For the past decade, the commercial auto insurance market has posed significant challenges for insurers and policyholders. Persistent underwriting losses, declining profits and consistent rate increases have defined the market. In 2024, commercial auto premiums experienced some of the highest increases, with rates rising between 9% and 9.8% in the first two quarters. Insurers have reported combined loss ratios above 100% for 12 of the past 13 years, paying more claims and expenses than earned in premiums.

These tough market conditions are expected to continue in 2025. Key factors driving this trend include widespread driver shortages, nuclear verdict concerns, inflation and distracted driving. These issues have contributed to rising claims frequency and greater loss severity.

As a result, businesses with large fleets or high-risk profiles are finding it harder to secure affordable coverage. Some companies adapt their operations by moving from long-haul to local trucking or utilizing smaller trucks for long distances to help reduce costs. Premium increases, capacity reductions and coverage restrictions are expected for those with poor claims histories or substantial exposures.

Trends Shaping the Commercial Auto Market in 2025

Addressing Commercial Driver Shortages

The transportation industry is grappling with a severe driver shortage. In 2023, the U.S. had an estimated three million truck drivers, yet 60,000 positions remained unfilled in 2024. will expand to 82,000 by 2024 year-end and could reach 160,000 open positions by the decade's end.

In response, businesses are improving recruitment and retention strategies by increasing wages, improving working conditions and targeting underrepresented demographics like women. However, some employers are lowering hiring standards to fill vacancies, leading to an influx of inexperienced drivers. This trend is associated with higher accident rates, increasing losses and claims.

To address these challenges, the federal government introduced the DRIVE Safe Integrity Act in 2023, which promotes better safety training and a permanent apprenticeship program for young drivers. Moving forward, businesses must prioritize robust driver education and safety initiatives to manage the risks posed by inexperienced operators.

Rising Nuclear Verdicts & Social Inflation

Social inflation significantly impacts the commercial auto insurance market, particularly due to surging nuclear verdicts in the trucking industry. Over the past decade, the frequency of these large verdicts has increased by over 50% annually, significantly raising the cost of claims. The trucking industry is particularly vulnerable because of the serious nature of accidents, resulting in larger settlements. Together, social inflation and nuclear verdicts have contributed to a $30 billion surge in commercial auto claim costs since 2012. As a result, insurance carriers are reevaluating their risk tolerance and may consider restricting coverage options or withdrawing from the market, leaving policyholders exposed. While state-level reforms could provide relief, the current environment is expected to persist in 2025.

Fleet Electrification

The use of electric vehicles (EVs) in commercial fleets is gaining momentum. By 2021, U.S. commercial and government fleets had over one million EVs, a 233% increase from 2019, with projections exceeding four million by 2030. However, the higher purchase price of EVs leads to increased insurance premiums, influenced by risks unique to these vehicles, including:

• Cyber Threats: EVs’ connected technologies, including reliance on public charging stations, increase the risk of malware, data breaches and cyber attacks that could compromise entire fleets.
• Battery Hazards: Lithium-ion batteries present fire hazards that are more intense, prolonged and toxic compared to conventional vehicle fires, complicating claims and recovery efforts.
• Pedestrian Accidents: EVs are quieter, which can increase the risk of pedestrian accidents, as individuals may not hear them approaching.

While insurance premiums for EV fleets are initially higher, the long-term outlook is positive, with costs expected to stabilize as technology advances and the market matures.

Surging Physical Damage Claims

The cost of vehicle collisions has risen sharply due to higher repair costs and ongoing supply chain challenges. While safety technology like backup and blind-spot cameras enhance vehicle performance, they can make repairs more expensive. For example, AAA reports that repairing cars with driver assistance systems can be up to twice as expensive as repairing vehicles without these features. Supply chain challenges like part delays have extended repair times, increased fleet downtime and elevated costs. As a result, many vehicles are being deemed total losses as the combined repair costs and salvage value surpass the vehicle’s actual cash value.

Risk Management Strategies

• Develop driver safety programs. Regularly evaluate and enhance driver safety programs tailored to your fleet’s specific needs. Create onboarding protocols for new drivers and implement ongoing training programs to reinforce safe driving practices.
• Implement employee retention programs. Develop and maintain programs designed to retain experienced drivers, reducing turnover and associated risk.
• Establish driver qualification standards. Utilize motor vehicle records (MVRs) to thoroughly vet driver experience and history. Define disqualification standards for unacceptable violations and regularly review MVRs to ensure compliance with safety standards.
• Evaluate and adjust your policies. Partner with a broker to determine potential structural changes to your commercial auto policies.
• Leverage technology. Invest in technological solutions such as telematics, to monitor driver behavior and strengthen loss control measures.
• Monitor fleet management and safety scores. If applicable, regularly review your Federal Motor Carrier Safety Administration (FMCSA) Behavior Analysis and Safety Improvement Categories (BASICs) scores to identify and address fleet management gaps.
• Ensure legislative compliance. Stay compliant with applicable commercial driving legislation, including those governing road safety, vehicle maintenance and drug testing policies.

We’re Here to Help Protect Your Fleet & Drivers

With experts predicting rates increasing from 5% to 15%, our property and casualty team is dedicated to keeping you informed of changes in the market and helping you to have the right coverage at the right price. Their knowledge and experience have earned the trust of businesses across the nation. To learn more about changes in the commercial auto liability insurance market and how to protect your organization, connect with a member of our team.