Weaving in Traffic: What Lies Ahead for Commercial Auto?
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Transcript of Weaving in Traffic: What Lies Ahead for Commercial Auto?
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Weaving in Traffic: What Lies Ahead for Commercial Auto?
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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.
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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…
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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
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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)
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Economic Pressures• Automated enforcement tools as
revenue maker for cities, states
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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.”
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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.
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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
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Economic Pressures• “Personal” driving habits:
– Drug and Alcohol Abuse
– Local communities reporting increases in traffic stop arrests for DUI
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Economic Pressures• “Personal” driving habits:
– Stated commitment to proactive maintenance
– Pushing older cars longer
– Under reporting of “minor” claims
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Fuel Costs & Green Goals• Fuel costs affect individuals, families
and businesses.– The unpredictability of fuel costs
undermines budgets and causes disruptions within normal operations.
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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.
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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
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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”
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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
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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.
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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.
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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
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Fuel Costs & Green Goals• Hybrids are more expensive to repair:
–Two engine systems in most hybrids
–Onboard computers
–Specialized parts
–Labor costs
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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.
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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.
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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
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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
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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
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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
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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
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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/
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Emerging Technologies• Increasing use of onboard recorders and
OEM recorders
• “E-Discovery” in litigation
• Spoliation of Electronic Evidence
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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
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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
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Ongoing Issues – Youthful Drivers
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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
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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.
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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
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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?
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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?
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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
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THANK YOU for your interest &
attention
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SafetyFirst• SafetyFirst is a progressive leader in
commercial auto safety programs.Paul Farrell, CEO
www.safetyfirst.com
1-888-603-6987 (toll free)