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A closer view of commercial auto risks

By Jim Davidson  |  September 14, 2015

There’s a difference between a 12 year-old truck and one that’s 24. There’s also a difference between insuring a company with five trucks and one with 200.

And it’s those differences, along with the growing and diverse use of vehicles in business, that have informed ISO’s new optional class plan for Commercial Auto Trucks, Tractors, Trailers, and Private Passenger Types. The optional plan, which we expect to file beginning in September, will feature more detailed rating variables for factors such as age, cost, and commercial segment. It’s designed to help insurers better distinguish among risks and provide them with more precise estimates of expected loss.

Why a new plan?

The class plans that much of the insurance industry uses today are based on actuarial methods that are more than 40 years old. And in that time, the risks have changed dramatically.

Consider the number of large trucks on the road today, and the number of accidents they’re involved in. According to the U.S. Department of Transportation, there were more than 10 million registered commercial trucks in the United States in 2013, which together, traveled 275 billion miles. Those trucks were involved in more than 126,000 crashes, resulting in more than 4,000 deaths and more than 66,000 injuries.

At the same time, the economy has also evolved, creating new uses for commercial vehicles. Online retailers, restaurants, and even dog groomers are just a few of the businesses that use trucks to distribute their goods and services.

Each of those businesses uses different vehicles to serve its customers and present a wide range of exposures that insurers need to consider when underwriting Commercial Auto Trucks, Tractors, Trailers and Private Passenger policies.

How does the plan work?

In the new plan, we’ve moved beyond traditional methods to increase granularity with regard to our current rating variables, including vehicle age, vehicle cost, commercial segment, and purpose/use of vehicle. We’ve also added the NAICS (North American Industrial Classification System) to the model, a system that groups business establishments into industries according to similarity in the processes used to produce goods or services.

The new plan differs from the current plan manual in a number of ways, including:

When will the new plan go into effect?

Our goal is to have the new optional class plan permanently replace the current ISO manual, no earlier than 2019. But, in the interim, ISO participating insurers can continue to use the current manual if they like, or until they feel ready to implement the new optional class plan. Those who adopt the optional class plan are responsible to independently notify regulatory authorities, as appropriate.

If you would like more information or have any questions, please feel free to contact me at or 201-469-2679.