.e. GreenRoad Tech) OR
– Replace equipment with hybrid or alternate fuel capability
Fuel Costs & Green Goals• Going Green….
– Introduction of new vehicle technology and designs affecting crashworthiness, and repair costs
– Increase in motorcycle use & an increase in motorcycle crashes, too.
“Tiny for Two”
Fuel Costs & Green Goals• More interest in hybrid, exotic and
ultra light vehicles (i.e. golf cart construction, electric cars, Segway, mopeds for local delivery)
• Some concerns with ‘mini-cars’
http://www.iihs.org/video.aspx/releases/pr041409
Fuel Costs & Green Goals
• While the average Bodily Injury costs (in 2007) were $8500, IRC found costs to be 14.3% greater if sustained in a lightweight vehicle.
Fuel Costs & Green Goals• IRC found that:
– Claimants injured in lighter-weight vehicles were 12% more likely to be hospitalized following their injury than were claimants in heavier vehicles.
Fuel Costs & Green Goals
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Mini Cars Mid Size
Immediate Return toWork
An 8 point difference in Immediate Return to Work Cases depending on size of auto
Fuel Costs & Green Goals• Hybrids are more expensive to repair:
–Two engine systems in most hybrids
–Onboard computers
–Specialized parts
–Labor costs
Fuel Costs & Green Goals• Motorcycles:
– 2007 marked the tenth consecutive year of increasing motorcycle deaths & a 6.6% increase from 2006.
– 2007 fatalities were the highest since NHTSA starting collecting data in 1975.
– In addition, motorcycle rider fatalities increased to 12.6% of all motor vehicle crash fatalities, compared with 5.5% in 1998.
Fuel Costs & Green Goals• Motorcycles:
– Between 1998 and 2007, motorcycle fatalities rose 126%.
– Per vehicle mile traveled in 2006, motorcyclists were about 35 times more likely than passenger car occupants to die in a crash and eight times more likely to be injured.
Insurance Industry Changes• Insurance industry changes:
– Increasing medical costs (increasing faster than for Workers Comp, etc.)
– Predicted rise in U/UIM due to economy
– Emerging technologies
– Potential changes in coverage
Medical Expense• The Insurance Research Council (IRC) has
found that medical expenses reported by auto injury claimants continue to rise faster than the rate of inflation:
– Average claimed economic losses bodily injury grew 9% annualized, from $5,520 in 2002 to $8,522 in 2007.
– In comparison, Consumer Price Index (CPI) was only 3% over the same period; the CPI inflation rate for medical care was 4%.
http://www.ircweb.org/news/20080213.pdf
Medical Expense• A 2008 IRC study looked at data on more
than 42,000 closed auto injury claims.
• Two factors as likely explanations for the faster growth in medical care expenses:
– more frequent use of more expensive treatment alternatives and
– increased unit cost for claimed treatment.
http://www.ircweb.org/news/20080213.pdf
Uninsured Motorist• Although the estimated percentage of
uninsured motorists decreased nationally, from 14.9% in 2003 to 13.8% in 2007, the recent economic downturn might reverse that trend.
http://www.ircweb.org/News/IRC_UM_012109.pdf
Uninsured Motorist• IRC recently released a study, Uninsured
Motorists, 2008 Edition:
– The extent of the uninsured motorists problem varies widely from state to state.
– The report also found a strong correlation between the percent of uninsured motorists and the unemployment rate:
• An increase in the unemployment rate of one percentage point is associated with an increase in the uninsured motorist rate of more than three-quarters of a percentage point.
http://www.ircweb.org/News/IRC_UM_012109.pdf
Emerging Technologies• Web-based Auto Insurance Verification:
– In Texas, a web-based system available to check whether a driver has auto insurance.
– An estimated one in five vehicles, about 4 million, did not have proper insurance, according to TexasSure, the vendor.
– Funded by a $1 fee on vehicle registrations– The program is a joint effort by the Texas
Departments of Public Safety, Transportation and Insurance
http://www.iii.org/media/hottopics/insurance/compulsory/
Emerging Technologies• Increasing use of onboard recorders and
OEM recorders
• “E-Discovery” in litigation
• Spoliation of Electronic Evidence
Changes in Coverage?• Attempts to expand definition of who
is covered have been made in the past and may continue due to economy (i.e. Delancy v. State Farm)
• Pay as you drive (PAYD) based on GPS tracking devices.
http://bulk.resource.org/courts.gov/c/F2/918/918.F2d.491.89-4893.html
http://www.property-casualty.com/News/2008/12/Pages/14-Insurers-Ready-To-Offer-Miles-Driven-Auto-Insurance.aspx
Ongoing Issues – Crash Stats• Mileage down, Fatalities down
• However, crashes did not decline at the same rate:– Early estimates for 2008 = fatalities
decreased by 9.1% (from 41,059 to 37,313)
– However, crash rate reduced only 1.2%-1.5%
– More survivors, more expense
Ongoing Issues – Youthful Drivers
Ongoing Issues – Youthful Drivers
• Despite wide acceptance of Graduated Drivers License programs, teens and young adults continue to crash at alarming rates– “Driving While In-Texticated”
– Affordable cars = uncrashworthy or just plain “old”
– Binge drinking cited as new issue for DUI/DWI
Ongoing Issues - Insensitivity• Our culture:
– Sees driving as an undeniable right/privilege
– Doesn’t see overall crash rate as a serious problem
– Perceives self as “good driver” while admitting to running red lights, shaving while driving, etc.
…And it’s only getting worse.
Summary• Truckers
– Excess capacity in their market forcing steep competition, bankruptcy
– Pushing for larger, heavier rigs for efficiency
– Freight could rebound and create driver shortage
Summary• Sales/Office Fleet
– Grey fleet trades off control for fractional expense savings
– Gadget overload, distracted driving, personal use continue to be a problem
– Supplier availability seems to be easing
– Cells/Texting the next big litigation area?
Summary• Public Auto (Bus, Limo, Van, Shuttles)
– New law this month (September) for day care, church and human services – inspect for children left behind in the vehicle
– Seatbelts, roof strength during roll over emerging issues
– On-board, evidential, post-crash data recorders: boon or bane?
Summary• Manufacturing/Wholesale/Retail
– Major expansion of alternate fuel engines for medium trucks (new technologies, cost to repair)
– If economy heats up, could see rash of claims as safety lags behind the ramp up of productivity.
– Non-professional drivers on tight schedules, little training, no oversight
THANK YOU for your interest &
attention
SafetyFirst• SafetyFirst is a progressive leader in
commercial auto safety programs.Paul Farrell, CEO
www.safetyfirst.com
1-888-603-6987 (toll free)