Let’s talk insurance, it’s not a well kept secret that I have had my share of dust ups with many an insurance executive. During my tenure at a couple carriers I witnessed many a circumstance that thoroughly reinforced my staunch believe that more money can be stolen with a briefcase than a gun, and most insurance companies prove that theory. I put most in there because there are always exceptions in the trucking sector, not all that many, but still I need to give a little wiggle room for a few that I know try and do it right.
My blood would boil when we would start negotiating our insurance renewal, after having a good year with minimal losses, and then have listen to the insurance company suggest that, yes we have been clean, BUT odds are the big one is just around the corner and as a result, were in line for a premium increase. Or how about this one, the total dollar amount of claims is very low but your frequency is up, SO here comes the increase.
I remember one year we were completely clean, we had no instances of reportable accidents, we were winning safety awards and working extremely hard at being the best we could be, we were proud of our year. During renewal I was expecting to have these folks eating out of our hands, that’s when I was informed that we did in fact have a single claim against us. We had a car run into the side of our truck in a construction zone in the St Louis area, the driver of the car was charged, our truck was not damaged and soon moved on after the police cleared our vehicle of any wrongdoing. The driver of the car sued us for damages; I forget the amount now as I recall it was under 10K. Sounds like it would be easily defendable right, the insurance company made the decision to pay the claim with no contest because the price to defend the action would have been greater than just giving the driver of the car the money. Man I lost it right there, insurance fraud cost us all because of decisions like this, might make financial sense in a micro situation but in the big picture this is what propagates the ridiculous amount of fraud that exist in this world.
The sudden increase in offshore captives in the Trucking Industry is a direct result of what I have outlined above, the opportunity to get out of the yearly fencing match with the insurance industry is very appealing to Trucking Companies who have had to deal with the moving target called renewal. Ingenious brokers devised a way to extricate their clients from the financial uncertainty of the typical insurance markets and let them manage their own risk and claims in a pooled fashion. FYI much of the savings by going to offshore captives is made through administration cost which are typically half what the large Insurance companies cost base is.
I’m going to reveal an unguarded secret that exist for many small and medium sized carriers, I have seen this situation on many a consulting job and it has a dramatic effect of your renewal rate. I was at a small carrier not to long ago and this 12-truck fleet saved 80K by simply moving from a victim mentality to that of a valued customer mentality. During my interview with the owner I found out his rather high insurance rate and the fact the company had never had a claim. Moving on from there I find out that his broker has led him to believe that the insurance company he had been with for years was actually doing him a favor, even writing the business.
For the sake of brevity I will need to condense all the work that was done, but crucial to the savings the company enjoyed was in this case a paradigm shift from the owner’s perspective to the fact that not one but many companies would like a crack at his company’s business. We immediately started assembling an insurance submission. The company’s submissions in the past that were done through an insurance broker who really didn’t know the industry nor were particularly interested in their client’s best interest, it consisted of a list of equipment and drivers, period.
So here’s the drill, when you apply for insurance it is like you’re selling yourself, plain and simple, if you were an insurance company and you were receive nothing but a list of drivers and an equipment list, there isn’t too much to go on as far as determining risk, is there? Now pretend it’s the same company but what you receive now is a nice neatly laid out binder, which is tabbed with the following content. Driver’s List, Drivers abstract, your onboarding process including a copy of your orientation, your safety manual, all of your policies and procedures that pertain to drivers and operations, your last three years trailing loss ratios, your detailed equipment list, a copy of your IFTA reports. From there you round out the submission with anything else that you feel might paints your company in a better light, such as your industry association involvement, company newsletters, any social media efforts, charitable efforts, community involvement, company social events, Christmas parties, Driver awards, longevity programs etc.
Now go find a broker who knows the industry one that has access to the available markets, one that brings more to the table than just rates. A good broker has access to information on the industry, they have safety knowledge, they can provide content for safety meetings or even conduct a meeting, and they share industry knowledge. What they are not is a person you see once a year when renewal rolls around, they are folks who bring value to your business.
If you’re not doing what I have just laid out you are playing the role of victim when you could easily be in a position of power and have some degree of control when it comes to this significant business cost. Need a good broker drop me a line I know where to find a few…
Mr. Ray Haight has enjoyed a successful career in transportation starting as a company driver and Owner Operator logging over one million accident free miles prior to starting his own company. After stepping down from a successful career managing one of Canada’s 50 largest trucking companies, Ray focused on industry involvement including terms as Chairman of each of the following, the Truckload Carriers Association, Professional Truck Drivers Institute, North American Training and Management Institute and the Ministry of Training Colleges and Universities voluntary apprenticeship of Tractor Trailer Commercial Driver, along with many other business interests, he enjoys a successful consulting business, also sitting on various Boards of both industry associations a private motor carriers. He is also Co-Founder of StakUp O/A TCAinGauge an online bench marking service designed to assist trucking companies throughout North America focus on efficiency and profitability within their operations. All posts by Ray Haight