Take a holistic approach to reducing insurance costs

Insurance costs are burdening the trucking industry. In response, you need to take a holistic approach that focuses on “total risk cost” by controlling what is within your control.

A recent study by the American Transportation Research Institute (ATRI) provides a blueprint for this approach. Spoiler alert: Think holistic. Think total risk cost. 

Control what you can control. You are not in control of premiums. What you do is unlikely to reduce premiums. The study tells us that increased safety performance will not lower premiums. Nor will decreased crash rates or tactical technological additions. 

So don’t focus only on premiums. Instead, think holistically about the “total cost of risk.”

“The best measure of insurance cost impacts is a ‘total cost of risk calculation,’” according to the study. It is “one that permeates training, investments, equipment, operational planning, and safety management practices.”

In a time when controlling premiums requires increasing your company’s deductible or self-insured retention (SIR), a holistic approach is a must. Focus on limiting the risk that you have to assume. 

Do so by controlling what you can control.

Insurance costs graphic

One of my grandmother’s favorite sayings was, “The Lord helps those that help themselves.” That truism applies to trucking-related risk.

Even if premiums cannot be reduced, safety and risk management within your control can limit the total cost of risk. This requires a comprehensive approach.

According to the ATRI study, “This comprehensive approach enables carriers to organize costs more effectively for the long term by emphasizing the impacts that all cost centers have on safety and the relationship between them.”

View safety expenditures in the context of reducing overall risk and coordinate their impact.

The result? Well, according to the study, “Carriers that decrease deductibles or SIR appear to have successfully curbed out-of-pocket incident costs by either decreasing the number or severity of incidents — that [saves] costs on both premium and crashes. For these carriers, greater exposure was an effective incentive to lowering risk.”

The holistic approach yields economic rewards: “While deductible levels are increasing in total and on a per-incident basis, out-of-pocket expenses were stable or decreased.”

The study found something else. The decrease in coverage has produced an increase in vigilance. 

“Reductions in coverage levels increase litigation exposure but lead to improvements in safety for most fleets,” it said.

ATRI also found that 80% of the carriers that reduced coverage, through increased SIR or deductibles, or reduced excess, decreased their Motor Carrier Management Information System (MCMIS) crash rates the following year. “This counter-intuitive finding appears to result from a heightened awareness of increased liability and exposure that leads to increased safety investments,” the study said.

Control what you can control. Help yourself.

Even if you can’t control premiums, you can control total costs of risk if you think holistically.

Doug Marcello is a transportation attorney who has earned his CDL. His law practices focuses upon serving the trucking industry. Based in Central Pennsylvania, he has represented trucking companies in cases throughout the US, having been specially admitted in 35 states. He is a frequent speaker at industry events and driver safety meetings. He has also written numerous articles concerning issues confronting the industry and has produced several DVDs relating to accident response and aggressive defense of claims.

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