Telematics and Tort Reform Can Curb Commercial Auto Losses

• By: Olivia Overman
• August 31, 2026

Commercial auto insurance has recorded 13 consecutive years of underwriting losses, with combined ratios consistently above 100%, despite 55 straight quarters of rate increases, according to “2025: Commercial Auto Insurance Market – Challenges and Opportunities” from Conning.

The market continues to face significant challenges, notably as claim severity escalates due to inflation, technology-driven repair costs and litigation trends, including nuclear verdicts and third-party litigation funding (TPLF).

Further, commercial auto liability losses have increased at a rate exceeding general economic inflation, driven by social inflation, according to the “2026 Drivers Risk Report: Current Trends Facing Roadway Safety” by SambaSafety. The report notes that worsening claim severity is the main factor behind challenging market conditions, with commercial auto claim severity increasing by 64% since 2015.

“There’s an interesting dynamic right now because in commercial insurance, we’re seeing the property market and other commercial lines become softer while commercial auto continues to see a hardening,” says Mark Gallagher, transportation practice leader, Risk Placement Services (RPS). “As a result, carriers are leaning into analytics and selective underwriting more so than in prior years because the market is continuing to see accident and combined loss ratios that continue to be unprofitable.”

Telematics continues to be one of the most important risk management and underwriting tools in the industry’s toolbox as it attempts to address the market’s challenges.

“Data sharing has been a positive development within the industry because it’s allowed clients to either save money upfront or receive subsidies for some of the cameras they’ve installed in their vehicles in order to cut down on potential future losses,” Gallagher says. “It reduces upfront costs with the goal of reducing claims in the future.”

For agents operating as strategic advisors for clients, “as telematics becomes more widely adopted, customers will have questions about how it works and what it means for their coverage,” says Daniel Clements, senior director of sales, underwriting, market development, transportation, Sentry. “Agents who have answers can provide feedback and make insightful recommendations will have an edge.”

That advisory role is becoming more important as telematics evolves from an emerging technology into an industry norm. Its use has become “almost a standard of safety today,” says Kirk Aguilera, president, middle-market property & casualty, West region, The Liberty Company Insurance Brokers. “Telematics is no longer viewed as optional, with carriers increasingly seeing it as a baseline requirement.”

Further, while telematics creates some safety net for the underwriter, it also creates another level of liability because if drivers are not using it properly—not engaging with it or not recording—“it’s useless,” Aguilera says.

Aguilera adds that litigation is rampant and while telematics can help fleets defend against claims and potentially mitigate losses, it is unlikely to offset the growing costs associated with litigation and legal defense.

However, the industry continues to take steps to curtail the adverse dynamics within the market. One major step has been legal system abuse reform.

“Several states have made meaningful progress on legal reform, helping foster more competitive insurance markets and improve affordability for consumers,” says Nick Saeger, associate vice president, products and pricing, transportation and specialty, Sentry. “While reform efforts have historically been led by states in the South and Southeast, there are encouraging signs that momentum is expanding to other parts of the country.”

Over the past few years, numerous states have moved to impose stricter rules on third-party litigation funding (TPLF). Eighteen states enacted bills related to TPLF through the first quarter of 2026 and another 16 states proposed legislation related to the practice, according to the latest update of the Verisk “Third-Party Litigation Funding Legislative Activity Map.” Most notably, on June 22, North Carolina became the first state to pass a ban on commercial TPLF.

“The commercial auto industry in general is viewing a lot of the tort reform that has occurred to be positive steps towards where we want to be in the future,” Gallagher says. “While most of the carriers we talk to haven’t yet seen the results come out of that, those changes could help reduce losses out there for carriers, clients and programs.”

That cautious optimism is shared across the industry, as insurers acknowledge that “while that [legal reform] might not produce immediate relief, as actuaries see the impacts in results, they will recognize the benefits, leading to moderating rates in the future,” Saeger says.

“Looking ahead, tort reform in states like Florida, Georgia and, most recently, New York, has already helped address certain loss-cost pressures, but it is still early to determine its full impact,” says Tara Sites, vice president of small commercial product, Liberty Mutual. “If severity trends continue to moderate and tort reform efforts gain traction, the market could move toward greater stability.”

 Olivia Overman is IA content editor.