Buy Low . . . Sell High!
While freight rates are high due to current market conditions, unfortunately, so is commercial auto insurance. It’s been on the rise for the last 18 months or so. And unfortunately, no one is predicting a drop in insurance rates in the foreseeable future. Market cycles seem to be longer in the insurance world.
In that spirit, here are some additional things, some “best practices” that the best companies are doing which can result in a better risk profile and lower premiums. This article covers:
#50 The Quick Fix for High Insurance Premiums
#51 The Mobileye Forward Collision Warning system
#52 Understanding Driver Biometrics Liability
#53 Brain-friendly communications . . . for the important stuff
#54 Do I need broker liability coverage?
Disclaimer: This is not legal advice, only information for possible ways to reduce risk, improve your risk profile, or save on insurance. Seek any legal advice from qualified legal counsel. Seek insurance advice from a qualified, licensed insurance agent or broker.
Best Insurance Practices
2021 Insurance Saving Tip #50
The Quick Fix for High Insurance Premiums
How insurance companies assess risk varies from company to company. Insurance risk-assessment models are considered trade secrets, based on a number of factors including your business’ history, how you run your business, how you approach things, and so on, not only recent claims.
In “hard markets,” however, insurance companies tend to circle the wagons. Their mandate can change, and they sometimes will over-scrutinize things that would not have been worth a second look a few years prior.
- Part of this is based on pressure from their investors. Part of this is also pressure from the State regulators who make the rules under which they must abide.
- One area is in the payouts for claims. A claim is a claim is a claim.
For example, a small operation with trucks filed four claims averaging about $1,500 each, and their policy was not renewed. They had to scramble to find a new insurance carrier and their agent advised the owner, in the future, to not even file anything under $20,000.
- While four small claims are not statistically significant, as they could happen to anyone, the owner was doing everything right and yet still found himself in a bad spot with his insurance company.
- What was the problem?
This could be looked at from a few ways. Had the owner paid out of pocket, he would have not filed the claims, and would likely have been renewed.
- Someone might have also suggested increasing his $1,000 deductible. Perhaps his agent did suggest that, but at the time it was shrugged off.
- The lesson here, in this time of unruly insurance companies, is to seriously look at your deductibles. As in the above example, a deductible can be too low, and work against you.
- What can you do?
While everyone’s situation is different, start by looking back at your claims history. How much is your average claim? How often do they occur?
- Get an insurance quote based on several deductibles, starting with your ideal number, then bumping it up. A higher deductible should result in not only lower premiums but lessen the number of claims paid by the insurance company.
- How much collateral do you have? Are you able to escrow the amount of the deductible? Not paying a deductible when due can result in policy cancellation.
Savings from lower premiums should be set aside to cover possible future claims and deductibles.
- Deductibles can be slowly bumped up, from year to year (stair-stepped).
- A higher deductible can substantially reduce your premiums.
- Be sure to have a program in place to reduce accidents and collisions in the future in both in number (frequency), and in size (severity).
“The Quick Fix” Summary
- Insurance companies are under pressure to lower the number of claims they pay out on.
- Increasing your deductibles (retention) can both lower your premiums and improve claim payouts made by the insurance company.
- Finding the right deductible for you is more art than science. Work with your agent or broker to ensure your deductible isn’t too low or too high.
- At the same time, renew your efforts to improve your claims history.
2021 Insurance Saving Tip #51
Install the Mobileye Forward Collision Warning system
on your Vehicles
What is Mobileye?
- Started over two decades ago in a garage with the mission of improving camera-based technology to make mobility safer.
- In 2011 the company introduced the world’s first OEM production vision-only Forward Collision Warning system.
- Their various systems are installed on over 60 million vehicles on the road.
Why a forward collision avoidance system?
- Says Mobileye: “Rear-end crashes are one of the most common types of collisions. They are often the result of drivers following too closely or drivers that are distracted or speeding. In fact, 40% of rear-end collisions have no brake application whatsoever, reflecting driver distraction. The NTSB has found that over 80% of rear-end crashes could be prevented with forward collision avoidance systems.”
While newer trucks have built in advanced driver-assistance systems (ADAS), with a number of functional features, the Mobileye Forward Collision Warning system has a device which can be added-on or retrofitted to vehicles without an ADAS.
- This makes it possible to upgrade every vehicle in your fleet with a forward collision warning system to help eliminate most rear-end collisions.
- There are no monthly fees after the initial installation.
1350 Broadway, Suite 1600
New York, NY 10018
2021 Insurance Saving Tip #52
Understanding Driver Biometrics Liability
- What are biometrics?
- What is biometric information?
- Why is use of biometrics data a recent concern?
- Do I need a biometrics data use policy?
Biometrics are a person’s unique biological measurements including the physical characteristics of a person.
- Biometric information refers to unique biometric identifiers such as a person’s fingerprints, facial patterns, voice, and iris recognition.
- Use of biometric information, based on privacy concerns, is gradually being regulated by various states, opening up employers who use biometric data to fines or lawsuits.
- In 2008, the State of Illinois passed the Biometric Information Privacy Act (“BIPA”), 740 ILCS 14.
- On April 1, 2009, the Texas Statute on the Capture or Use of Biometric Identifier, Tex. Bus. & Com. Code Ann § 503.001, went into effect.
- And the State of Washington passed House Bill 1493, the Washington Biometric Privacy Law, effective on July 23, 2017.
