Let's be honest for a second. The commercial auto insurance market has been a bit of a nail-biter for years now.
If you're in the industry, you've seen it. Claim costs keep climbing, new vehicle tech makes repairs wildly expensive, and it feels like we’re constantly trying to hit a moving target. For several years running, the numbers have shown that for every dollar carriers take in, they’re paying out more than a dollar in claims and expenses. That’s just not sustainable.
So, what’s the solution? How do we get a better handle on the actual risk we’re putting on the books?
It turns out, the answer might be hiding in plain sight: inside the vehicles themselves. We’re moving beyond the old, general ways of pricing and getting much, much smarter about understanding what makes one truck or van riskier than another.
The Old Way: A Blurry Snapshot of Risk
For the longest time, commercial auto pricing relied heavily on something called a "vehicle symbol."
Think of it like a car's basic job title. It's a shorthand code that gives you a general idea of the vehicle's characteristics based on how it was built. It’s a summary, a quick snapshot.
I was chatting with Gary Wang, a Senior Consulting Actuary over at Pinnacle Actuarial Resources, and he explained it perfectly. He said, “The vehicle symbol is a summary variable that tells you about the vehicle characteristics. It represents what we know about a car based solely on how it’s built.”
Basically, it tells you, in a very general sense, "how risky this car is when it’s out on the road.”
And for a long time, that was good enough. It gave us a starting point. But in today's world, with so many variations in safety features, horsepower, and build materials, a "summary" just doesn't cut it anymore. It's like trying to hire a specialist by only looking at their job title—you're missing all the important details.
The New Way: A High-Definition Picture
This is where things get really interesting. The industry is now shifting toward something far more detailed, often called a Vehicle Build Score, or VBS.
If the old vehicle symbol was a blurry snapshot, the VBS is a 4K, high-definition video.
As Wang explained, “VBS stands for vehicle build score, which can be thought of as a model for vehicle characteristics.”
Instead of just one summary code, these new models look at hundreds of different data points specific to that exact vehicle. We're talking about everything from the engine size and horsepower to the presence (or absence) of advanced driver-assistance systems (ADAS) like automatic emergency braking or lane-keeping assist.
Why does this matter so much? Wang put his finger on it: “This tool’s greatest values are completeness and accuracy.”
Finally, insurers can get a crystal-clear picture of what they’re actually covering.
What Does a Vehicle Build Score Actually Look At?
Imagine two delivery vans. They are the same make, model, and year. Under the old system, they’d likely be priced almost identically.
But what if one van was the base model, and the other was kitted out with every safety feature available?
- Collision avoidance system
- Blind-spot monitoring
- A beefier suspension designed for heavy loads
- Advanced stability control
Common sense tells you these two vans don't carry the same level of risk, right? The one with the advanced safety tech is probably less likely to be in an accident. The one with the better suspension is less likely to have a rollover.
A Vehicle Build Score captures all of that nuance. It allows insurers to stop guessing and start pricing based on the vehicle's specific DNA.
So, What Does This Mean for You?
This shift is more than just a cool new tool for actuaries. It has real-world consequences for everyone involved in commercial auto insurance.
For insurance carriers, it’s a game-changer. It allows them to price risk with a level of precision they've never had before. This means they can more confidently price policies, which is a huge step toward getting those combined ratios back under control and building a healthier, more stable market.
For business owners, it means fairer pricing. If you’ve invested in a fleet of vehicles with top-of-the-line safety features, you should be rewarded for that, right? These new scoring models make that possible. Your proactive investment in safety can finally be reflected in your insurance premium.
Ultimately, it’s about moving from a one-size-fits-all approach to a tailored one. The more we know about the specific characteristics of the vehicles we’re insuring, the better and fairer the system becomes for everyone. It’s a true win-win, and frankly, it’s a change that’s been a long time coming.
