Adverse Selection Is Not a Theory, I Have Watched It Happen - Twice.
When I first entered the insurance industry more than two decades ago, one of the earliest concepts I learned while earning my Associate in Insurance (AU) was adverse selection. At the time, it was purely academic. A textbook definition.
Now, as a veteran of the industry and a CPCU, I have observed the real impact of adverse selection. It’s no longer a theory I learned; it is a reality I’ve seen play out.
It began in my role at Central Analysis Bureau (CAB). We discovered a disturbing emerging trend: Chameleon Carriers. These are carriers that alter aspects of their identity to conceal their history and prior operations. It was easy to watch adverse selection play out with Chameleon Carriers because those programs or insurance carriers that weren’t using CAB were inadvertently writing what everyone else was declining. Simply put, late adopters of CAB paid the price.
Not because anyone was reckless, but because decisions were made with partial information. Adverse selection did not announce itself loudly. It crept in slowly, and by the time it was obvious, the damage was already done.
Today, I am beginning to observe the same pattern in trucking and commercial auto insurance. The difference is that this time, the warning signs are much clearer.
At its core, adverse selection occurs when one party to a transaction has more information than the other. In insurance, that imbalance almost always harms the insurer or the program manager. When risk is not properly measured, priced, or monitored, loss ratios suffer. And the poorer risks stay because the pricing does not fully reflect their true exposure.
In trucking and transportation risks, this problem has always been amplified by limited visibility. Historically, insurers relied on lagging indicators like loss history, inspections, and violations. Useful, but slow. By the time the data told a clear story, months or years had passed.
With modern telematics and operational data, risk is no longer a black box. Driving behavior, patterns, and trends are visible in near-real-time. This fundamentally changes the underwriting and risk management equation.
When a carrier or program chooses not to use this data or relies on a weaker alternative, they are not standing still. They are moving backward relative to the rest of the market.
Insureds who invest in transparency, safety, and measurable performance know how they are performing. They expect their insurance partners to see that same picture. When they do not, those insureds look elsewhere. What remains are the risks that benefit from opacity. This is adverse selection in action.
I Am Watching It Happen Again
I am beginning to see a widening gap between programs that have embraced high-quality trucking data and those that have not. Programs with weak data are increasingly attractive to risks that do not want scrutiny. Meanwhile, the best operators are gravitating toward programs that recognize and reward their performance.
This is not a moral judgment. It is a market reality. Insurance has always been a data business. The difference now is that the data exists whether or not you choose to use it. Ignoring it does not eliminate risk; it concentrates it.
Any insurance company or program that underwrites trucking, commercial auto, or business auto risks without robust, accurate, and actionable data is exposing itself to the very real consequences of adverse selection. Loss ratios will suffer, and pricing will become less competitive for the risks you actually want to keep.
The most important thing to understand is this: Doing nothing is still a decision. Choosing incomplete data is still a choice. And every choice shapes the risk pool you attract.
After 23 years in this industry, I can say with confidence that adverse selection is not a theoretical concept from an insurance textbook. It is a living force in the market. The programs that recognize it early and act decisively are the ones that endure. The rest eventually learn the lesson the hard way.
Why TruckerCloud
Now that we’ve established why it’s time to adopt telematics, let’s talk about why it matters who you use.
Not all telematics data and analytics are created equal. At TruckerCloud, we have more than 170 native integrations. This means we perform our own integrations, unlike others offering similar services. This gives us a unique advantage as SMEs (subject matter experts) in the telematics space, specifically for the commercial auto, trucking, and business auto insurance industries.
We have specifically designed our products and data to be solely focused on insurance, so we can be the best in the industry. We provide unparalleled, data science-ready datasets, along with advanced analytics for underwriters, loss control, and claims.
I joined the team at TruckerCloud because we offer and continue to advance the industry-leading platform. We are trusted by more than 70 insurance companies, programs, and agencies. If you are using different data, you are likely to miss key benefits that all of our clients realize.
If you are using a sub-standard product or not using telematics data at all, you are at risk for adverse selection. Don’t let this happen to your program or company.
A high tide raises all ships; we welcome you to join our many clients in raising the tide.
Tiana Schowe, CPCU
Head of Commercial Strategy
TruckerCloud
