Commercial Auto Insurance Risk Management Strategies

Abstract

Autopilot, Distronic Plus, Intelligent Cruise Control. These are the names of semi-autonomous driving systems currently offered by Tesla, Mercedes-Benz, and Infiniti, respectively. It is clear that the leading companies in the automotive industry have embraced the push for autonomous vehicle technologies, and that this trend will continue to reshape our fundamental notions of transportation and mobility in the coming years. Until autonomous vehicles become a part of our daily lives, businesses in industries related to the transportation sector will be forced to evaluate their present business operations, and to decide if embracing autonomous vehicle technologies is a valuable and worthwhile investment with respect to the profitability of their respective businesses.This thesis analyzed the performance of a specialty commercial auto insurance company's currently available risk management strategies, as well as the potential effectiveness and profitability of autonomous vehicle technologies if purposed as risk management strategies. The purpose of this thesis was to conduct a case study which rigorously analyzed the current risk management practices of a commercial auto insurance company, to propose recommendations for the company in the case study to improve their risk management strategies, and to investigate the potential of new risk management strategies which utilize autonomous vehicle technologies.Four existing risk management strategies were analyzed in this thesis: the use of automated event recorders (abbr. AERs), defensive driving courses and training, physical abilities testing (abbr. PAT) programs, and return-to-work (abbr. RTW) programs. After a comprehensive analysis, it was determined that insured customers from the trucking industry who had implemented PAT programs correlated with outperforming the baseline claims frequency standard by at least 0.09 claims per one million miles driven, and this figure is confirmed at the 95% confidence level. Ultimately, the existing risk management strategies analyzed in this thesis were not supported by the data to have a consistent correlation with outperforming the baseline performance standards. It is recommended that risk management strategies involving autonomous vehicle technologies be investigated by the Company.