- Other states and even some cities define and regulate the use of biometric data.
While biometric laws vary from state to state and city to city, almost all generally require:
- An employee be given notice of the intended capture of the data
- An employee consents to the use of the data, before capture
- Disclosure, lease, or sale of biometric data is prohibited
- The data is destroyed when no longer needed, per laws in effect
- Illinois law requires a policy in writing, with specific elements
- Insurance coverage for liabilities involving the use of biometric data should be discussed with your insurance agent or broker.
- Policies (and any exclusions) covering biometric liability might include provisions found in:
- —General Liability
—Employment Practices Liability
—Other coverage, as in Media Liability insurance
- —General Liability
Best Practices should include the previous general requirements:
- Give employees notice of the intended capture of the biometric data, before it is collected; What is collected, and why? How will it be used? Who will use it? Who will share it? When will it be destroyed?
- Obtain the employees consent of the use of the biometric data, before it is captured
- Do not maintain the biometric data beyond its useful shelf life, other than in meeting other legal requirements
- Obtain employee “buy-in” before deploying any devices collecting biometric data as driver-facing cameras. Explain how the data not only benefits the company or organization, but how it will directly benefit them.
- Create a biometric data policy for your organization.
- Review your insurance program for any gaps in coverage regarding biometric liability.
Finally, be sure to consult with appropriate insurance, risk management, or legal professionals, if uncertain about biometric laws and requirements.
2021 Insurance Saving Tip #53
Brain-friendly communications . . . for the important stuff
- How can we better communicate with operators and drivers?
- What can be done to help our staff recall important messages?
- How can we be more effective in our communications?
Everyday we communicate with operators and drivers. It starts on day zero and can continue, we hope, until their retirement.
- Even experienced operators and drivers can feel overwhelmed or overloaded at times with too much information, too many directions, or with complex instructions.
- One strategy used by top companies is to design their communications to be “brain friendly.”
You Must Remember This . . .
- In order for your information to be useful, it needs to be put to good use. That is only possible, if the information is easy to recall.
- Spoken words can only be recalled for several seconds. Remember the “3-second Rule” when conveying an important message, you want others to recall later.
- Key Point: If you can say it in three seconds or less, it will likely be more memorable, therefore more actionable.
Keep It Simple!
- Make sure the information is easy to recall by using simple language and relevant examples.
- Use simple words and phrases, also known as plain language: familiar or commonly used words. (See plainlanguage.gov)
- “Words move, examples compel.” Use examples or stories directly connected or related to the topic at hand.
- It’s okay to occasionally pause and ask, if any additional clarification is necessary or, if the listener understands, so far.
Break It Up!
- If possible, break up longer sessions into shorter ones. For example, break up a 90-minute topic into two 45-minute or even three 30-minute sessions, and spread them out. A week apart is best.
“Research on the forgetting curve shows that within one hour, people will have forgotten an average of 50 percent of the information you presented. Within 24 hours, they have forgotten an average of 70 percent of new information, and within a week, forgetting claims an average of 90 percent of it.” Art Kohn
“Brain Friendly” Summary
- Design your communications to be brain friendly.
- If you can say it in three seconds or less, it will likely be more memorable, therefore more useful.
- Use simple, plain language: familiar or commonly used words.
- Add in a few relevant examples or stories
- Ask if further clarification is needed?
- Break up or spread out longer sessions.
2021 Insurance Saving Tip #54
Do I need broker liability coverage?
- Companies hauling freight (motor carriers) sometimes have customers with special needs that require more capacity or occasional loads with specialized equipment the hauler does not have.
- To satisfy the customer, the motor carrier then obtains DOT authority to become a broker.
- But do you need broker liability coverage?
A broker is defined in United States Code as:
49 U.S.C. § 13102:
The term “broker” means a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.”
The DOT defines a property broker on its OP-1 application for authority as:
- Broker of Property (except Household Goods) — An individual, partnership, or corporation that receives payment for arranging the transportation of property (excluding household goods) belonging to others by using an authorized Motor Carrier. A Broker does not assume responsibility for the property and never takes possession of it.
(c) Brokerage or brokerage service is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor, or consignee.
The DOT requires a surety bond (Form BMC-84) or a trust agreement, used in lieu of a surety bond (Form BMC-85) for broker authority. 49 CFR § 371.2 (c)
Meeting the DOT requirements means the decision to add liability insurance is a business decision, not a regulatory requirement.
If the business does not purchase insurance for whatever operations it is engaged in, then it is assuming all of the risks of liability.
What is the liability involved for a brokerage?
Brokerage liability can arise from (among other causes), tendering a load to a motor carrier :
- without proper DOT authority, or insurance
- with a questionable safety rating or safety history
- that double-brokers the load to a third-party carrier
- that provides fictitious information, or successfully evaded your best efforts for due diligence
Truck Broker Liability insurance covers companies operating with DOT broker authority.
- It is a primary insurance, covering brokerage operations up to the limits of the policy, regardless of what other insurance policies are in effect.
- It provides coverage for possible mistakes made at the time the load is tendered, resulting in later claims.
Do you need the coverage?
- As always, it is best to discuss your specific insurance needs with your agent or broker.
- The insurance company will want to know how you vet carriers for brokered loads, before hiring them, what due diligence and due care you take in the vetting process, what your broker/carrier agreement looks like, and so on.
- Also be sure to consider the counsel of a good transportation attorney. ■