When a company operates vehicles, whether it is a full fleet or a handful of cars, auto liability exposure is one of the biggest risks to both your bottom line and your company’s reputation. In today’s environment, a single severe claim can cost millions, while frequent smaller claims can quickly drive-up insurance premiums, damage employee morale, and distract the company from growth.
Why frequency and severity both matter
Too often, businesses focus on one side of the equation. Frequent “fender-benders” can feel like a cost of doing business, while major accidents are seen as rare outliers. In reality, both trends are connected. Frequent small incidents increase loss ratios, strain insurance programs, and often highlight cultural or operational issues. These same gaps can ultimately lead to catastrophic events.
The most effective organizations address both frequency and severity together, building programs that reduce the likelihood of incidents while also mitigating their impact when they occur.
Emerging best practices in auto liability risk management
1. Prioritize driver selection and training
Your drivers are the front line of defense against claims.
- Screening involves performing background checks prior to hiring and running Motor Vehicle Records (MVRs) prior to hire and annually.
- Ongoing training includes defensive driving programs, refresher courses, and post-incident training to reinforce safe habits.
- Safety isn’t just HR’s responsibility; it should be a leadership priority.
2. Use technology to your advantage
Telematics and safety technology are powerful tools for reducing both accidents and claims costs.
- Dashcams and telematics provide objective evidence in claims disputes and help coach drivers.
- Collision avoidance systems in newer vehicles can reduce rear-end crashes, which is a leading cause of liability claims.
- Real-time alerts through telematics for speeding, harsh breaking, or distracted driving help intervene early before an accident occurs.
3. Maintain vehicle proactively
Poorly maintained vehicles are more prone to breakdowns and accidents.
- Implement a preventive maintenance schedule that exceeds minimum requirements.
- Train drivers to perform daily vehicle inspections and report issues immediately.
- Keep thorough documentation – strong records can help defend against claims of negligence.
4. Strengthen risk transfer and insurance programs
With insurers tightening terms and increasing premiums, companies are reevaluating their risk financing strategies.
- Work with your broker to ensure your liability limits match your true exposure.
- Use layered liability programs to ensure adequate protection against catastrophic claims.
- Contractual risk transfer shifts responsibility back to subcontractors or vendors when appropriate.
5. Prepare for when claims happen
Even the best program cannot prevent every incident. Having a plan can limit severity.
- Establish rapid response protocols to gather evidence, witness statements, and dashcam footage immediately.
- Partner early with your broker and insurer to reduce claim costs.
- Develop a crisis communications plan to protect your company’s reputation if an accident gains media attention.
Reducing auto liability frequency and severity isn’t just about compliance – it is about protecting your employees, your brand, and your profitability. Companies that invest in proactive driver management, safety technology, and strong risk culture consistently experience lower claims costs and more stable insurance premiums.
If you have more questions on auto liability frequency and severity claims, please contact a Marsh McLennan Agency (MMA) advisor.
