Lower Your Commercial Truck Insurance

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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.

Picture of John Taratuta

John Taratuta, Safety & Risk Engineer, 989-474-9599

Trucker . . . or Motor Carrier?

tractor  So . . . Are you a “trucker” or a “motor carrier?”

Ask anyone involved in trucking if they are a “trucker” or a “motor carrier” and they might scratch their heads as they give you a funny look.

While it’s true that when it comes to insurance, the policies are almost identical, the two terms are not—at least in the world of insurance.

Why the difference?

One effect of Motor Carrier Act of 1980 was that private carriers who were not in the trucking business could sell some of their capacity. Perhaps a widget factory hauled a load of widgets to a destination, and returned empty (deadheaded back). This was not only an inefficient use of resources, but clogged the highways with empty trucks. Once trucking was deregulated, in 1993 the Insurance Services Office, Inc. (ISO), created the Motor Carriers Coverage Form for private carriers.

The term trucker is defined as “A person, firm or corporation in the business of transporting goods, materials or commodities for another.” Commercial Lines Manual

Who is a Trucker?

The term trucker is defined as “A person, firm or corporation in the business of transporting goods, materials or commodities for another.” So says the Commercial Lines Manual. So anybody that in the business of hauling stuff for others is considered a trucker for insurance purposes.

On the other hand, the definition of a motor carrier is, “A person or organization providing transportation by auto in the furtherance of a commercial enterprise.” This is anybody using trucks, but not really in the trucking business.

Does it make a difference?

Unless you are directly involved with insurance, there is not much difference in the terms. “Trucker” or “motor carrier” can be used interchangeably.

But if you are dealing with your insurance company, for purposes of clarity, you may want to specify if you are a trucker or a motor carrier.

Keep in mind that the U.S. Department of Transportation has its own set of definitions as well.

And if you are involved in approving trucking contracts, be sure the terms are defined to your satisfaction.

Thank you for reading this.

Picture of John Taratuta

John Taratuta, Safety & Risk Engineer, 989-474-9599

Why is My Trucking Insurance so Expensive?

Highway truck

Guest blog by Jeffery Gordon

Our agency gets no less than 10 calls a week from owner operators in Louisiana and Texas looking to get their own authority. The majority of owner operators are shocked when we ballpark what trucking insurance will cost them. New venture trucking risks are difficult to place right now, at affordable rates anyway. I’ll save my soap box rant on why, and what I think will help, for another time.

Trucking can be Risky

One reason new venture trucking insurance is priced so high is there are very few insurance companies wanting to write them. The last few years have been tough on insurance carriers. Their loss ratios have not been favorable. Meaning the insurance carriers are paying out much more in claims than they are receiving in premium. On average, loss ratios have been in excess of 150%! Some of the fault lies on the shoulders of the insurance carriers. Better handling and more efficiency in the claims process could do wonders. Tort reform at the state level would definitely help us all.

With that said, there are a few quality insurance carriers offering affordable trucking insurance for owner operators in Louisiana and Texas. These carriers appetites differ from others, and that is part of the reason why their Louisiana and Texas trucking insurance rates are affordable.

These markets are fairly exclusive, so not all agencies have access to them.

What is your risk strategy?

I would suggest any owner operator in Louisiana or Texas make a few calls to LOCAL, reputable insurance agencies that focus on Louisiana and Texas trucking insurance. The insurance carriers writing new venture Louisiana and Texas trucking insurance at an affordable rate, want the radius to be within 300 miles. Their research and data show new trucking operations staying within a 200-300 mile radius, have more favorable loss ratios than those going out further.

I have owner operators push back often on the shorter radius. They say they can “make” $2,300 on a load that takes them on a 1,000 mile run. Maybe so. But what are the expenses associated with that longer run? Fuel, wear/tear, Fuel Tax, tolls, etc…The expenses add up the longer you run. Back to my point on the insurance. If a new venture owner operator in Louisiana or Texas calls me requesting coverage for their long haul operation, I suspect their cost is going to exceed $18,000 annually. The lesser radius can reduce that cost by several thousand dollars.

Make sure you have a knowledgeable trucking insurance agent on your team. There are many variables that go into calculating an insurance rate. You want to work with an agent that will give you honest and helpful input into your operation. A good agent will be part of your team and assist you in being profitable!

Jeffrey Gordon is President of The Bayou Agency, LLC dba Bayou Insurance. He can be reached at (318) 805-6448.

Disclaimer required by the Federal Trade Commission: We are not compensated for this blog by this guest blogger or his company. This information is provided for informational purposes only, and should not be construed as legal or professional advice on any subject matter.

You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice.

Using any of the information or content available on this website is at your own risk.

Thank you for reading this.

Managing Your Risk in Trucking

rollawayManaging Risk in Trucking

On Oct. 17, 2018 the Transport Topics’ LiveOnWeb program, “Managing Risk in Trucking” was broadcast.

Panelists included:

  • Joe DeLorenzo, director of the Office of Enforcement and Compliance at FMCSA.
  • Lisa Gonnerman, vice president of safety and security at Transport America.
  • Bert Mayo, director of transportation risk solutions for TrueNorth Companies.

In a Nutshell

Delorenzo talked about changes in the works on how the DOT will score trucking companies in the area of safety. The DOT will be taking a more data-based, evidence-based approach in how haulers are assessed, with the goal of prevention of safety incidents.

Gonnerman spoke on how Transport America (over 1,300 trucks and 1,500 drivers) uses the latest safety tools and technology to recruit, train and develop their workforce, from the use of driving simulators to collision avoidance technology. Her tips included the advice to invest in new safety technology, especially in the area of rear-end collisions, “There are some great products out there.”

Mayo covered some of the recent insurance industry changes in how CSA has been used in rating motor carriers. “It’s a ‘hard market.’ By that I mean, insurance premiums keep going up.”

Mayo said there are a few things companies can do to keep their premiums down:

  • Manage your ‘cost of risk’ (how much you pay out of pocket)
  • Do a better job of managing safety
  • Take on more risk (higher deductibles)
  • Look into the captive insurance market (shared losses), if your fleet’s size runs into the hundreds of trucks

Watch the Program

This is the one presentation in 2018 you do not want to miss. (Starts at 8:50)

Kudos to our good friends at Transport Topics and Protective Insurance for their sponsorship of this program. Even if you are not in the market for insurance at this time, be sure to check out all their valuable safety information and insights.

Thank you for reading this.

Picture of John Taratuta

John Taratuta, Safety & Risk Engineer, 989-474-9599