Commercial auto has never been seen as the most profitable line of insurance. It traditionally underperforms — particularly when compared to personal auto. The industry has struggled to figure out what could be done to improve commercial auto results. But before I share what I see as the future of commercial auto, let’s talk about some of the reasons commercial auto lags when it comes to profitability.
Commercial and Personal Lines Are Not the Same
One misconception is that the commercial and personal auto lines work essentially the same way, which begs one to ask why personal auto yields higher profits. In the personal auto line, policies often focus on one driver, one automobile. It’s comparatively easy to assess risk factors, such as the driver’s experience and the make and model of the vehicle, for example. Chances are the personal auto policyholder is also going to drive far fewer miles than a commercial driver, and spending less time on the road generally translates to fewer accidents. Pre-pandemic, the
The commercial line was designed to cover a business’s multiple drivers and multiple vehicles, introducing a myriad different characteristics and risk factors. There tend to be more maintenance-related issues, and when accidents happen, they are often far worse than what one would experience driving a personal vehicle. By contrast, the semis and delivery trucks many commercial policyholders deploy carry enormously heavy loads, and these vehicles have a much harder time slowing or stopping before impact; therefore, they tend to inflict and/or sustain more damage.
As a result, injuries can be more significant and lawsuits more plentiful in the commercial space.
Legal Fees Can Be Exorbitant
That brings us to one of the biggest cost centers in commercial auto claims: litigation. The price of resolving a claim jumps exponentially as soon as attorneys are involved.
Avoiding or even reducing litigation can be a very impactful way to improve the efficiency of fair claims resolution and ultimately the profitability of commercial auto. Cut out this cost center, and margins instantly increase. In addition, steering clear of litigation means claimants receive their money faster without having to share payouts with an attorney. Commercial auto claims that can be resolved fairly and expeditiously — eliminating attorney involvement, settlement talks, and jury trials — are a win for both carriers and claimants.
So, how do we do that?
Using Technology To Eliminate Litigation
Fortunately, artificial intelligence (AI) and machine learning technologies are advancing at a rapid pace. Today’s data science models can be used to pick up on a wide range of related signals that predict a claim’s future — far more signals than even the very best human adjuster could ever see.
With this information and key insights into a claim, such as sentiment analysis, intelligent systems can flag changes or propose steps that claims representatives can take to prevent claim escalation.
Additionally, by using AI to determine which claims pose litigation risks early in the claims’ life cycle, organizations can then assign claims to the most appropriate adjuster and enable them to prioritize their workload accordingly. AI systems offer an entirely new pathway to not only reduce risk but also increase operational efficiency. Quite a powerful value proposition!
Finding the Right AI Vendor To Meet Your Needs
For AI-based technologies to make a positive impact, however, they must be easy to adopt. Look for solutions that don’t require extra work from your claims team members to fully leverage capabilities.
This means vendors must have deep knowledge and expertise in data science and how to deploy it to make sense for users. Application vendors and their data scientists should have a track record of creating models that address highly specific problems.
As such, vendors have to understand the insurance industry as a whole, including its regulations, and have a firm grasp on the unique aspects and challenges associated with the commercial auto line. The clear differences between commercial auto and other business lines should be taken into account by AI systems developers if an organization wants to maximize its AI investment. At Amerisure, the vendor we use is CLARA Analytics.
I believe that AI will continue to become more prevalent across the insurance industry in the days to come. My organization, for one, is diving in and embracing it.
