This article originally appeared at InsNerds.com
Today we continue our series introducing personal lines focused agents, underwriters and CSRs to commercial lines. When is it appropriate to offer Commercial Auto Insurance? What are some differences between commercial and personal auto policies? These are questions that many personal lines focused agents may be asking as they start to consider writing commercial insurance. Some of the answers will vary depending on the insurance company that the business is being placed with, but many are similar. Let’s start by talking about who needs a commercial auto policy.
The first answer is obvious: any business that owns a vehicle. So, if the vehicle is titled to an LLC or a corporation, the vehicle will not be eligible for a personal lines policy. The second answer may be grayer: any vehicle that is used primarily for business purposes that are beyond what is acceptable to the personal lines policy. For example, if an individual owns a truck in his individual name, but he has started a landscaping business and now uses the truck to haul his tools and supplies to job sites, many personal lines insurers would prefer to have this risk on a commercial policy. The exposures for an insured in this situation are broader than that of an insured who uses his vehicle to commute to and from the same place of business each day. The landscaper in this example may be driving farther and to many different places each day; it is more appropriate to place this with a commercial insurer. The third and final answer would be if the vehicle is heavier than allowed on a personal policy. In this case, even if the vehicle is not truly used for anything beyond personal use, commercial insurers may offer the policy as an accommodation, or you may need to look for a specialty carrier.
When it comes to differences between the policies, there are often differences in coverages and benefits. It is important to review these differences and understand how to best serve your client if they are eligible for either type of policy or if they come to you asking advice on how to title their vehicle. One example of a coverage that is typically provided on a personal lines policy but not automatically on a commercial policy is hired and non-owned auto coverage. Often, personal lines policies will offer benefits such as first accident forgiveness or the opportunity to add new car replacement coverage that commercial auto policies may not offer. In general, the personal lines policies will have more options and built-in advantages.
Remember that front-line underwriting for commercial auto may be more challenging than for personal lines auto coverage. Businesses may have turnover of employees who are drivers much more frequently which will require more discussions around driver than a family auto policy may require. The vehicles used in business are often more customized. They also typically have a higher Gross Vehicle Weight which makes them inherently more dangerous. When writing the policy, make sure you understand what the vehicles are used for, so you can classify the vehicle appropriately and get enough rate to maintain your profitability on the auto policy. Understanding state and federal filings is helpful in recognizing what kind of commodities a business is hauling-this can impact where you can place the business. Using the U.S. Department of Transportation’s website can help alert you to concerns that your customer may have neglected to discus.
Finally, when you begin to write commercial auto insurance, discuss coverage differences and front-line underwriting with your commercial underwriter, so that you understand what fits the particular carrier’s appetite.