Commercial Truck Insurance Can be Expensive
Frequently fleet owners frequently express their concerns to me about their rising insurance premiums. Insurance for heavy commercial trucks can carry a heavy price tag. This article will detail a number of ways to lower your insurance, from a business perspective.
Axiom 1: Trucking is a Business
The purpose of engaging in trucking is to provide a service to a customer to make a profit.
The most important question: Is there a need for your type and level of services? Do you have a customer or customer base? With fair amounts of freight available, there are many trucking businesses starting up without any customers. They totally depend on obtaining loads through third-parties as brokers or 3PLs. They are depending 100% on “luck,” in my opinion. Top tip: Find a customer or two, before starting out . . .
Axiom 2: Business is a Long-term Proposition
Accountants are taught the basic concept of a business as a “going-concern.”
Going concern is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary. This term also refers to a company’s ability to make enough money to stay afloat or avoid bankruptcy.
It can literally take years to realize a business return-on-investment (ROI), if ever. Most businesses, however, are marginal or even not profitable. Are you in it for the long haul?
Axiom 3: Most businesses fail before the owner or owners intended. Trucking is no exception.
Reasons for trucking business failure include:
- A shift in market conditions: customers do not need your services
- A change in conditions: new regulations, customer bankruptcy, litigation, and other game-changing events occur like the COVID-19 (coronavirus).
- Miscalculation: mismatched equipment for the job; obsolete equipment; improper vetting of drivers; under-capitalized (little equity or cash in the business), no real understanding of the industry
Axiom 4: A Business “Mindset” is Required To Survive or Thrive in Trucking
Extraordinary business skills are not required in a business like trucking. A good basis in ordinary business skills is necessary, including a business mindset.
A mindset is a belief that orients the way we handle situations—the way we sort out what is going on and what we should do. Our mindsets help us spot opportunities, but they can also trap us in self-defeating cycles.
Mindsets aren’t just any beliefs. They are beliefs that orient our reactions and tendencies. They serve a number of cognitive functions. They let us frame situations: they direct our attention to the most important cues, so that we’re not overwhelmed with information. They suggest sensible goals so that we know what we should be trying to achieve. They prime us with reasonable courses of action so that we don’t have to puzzle out what to do. When our mindsets become habitual, they define who we are, and who we can become. Gary Klein Ph.D.
A basic business mindset might include acknowledging from time-to-time the need to review and control all of your costs, including insurance.
Axiom 5: You can Lower Your Commercial Truck Insurance Premiums
Insurance is about risk management or properly managing your risks. It’s not the job of the insurance company to run your business or tell you what kinds of risks you should or should not take. They would not know where to start.
The insurance company is happy to rate your level of risk, if you are in an industry segment they insure. Certain transportation segments (i.e., log hauling, heavy-duty towing) have fewer insurance companies interested in them, so premiums are much higher.
Some insurance companies have a fully resourced Loss Control department to help you control adverse events as much as possible. Some are weak in this area. In any case, don’t abdicate your responsibility to protect your bottom line.
How to Lower Your Premiums
The biggest risk in trucking is the driver. A major mistake is to hire drivers who may have a questionable driving record, are not properly qualified, or lack experience. Sometimes we hire a friend, family member or acquaintance. That’s okay—if they are able to safely do the job.
Soon all new CDL drivers will have to go to school. Do you look for trained drivers when hiring? Do you road test or assess their skills and knowledge in other ways?
The second biggest risk is not properly monitoring the driver. Most truck insurance companies are now expecting some level of telematics be installed on all trucks. One company I work with reserves the right to access the telematics at any time. How do you monitor driver behavior?
There are other risks in no particular order that also concern the insurance company:
- Do you train and develop your drivers? Are training records available?
- Are your safe drivers recognized or even rewarded?
- Do you train and develop your safety staff?
- Do you have a relationship with business professionals who can help you? (Attorney, CPA, Safety Consultants, Trainers, and others)
- Do you have a good relationship with your agent/producer or broker? Do you know who your underwriter is? Help them to help you.
- Do you know what to do if you are unfortunate enough to have a claim? What not to do? Ask your agent for a complete checklist before you might need it. Don’t rely on an 800-number tied to an overseas location.
- Do you operate top-notch equipment?
- Do you have a top-notch maintenance program?
- Do you stay up with current driver safety technology?
- Does your company have membership in, or support any safety associations?
- What safety-initiatives have you taken in the last year? What safety-initiatives do you have planned? Don’t wait for someone to rescue you. No one is coming.
- Are you “defendable” in court? Do you keep excellent paperwork? Are there high-quality dashcams in all your trucks? Can you beat a questionable claim, if necessary?
- Are you cooperative with your insurance company? Is insurance or risk management something you approach seriously? Do you or your staff respond to inquiries in a timely and reasonable manner?
- Do you monitor your CSA Safety Profile?
- Are all your CSA BASICs not much over 20%? Any BASICs in an “alert” status are not acceptable to the insurance industry.
- Top tip: Shop around every renewal. It may not lower your premium, but this simple act can sometimes keep it from rising.
Approaching your trucking business with a business and risk-management mindset will go far to help lower your insurance premiums and ensure the continuation of your business as a ‘going concern.’ ■
Thank you for reading this. Opinions expressed are my own and may not reflect any positions of the clients or companies I work with.