How to price commercial fleet insurance: rating factors and a worked example
How a commercial auto fleet is rated vehicle by vehicle, then adjusted for state, claims record and risk management, with a worked quote priced by a real rating model.
A commercial fleet is priced in two layers. Each vehicle gets its own premium from its class, weight and how far it travels. The fleet total is then adjusted for things that belong to the operator rather than any one vehicle: where it is based, its claims record and how well it manages risk.
This article covers the main rating factors in each layer, the underwriting rules around them and a worked quote priced by a real rating model. It uses the commercial auto fleet example, one of the default models in Ptally. The rates are illustrative and are not taken from any insurer.
Rating each vehicle
Vehicle class
The base premium comes from the vehicle class. Heavier classes cost more because they do more damage in an accident and are more expensive to repair. The example model uses a base of $900 for a private passenger vehicle, $1,200 for a light truck, $2,200 for a medium truck, $3,800 for a heavy truck and $5,400 for an extra heavy truck.
Operating radius
Vehicles that travel further spend more time on the road and more time in unfamiliar places. The per-vehicle radius factor is 1.00 for local work, 1.15 for intermediate and 1.35 for long haul.
Gross vehicle weight
A weight factor refines the class. Vehicles up to 10,000 lbs take 1.00, up to 26,000 lbs 1.10, up to 45,000 lbs 1.25 and up to 80,000 lbs 1.45.
Each vehicle's premium is class base × radius factor × weight factor, rounded to the cent. In Ptally the vehicle model runs once for every vehicle on the schedule, as a child model, and the fleet model adds the results together.
Rating the fleet
Once the vehicles are summed, the fleet model applies factors that describe the operator:
- State. A state load reflects claim costs and the legal environment. The example uses 1.00 for Texas, 1.05 for Illinois, 1.15 for California, 1.20 for Florida and 1.25 for New York.
- Claim-free years. A credit of 3% for each consecutive claim-free year, floored at 25%.
- Safety programme. A formal driver safety programme earns 5% off.
- Telematics. Fleets with telematics fitted get 8% off, for better driving and more stolen vehicles recovered.
- Fleet radius. A fleet-wide radius factor of 1.00, 1.10 or 1.25.
- Cargo. General goods are neutral, refrigerated loads take 1.08 and hazardous goods 1.35.
A $200 policy fee is added at the end.
Underwriting rules
The example model declines fleets with no vehicles or more than 200, which sit outside a standard commercial auto appetite. It refers fleets of 50 or more vehicles, and fleets of five or more with no claim-free years, to an underwriter.
A worked example
Take an Illinois delivery business with six vehicles: four light trucks at 9,000 lbs working locally, and two medium trucks at 20,000 lbs on intermediate routes. It has five claim-free years, a formal safety programme, no telematics, and carries general goods.
First, each vehicle:
| Vehicle | Class base | × Radius | × Weight | = Premium |
|---|---|---|---|---|
| Light truck (×4) | $1,200 | 1.00 | 1.00 | $1,200.00 each |
| Medium truck (×2) | $2,200 | 1.15 | 1.10 | $2,783.00 each |
| Vehicle total | $10,366.00 |
Then the fleet:
| Step | Value | Reason |
|---|---|---|
| Vehicle total | $10,366.00 | Six vehicles |
| × State factor | 1.05 | Illinois |
| × Experience credit | 0.85 | Five claim-free years |
| × Safety programme | 0.95 | Formal programme |
| × Telematics | 1.00 | Not fitted |
| × Fleet radius | 1.10 | Intermediate |
| × Cargo | 1.00 | General goods |
| + Policy fee | $200.00 | |
| = Fleet premium | $9,867.98 |
The calculation is 10,366 × 1.05 × 0.85 × 0.95 × 1.00 × 1.10 × 1.00 = 9,667.98, plus the $200 fee. The quote is valid and is not referred: six vehicles is under the 50-vehicle threshold and the fleet has a claims-free record.
Where fleet models go wrong
Fleet models have more moving parts than personal lines, and a few mistakes come up often.
Rating the same thing twice. This example has a radius factor at vehicle level and another at fleet level. That is deliberate in a teaching model, but in a real product you should decide where radius belongs. If both apply, a long haul fleet pays 1.35 × 1.25, which may not be what the rating guide intends.
Changing schedules mid-term. Vehicles are added and removed during the year. Rating each vehicle separately makes mid-term adjustments simple: price the new vehicle with the same child model and apply the fleet factors from the policy.
Rounding. Rounding each vehicle before summing gives a different answer from rounding the total. Decide which your rating guide uses and test it with worked examples like the one above.
Building the model
The full model, with every rate table, rule and test, is on the commercial auto fleet example page, along with a trace of a quote through every step. You can price a quote over the API and add ?debug=true to see each vehicle's premium and each fleet factor in the response.
For long haul and heavy vehicle operations, see how to price trucking insurance, which uses the same model for an eight-truck refrigerated fleet.
Getting started
Ptally is free to build on, with no implementation fee. Send us your fleet rating guide or spreadsheet and we will help you turn it into a tested model, or start from the default fleet model and change the rates yourself. Talk to our team.