Advisen Front Page News
- Wednesday, February 9, 2022
Commercial auto claims costs boosted by attorney involvement: Study
Advisen
Commercial auto claims costs boosted by attorney involvement: Study
By Erin Ayers, Advisen
Attorney involvement in commercial auto insurance claims has increased over the last several years and with it, both costs and resolution times have risen, according to a study from the American Property Casualty Insurance Association (APCIA) and Milliman.
Analyzing four years of claims data, the report found a 21.3% increase in total losses between 2015 and 2019, bringing the average cost to $149,494 (including both the loss and loss adjustment expenses). Claims closed in 2019 involving an attorney were also found to cost over 14 times more on average than claims without attorney involvement, APCIA found. These claims represented just under 30% of all claims, but accounted for 86.7% of total losses and loss adjustment expenses in 2019.
“Increasing attorney involvement in commercial auto claims is a real concern. Commercial auto operations play a vital role in the U.S. economy by ensuring products reach the shelves of retailers, goods arrive at every consumer’s doorstep, and parts and supplies reach manufacturers. Artificially increasing costs to trucking companies through increased attorney involvement will not only directly impact those companies, but it will also cause broader repercussions for the economy and consumers,” said Stef Zielezienski, APCIA executive vice president and chief legal officer, in a statement on the report.
The report also revealed an increase of more than 100 days in the average time it takes for claims to be resolved between 2015 and 2019. Longer resolution times, known as the “cycle time,” typically translates to higher costs. For claims closed in 2019 with both an attorney involved and a loss of more than $500,000, the average cycle time was 1,272, APCIA said. However, claims closed in 2019 without an attorney actually closed 35 days faster on average than in 2015.
Claims in general became costlier over the four-year period: APCIA found a 50% increase in the percentage of claims with a loss of more than $500,000. And while these claims only accounted for 1.5% of total claims in 2019, they accounted for nearly half (45.4%) of all losses and loss adjustment expenses. Claims ranging from $100,000 to $500,000 in 2019 accounted for 4.6% of claims and 29.2% of losses and expenses, according to the report.
Commercial auto insurers have struggled over the last decade, with pricing lagging behind loss costs and more than $22 billion in underwriting losses between 2011 and 2020, according to a 2021 report from AM Best. The line experienced its best results in a decade in 2020, but with driving returning to pre-pandemic levels and courts reopening, the forecast is still negative, per Best.
According to recent broker outlooks, commercial auto insurance rates have begun flattening out somewhat from their hard-market highs. Challenges remain, though, as transportation accounts wrestle with driver shortages and higher demand for speedy deliveries. Commercial auto insureds have turned to both alternative risk transfer in some cases and technology to improve their risks in recent years, brokers says.
