Workers’ Compensation and Auto Liability Collide
Motor vehicle crashes are the leading cause of worker death and have historically been the number one contributor to workplace catastrophic injuries. Now Workers’ Comp writers need to sit up and take notice because of a new trend: the rising frequency and severity of auto losses.
What will greater auto losses mean to Workers’ Comp results? How can Loss Prevention help our insureds and our own employees? What do our Board of Directors and agents need to know? Should travel risks be part of ERM planning?
Of course, crash frequency and severity trends are critical to Personal and Commercial auto lines (PAL/CAL) and get a lot of attention. But when you consider that motor vehicle crashes account for 36% of all injury-related workplace deaths, you can appreciate why those trends are critical to Work Comp writers, too.1 So, what is happening in the Auto world you should know about?
1. More Miles Driven/Economic Recovery - Across the population, an overall increase in miles driven is well known to drive up claims - often a reflection of drivers responding to improved economic conditions. Beginning in summer 2014, for example, gasoline prices began to fall and it’s possible to track the rise in miles driven from that point. The economic recovery is a major factor in the mileage increase. A Texas A&M University study found there is a 9% increase in fatalities for each 1% increase in employment.2
2. Traffic Congestion - A related flashing light on the PAL/CAL performance dashboard relates to traffic congestion. The Property Casualty Insurance Association of America tracked auto loss ratios and found that the states with the more congested highways - Georgia, Louisiana, Michigan, Nevada and Texas - also have the worst loss ratios for both PAL and CAL.
3. Higher Speed Limits - To make matters worse, the signs are that speed limits are creeping up. Six states now have roads with legal maximum speed limits of 80 mph (Idaho, Montana, Nevada, South Dakota, Utah and Wyoming), while Texas has roads with maximum speeds of 85 mph. Research carried out by the Insurance Institute for Highway Safety found that for each 5 mph increase in a state’s speed limit, there’s a 4% increase in accident fatalities.
4. Distracted Driving - Distracted driving is believed to be responsible for as many as one quarter of crashes. The PCI reports that 60% of all teen crashes involve distracted driving. Your employees may be careful drivers, but that teen in the next lane may not be.
5. Drugs and Driving While Drowsy - State studies show that many crashes are connected with driving under the influence of drugs, with legal medical and recreational marijuana playing a part. Driving performance after 23 hours without sleep mimics a blood alcohol level of 0.08%, and after 24 hours, 0.1%. Professions most affected are night workers, including public entity employees, doctors, nurses and truck drivers.
Workers’ Compensation as well as PAL and CAL insurance carriers would do well to stay alert in the face of so many challenges to their underwriting performance. Emerging Auto trends will certainly collide with Workers’ Comp results; we just cannot predict the extent. Auto writers use many tools to help underwrite risks and contain losses, such as data from red light cameras, telematics, black boxes, smart phone photos/videos. Armed with this information, Workers’ Comp carriers can give their underwriting and risk management practices a tune-up.
If Workers’ Comp writers can recognize the auto trend coming at them, they can take steps to limit the damage. Get in touch if you need a direction on how to reduce auto claims frequency and severity.
- Centers for Disease Control, 2014
- “Traffic Gridlock Sets New Records for Traveler,” INRIX, 8/26/15.