Risk Analysis: Company-owned Vehicles vs. Auto Allowance

Angela Samarel | Principal, Vice President, Account Executive

The commercial automobile insurance market continues to harden due to rising medical costs, a shortage of experienced drivers, distracted driving, and increases in non-owned and hired auto exposures. Unprecedented jury awards, social inflation, and third-party litigation financing have moved motor vehicle losses from #6 in 2018 to #3 on the National Law Journal top 10 list of the largest 100 verdicts in 2019. On average, clients continue to see annual premium increases anywhere from 10%-20%. Underwriters take deeper dives into financials, raise deductibles, and lower limits on primary and excess policies. This analysis includes thoroughly reviewing all of a client’s fleet safety procedures, emphasizing motor vehicle record reviews for each employee who either has a company vehicle or who may drive their personal automobile for business purposes. Carriers will penalize those who do not have good fleet and driver controls even further than the average 10%-20% increase.

This trend has forced many clients to seriously evaluate whether or not they should continue providing company-owned vehicles for employees or to switch to an automobile allowance. To assist companies with this analysis, the linked chart provides a list of each approach’s pros and cons.

Either of these options is still heavily dependent on your internal risk management controls. Your Parker, Smith & Feek team has many resources available to assist you with developing and implementing the preferred controls that carriers will favorably view to continue to get the best rates possible. Please be sure to reach out to your team if you need assistance.

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