Loss trends and emerging risks: Transportation

Featuring: Kevin Dutchak, Audra Butt, and Leah Strader 

As part of a year-end Q&A series, three experts at Sovereign Insurance share the loss trends from 2021 and what to watch out for in 2022 in the transportation sector. 

KEVIN DUTCHAK, RISK SPECIALIST, COMMERCIAL AUTO

What were the loss trends/key exposures you saw this past year?
For fleet owners and operators, the loss trends I saw in 2021 were along the lines of sideswipe/lane change losses, rear-end collisions, and backing incidents whereby the driver strikes an object when backing up (pro tip: think GOAL…Get Out And Look). The majority of these losses are related to driver behaviour issues, such as not following proper procedures or taking unnecessary risks. In addition to looking at loss trends, it’s also important to look at loss severity. For example, the potential for a rear-end collision to be a severe loss event is significant.  

What are some of the emerging risks to keep an eye out for next year?
While this isn’t new, an ongoing risk is the lack of a sound driver-selection process. Many companies aren’t doing pre-hire road tests, reasoning that the drivers they’re hiring are experienced so pre-hire road tests aren’t necessary. I always say it’s great that the drivers are experienced, but without a pre-hire road test we don’t know if they have the appropriate behaviours for the position. These include everything from doing pre-trip inspections to driving behaviours like using signals properly and taking sound defensive driving actions. When screening applicants, the focus should be on driver competency, not just experience.

See: The importance of pre-hire road tests

How can organizations mitigate these risks?
It’s critical for operators to hire the right drivers and do their due diligence, including conducting reference checks with previous employers and conducting pre-hire road tests. It’s also important to hold orientation and training to provide new hires with information about the specific needs of the company. For example, what are your company policies? What are your expectations of your drivers? When you consider the importance of being safe on the road and the cost of equipment, it’s more than worth the relatively small investment of pre-hire road tests and training. Final point – periodic refresher training with existing drivers will guard against complacency, ensuring the safety of all drivers within the fleet.

See: Best practices for hiring and onboarding new drivers

AUDRA BUTT, AUTO UNDERWRITING MANAGER 

What were the loss trends/key exposures you saw this past year?
One loss trend is the theft of catalytic converters, a car part that contains trace amounts of precious metals. The value of these metals has risen significantly over the past few years, so catalytic converters continue to be an attractive target for thieves. 

See: Catalytic Converter Thefts are Revving Up, but they can be Prevented

The second loss trend involves thieves exchanging locks on gates at truck yards and construction sites. When a worker unlocks the gate, oftentimes they leave it hanging on the gate rather than locking up again. Thieves will come along and switch the lock with an identical-looking one. Then when the workers lock up and leave the site, the thieves have free access to the yard where they can steal equipment and cargo. 

See: Be aware of lock swaps. Protect your business.

What are some of the emerging risks to keep an eye out for next year?
Catastrophe loss should be on everyone’s radar. For example, with recent floods and mudslides in B.C., many commercial vehicles are being rerouted into the U.S. and coming back into Canada. So, we will be seeing more U.S. exposure on accounts that previously had none. Another risk to watch is having too much of an accumulation of vehicles at one location. In this scenario, if there’s a flood, fire or other disaster, all the vehicles will potentially be impacted. 

How can organizations mitigate these risks?
When it comes to theft, increased security measures are the primary course of action. Security measures should range from administrative controls such as company policies, to enhanced on-site security measures, to prevention measures on the equipment itself. With catastrophe losses, it’s important to pay close attention to new exposures that could potentially happen in existing policies. Organizations should also consider having their vehicles spread out at different locations where possible. 

LEAH STRADER, SENIOR UNDERWRITING SPECIALIST 

What were the loss trends/key exposures you saw this past year?
When it comes to commercial trucking and transportation, we’re seeing higher exposures and greater severity of losses. After the Humboldt tragedy in Saskatchewan, the public wants to be assured that big heavy trucks aren’t going to be a hazard when they’re sharing the same roads. As a result of loss severity, the market is tightening up on the types of limits that are available, which makes it more challenging for brokers to place an entire account with one carrier. 

What are some of the emerging risks to keep an eye out for next year?
Autonomous commercial vehicles—with no driver at the wheel—is becoming a reality in some global markets. There’s still a lot of testing being done on autonomous vehicles and with liability issues, again, the public is demanding that these vehicles are safe. On top of that, there is the question of whether autonomous vehicles would fall under an auto policy or P&C because they’re controlled by systems. While some people believe autonomous vehicles are just around the corner and others think they’re still many years away, this emerging technology is definitely one to watch. 

How can organizations mitigate these risks?
Fleet owners and operators have to make sure they have all their ducks in a row in terms of safety and maintenance. It’s critical to conduct frontline training and ensure drivers know what the rules are, sign off on the rules every year, and follow them. From a carrier and broker perspective, it’s important to work together and have a true partnership. At Sovereign, we value working with brokers who are knowledgeable in transportation, provide the right direction to their insureds, and are willing to work with us in getting risk assessments done. It’s important for insureds to know that we are all working together to mitigate loss exposures and help keep our roads safe.