If you own a towing company, you might have noticed an increase in your rates over time. The soaring costs can make it difficult to successfully run a tow truck business. If you’re wondering why tow truck insurance rates are constantly on the rise, here are some factors that might be contributing to this.
Why Tow Truck Insurance Rates Are Increasing
There can be several reasons why you might see your tow truck insurance rates increasing over time:
- Trends in the commercial auto insurance industry
- Your company’s experience
- Towing insurance-related trends
Not all insurance rate-related factors are in your control. Here are a few more details related to the issues mentioned above.
Trends in Commercial Auto Insurance
It’s important to know that commercial auto insurance companies pay more in claims compared to what they collect from premiums. Therefore, most insurers lose money in auto insurance. This is perhaps why you see rate increases for commercial vehicles. This includes garbage trucks, big rigs, tow trucks, delivery vehicles, etc. This can happen for many reasons:
- Distracted driving causes an increase in the number of accidents
- People now drive more miles
- The cost to repair cars with technology has increased
These reasons cause an increase in auto premiums. Insurers have to raise the rates of premiums to keep up with the soaring costs for claims. Otherwise, these insurance companies wouldn’t be making a profit.
Your Company’s Experience
As described earlier, you usually have no control over insurance-related trends. But it doesn’t mean that you should overlook factors that drive up the costs of insurance rates. Keep in mind that the rate for your vehicle insurance is based on the following factors:
- Replacement cost of your vehicles. If you were to total a new $500,000 class 8 tow truck it would be a larger financial hit compared to a $50,000 class 4 truck. Therefore, the more money you have invested in your trucks the more your premiums will likely be.
- SAFER Rating. Cars with anything other than satisfactory and green ratings will have higher insurance rates.
- Driver Records. The cleaner your truck driver’s records are, the better rates you’ll get. It’s similar to other auto insurance types. Bad drivers have to pay higher premiums and better drivers pay lower premiums typically.
- Claims History. The number of claims your business has filed and the type of claims will impact your rates.
Towing Insurance-Related Trends
Specifically, insurance companies consider insuring tow trucks risky. Since most auto insurers lose money insuring tow trucks, they typically avoid the industry. This is the main reason many insurance providers don’t insure towing companies. But if they do, they typically charge a lot to make up for the risks involved in the industry.
All in all, numerous factors can cause an increase in your tow truck insurance rates. This article can help you understand the reasons why tow truck insurance rates are going up and what you can possibly do to lower your rates.