An underwriter writes a $5 million commercial auto liability policy for a large trucking fleet and sees it as a big win, especially if the fleet doesn't incur any losses until the second, third or fourth year. However, the insurer hasn't really made $5 million. Instead, it has assumed years of potential liability that could ultimately make the policy woefully unprofitable.
Research from the American Transportation Research Institute (ATRI) released in May shows why. Per-mile liability losses rose an average of 33% between 2021 and 2024 due to a sharp rise in crash claims expenses, despite a 2.6% reduction in crash rates involving heavy-duty trucks.
It only takes one serious accident to turn a sure win for a carrier into a stinging underwriting loss. That is why insurers should take these three steps to assess a commercial auto client's risk management practices and determine whether its fleet demonstrates the operating discipline required to reduce its risks throughout the policy term.
Step 1: Look Beyond Historical Loss Runs
One of the biggest challenges underwriters face when reviewing commercial fleets is selecting and pricing a policy based solely on past performance. While historical loss runs may seem favorable, subpar claims processes will amplify loss severity in the event of a reportable incident.
Strong claims management is an equally strong indicator of future performance. Fleets that recognize an incident, report it and respond by improving both operational and risk management practices will perform better over time.
During underwriting, insurers should review each prospect's claims processes in detail. Ask how quickly they identify and report claims and whether they have any policies in place for investigation and escalation. Explore whether they use data to recognize recurring accident patterns and look for evidence the fleet has changed its procedures or behaviors based on their claims experience. Use the answers to objectively assess how responsive the fleet is likely to be throughout the policy period.
Step 2: Review How Fleets Use Data
Telematics, on-board camera systems, electronic logging devices (ELDs) and other monitoring systems provide fleets and carriers with a wealth of operational data. Yet the mere presence of these technologies alone does not necessarily make a fleet more insurable.
To see why, consider telematics devices. They deliver a seemingly endless stream of data points, from GPS location and vehicle speed to engine hours, fuel consumption, hard braking, harsh acceleration and following distance. There is so much data, however, that fleets can become overwhelmed quickly. They may not know which data is most important, and they might not have a set process for using that data to improve driver behavior and reduce their risk for accidents.
For these reasons, both carriers and brokers should look beyond a fleet's technology adoption when assessing a client's insurability. Underwriters should ask which data points a fleet monitors, who reviews them and what triggers an intervention. Fleets that manage their risks well will focus on a small handful of meaningful data points, then use them to tailor their continuing training efforts to each driver based on their individual behaviors.
Brokers have a complementary role. If they find a prospective client is experiencing data paralysis, they should partner with carriers with a proven track record of helping fleets make their vehicle safety data actionable. Doing so will position brokers as trusted advisors to their clients while also helping their carrier partners write profitable business.
Step 3: Use Technology to Identify Leakage
A fleet can look like a favorable risk when the policy is bound. It can also become unfavorable six months later. To understand why, consider a carrier that insures 100 trucks, but the fleet actually has 150 power units operating on the road. If the policy is priced on a per-power-unit basis, the carrier is taking on extra exposure it never priced.
The challenge for most insurers is finding those extra vehicles before a claim or renewal exposes the problem. Some carriers are solving this by developing proprietary AI tools that can compare scheduled vehicle data with inspection and operational records. If a vehicle identification number (VIN) shows up in the records but not on the policy, the carrier can talk with the client, find out why and add the vehicle to the policy midterm if applicable.
While AI can stop leakage, carriers should also realize technology should not replace human judgment. Predictive models can help insurers analyze more accounts and surface risk signals faster, but greater underwriting volume does not necessarily mean better underwriting. Experienced professionals must still determine which specific underwriting criterion matters the most.
Insurability Is More Than Pricing Risk
With premiums and claims costs continually rising, carriers can no longer focus solely on rising rates. They must also reduce their losses. Insurers that thoroughly assess a fleet's loss history and claims processes, help it use data to improve driver safety, and check in regularly to prevent leakage will write good business and reduce claim frequency and severity, thereby creating more value than pricing adjustments alone.
