Trucking—Insurance Companies’ Bad Bet . . .

betting bad

On Thursday, February 25, Dan Petrillo and Adam Harris of LaPorte & Associates’ Transportation Division, partnered with the Vertical Alliance Group and presented a webinar on how to save money on truck insurance.

The more you understand the process, the more you can exert control.

The talk started out with a review of the basics— Insurance 101. Insurance companies, like most businesses are competitive and make a 2% to 3% profit. But that’s in good times. Insurance company profits come from investment income and from business savvy underwriting. With the overall investment markets not doing so hot, that shifts most of the burden on underwriting — or vetting of risk — an arduous task in itself.

Another trend affecting insurance company profitability is the rising cost of personal injury claims . . . over $1 million on average in 2013.

Take low, “razor-thin” profit margins, rising costs and lower investment ROIs, and what do you get? Break-even or worse. When the insurance company sneezes, high-risk sectors like transportation will catch a cold.

The Transformation of Underwriting

The traditional criteria for underwriters comes from the insurance application, looking at such factors as: drivers’ age and experience, scope of operations (radius and commodities hauled), MVRs, and third-party snapshots as SAFER, CSA and CAB reports.

These criteria are historical and would be considered lagging indicators.

Underwriting, however, is changing. The emphasis is being placed on more forward-looking criteria— or leading indicators.

Leading indicators are measures of future safety performance.

Equally important as a good safety record are the measures a company takes to recruit, train, and monitor its drivers. How do these processes happen? How are drivers rewarded or incentivized?

The focus is on driver behavior.

Recommendations

Keep the conversation going with your insurance broker.

Invest in new technology.

Can you articulate your ‘philosophy of insurance?’ What role do you see your risk partner playing in your business? Should insurance be there for catastrophic protection or for maintenance or warranty protection? How much risk are you willing to assume?

How do you balance Revenue versus Safety? Are you willing to park your truck if you do not have the services of a qualified driver? Do you park your trucks from time to time?

Do you frequently interact with your insurance service team members — the broker, underwriters, risk management consultants and claims adjusters? Do you review claims?

Do you deploy new technology, telematics or GPS? Do you score your drivers?

What kind of training do you do?

The Out-of-Standard Insurance Market

An option for those for walk the safety talk, the “best-in-class” for safety, is to assume more risk (and rewards) by a Captive Insurance arrangement. Insurance premiums in Captives are solely based on your loss experiences and can result in savings.

It’s a Wrap

Dan Petrillo and Adam Harris warped up their talk with an informative Q&A session. Vertical Alliance Group invited attendees to learn more about their training resources.

I found the talk was highly informative on the direction in which truck insurance is heading. Nobody said the words “hard market” but it seems a transformation is taking place in the world of insurance and every carrier needs to establish a good rapport with their risk partners.

All safety metrics, Key Performance Indicators (KPIs), Key Risk Indicators (KRIs), leading and lagging safety indicators should be based on your safety goals. These in turn need to be directly linked to the organization’s high level objectives.

As one company owner said, Any mistake you make in trucking is a big mistake.

Then all bets are off . . .

Thank you for reading this.

J Taratuta

 

John Taratuta is a safety advocate and Risk Engineer. (989) 474-9599

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