When it comes to insurance companies avoiding higher insurance premiums for your fleet, one of the biggest drivers of your premium is how thorough your driver screening is performed and adhered to. One of the most critical factors in this process is evaluating a driver’s motor vehicle record (MVR), which serves as a key indicator of future risk and directly impacts insurance premiums.
As highlighted in The 10 Laws of Insurance Attraction, insurance companies closely analyze MVRs because drivers with poor records—especially those with major violations like DUIs or reckless driving—are statistically more likely to have future accidents. Underwriters use these records to determine eligibility and pricing, often excluding high-risk drivers or applying significantly higher rates to fleets with poor safety profiles. Additionally, due to the Doctrine of Negligent Entrustment, employers who allow unqualified drivers to operate company vehicles could face costly lawsuits and punitive damages that may not be covered by insurance.
In this article, we will explore how insurance companies assess MVRs, the financial impact of violations and accidents on fleet insurance, and best practices for screening and hiring safer drivers to mitigate risk and control costs.
Understanding How Insurance Companies Assess Motor Vehicle Records
Insurance companies use MVRs to evaluate the risk profile of each driver in your fleet. This assessment includes reviewing any traffic violations, accidents, and other incidents that may indicate a higher risk of future claims. Here are some key factors that insurers consider:
- Driving History: Insurers examine the driver’s past driving record, including any speeding tickets, reckless driving charges, or DUI convictions. These violations can significantly increase the perceived risk and, consequently, the insurance premiums.
- Accident History: A history of accidents, even if they were not the driver’s fault, can impact insurance costs. Insurers view frequent accidents as a sign of increased risk, leading to higher premiums.
- License Status: Ensuring that all drivers have valid and active licenses is essential. Driving with a suspended or revoked license can lead to severe penalties and increased insurance costs.
The Impact of Major Violations and Accidents
Major violations, such as DUIs and reckless driving charges, have a profound impact on fleet insurance costs. These offenses are considered high-risk and can lead to substantial premium increases, and in most cases, the insurance company will exclude the driver from coverage.
Major Violations:
- DUIs: A DUI conviction can double insurance rates, as it significantly increases the risk of future accidents.
- Reckless Driving: Reckless driving charges can increase premiums by up to 70%, as they indicate a disregard for safety and traffic laws.
- Excess Speed: The threshold does vary from insurance company to insurance company, but driving in excess of 20, 25, or 30 mph over the speed limit could be viewed as a major violation.
Accumulation of Tickets and Violations
While minor infractions might not significantly impact premiums initially, accumulating multiple tickets and accidents can lead to higher rates or a driver being excluded. Insurers view frequent violations as a sign of poor driving habits. According to the American Transportation Research Institute’s published data, an employee who had an accident has an 88% increased likelihood of having another one. A failure to obey traffic signs has a 68% increase in likelihood.
- Frequency and Severity: The frequency and severity of violations and accidents are critical factors. Frequent accidents, even minor ones, can lead to higher premiums due to the increased risk of future claims.
- Cost Implications: Accidents can result in significant costs beyond insurance premiums, including repair expenses, lost productivity, and potential legal fees.
Best Practices for Screening and Hiring Safer Drivers
Implementing effective driver screening processes is essential for reducing fleet insurance costs and enhancing overall safety. Here are some best practices to consider:
- Comprehensive Background Checks
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- MVR Checks: Conduct thorough MVR checks for all drivers at least annually, as required by the FMCSA for commercial motor vehicle drivers.
- Criminal Background Checks: Consider conducting criminal background checks to identify any past offenses that may impact driving behavior.
- Define Driver Profiles
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- Skill Requirements: Clearly define the skills and qualifications required for each driving role within your fleet.
- Behavioral Assessments: Use behavioral assessments to evaluate a driver’s attitude towards safety and risk management.
- Standardized Driving Tests
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- Skills Evaluation: Implement standardized driving tests to ensure that all drivers possess the necessary skills and competencies.
- Ongoing Monitoring and Training
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- Regular Reviews: Regularly review driver performance and provide feedback on areas for improvement.
- Ongoing Monitoring: There are services that can continuously monitor your employee’s driving record and alert you when something hits their record. That way, you can look to see if a discussion is needed with the employee or if their driving record is such that they can no longer drive for you.
- Safety Training: Offer ongoing safety training to address any identified risks and enhance overall driving skills.
- Incentivize Safe Driving
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- Recognition Programs: Implement recognition programs to reward drivers for maintaining safe driving records.
- Incentives for Safe Behavior: Offer incentives for safe driving practices, such as bonuses or additional benefits.
- Clearly Defined Driver Eligibility Policy
Establishing a clearly defined driver eligibility policy is crucial for maintaining a safe and compliant fleet. This policy should outline specific parameters for driver eligibility, including thresholds for acceptable driving records. Here are some key considerations:
- Thresholds for Violations: Define specific thresholds for the number of tickets or accidents that a driver can accumulate before facing disciplinary action or termination.
- Disciplinary Actions: Establish clear disciplinary procedures for drivers whose records deteriorate beyond set parameters. This may include mandatory training, probationary periods, or last chance agreements.
- Transparency and Consistency: Ensure that all drivers are aware of the policy and understand that their employment could be affected if their driving record deteriorates. Consistently enforce the policy to avoid claims of discrimination.
Having and following these guidelines makes your fleet more attractive to insurance companies. It demonstrates a proactive approach to safety and risk management, which can lead to lower premiums. Additionally, a well-defined policy helps protect against potential legal liabilities, such as claims under the doctrine of negligent entrustment. This doctrine holds employers liable for accidents caused by drivers they knowingly allow to operate vehicles despite being aware of the driver’s incompetence or recklessness.
By maintaining a clear and consistent driver eligibility policy, you can also mitigate the risk of punitive damages in lawsuits. Juries are less likely to award punitive damages if it is evident that the company took reasonable steps to ensure driver safety and compliance.
Furthermore, a well-documented policy helps prevent discrimination claims should you need to terminate a driver. By applying the policy consistently across all drivers, you can demonstrate that any disciplinary actions were based on objective criteria rather than personal biases.
Conclusion
Driver screening plays a critical role in managing fleet insurance costs. By understanding how insurance companies assess MVRs and the impact of major violations and accidents, businesses can take proactive steps to reduce their risk profile. Implementing best practices for screening and hiring safer drivers, combined with a clearly defined driver eligibility policy, not only lowers insurance premiums but also enhances overall fleet safety and operational efficiency. In today’s competitive business environment, investing in robust driver screening processes and maintaining a transparent and consistent safety policy is essential for maintaining a safe and cost-effective fleet operation.