A perfect storm

by James Menzies

TORONTO, Ont. — A perfect storm is embroiling the Canadian trucking insurance industry, preventing trucking start-ups from entering the business and limiting who established fleets can hire.

Increasing risks and evasive profits have chased some insurance providers from the transportation segment, pushing up rates for carriers. Newer, higher-tech trucks are more costly to repair with all the sensors and technologies built into them, and U.S.-style massive judgments against truckers involved in crashes have taken hold here.

“The level of litigious environment that’s been in the States for a long period of time is prevalent in Canada,” Todd MacGillivray, vice-president and national lead of trucking and logistics for Northbridge Insurance said in an interview with Truck News. “We have seen small claims become larger, and we have seen large claims become even larger and the asks from the litigation world becoming very much in line with what we’re seeing south of the border.”

Some insurers have left the segment altogether, after chasing business by underpricing premiums and finding profits to be elusive. Bill Moretti, director of business development with Tredd Insurance Brokers, said some insurers have seen loss ratios in excess of 150% in the trucking segment. With their departure from the industry – two or three large providers have already withdrawn from trucking, he said – premiums are on the rise.

“Well-performing fleets can expect single digit increases this year,” he predicted. “Poor performing fleets may not be able to find insurance.”

Lisa Arseneau, a transportation insurance broker with Staebler Insurance, said the current insurance environment has many trickle-down effects on the trucking industry. For one, those insurers who’ve remained are becoming more restrictive on the drivers they’ll insure. While a driver with two years’ experience may have been insurable a few years ago, now insurers are asking for three years of verifiable experience.

They’re also cracking down on trucking start-ups. While in the past, an owner-operator would aspire to obtain his or her own authority and add a few trucks, now they’re forced to remain leased to a carrier to be insurable under that carrier’s existing fleet insurance policy. Some fleets are going out of business because they’re unable to find an insurance provider to take on the risk they present. Consultants who in past years would help set up more than 80 trucking start-ups a year are now seeing that business disappear as these companies are unable to secure insurance, Arseneau said.

“I field calls all week long and the guys say, ‘What do I do?’ You don’t,” Arseneau said of owner-operators looking to obtain their own authority and launch a small fleet of their own.

“This is the worst I’ve ever seen it and our new normal will not look like anything I’ve ever seen in the past. It’s quite dire, actually.”

It’s also cyclical. And insurance providers must accept some of the blame, Arseneau said.

“For the lack of a better term, the trucking industry has been left to run amok,” she said. “Insurers have always had rules, however when we were in a soft market, when there was lots of competition and lots of business out there, they didn’t strictly enforce the rules. They had such bad loss ratios. In 2017-2018 they became stricter with the rules. There were less options, higher rates, the rules were more strictly enforced and it made it impossible for some people to get insurance. All these things have happened and it’s been the perfect storm.”

She said her clients are typically seeing premiums increase 20-40%, regardless of their claims, as insurers look to recover the premiums they’ve lost from the bad business they abandoned altogether.

Moretti takes an equally grim view of the current environment.

“I think this is the new reality,” he said. “I don’t see any relief coming down the pike.”

But for Northbridge, trucking is still an attractive market, according to MacGillivray, but he acknowledges a pricing correction was needed.

“Really, the rates have been increasing over the last 36 months and the main driver of that has been the level of profitability related to the line of business,” he said. “For more insurance companies, it has not been sustainable.”

So, what’s a fleet to do in such a challenging rate environment? Arseneau suggests cozying up to your broker and insurance provider. If you have insurance, embrace it, she advised.

“I’m telling clients right now, if you have an insurance policy, hug it, feed it, water it and look after it as much as you do your truck. Because without it, the viability of your operation is very marginal,” she said.

This means managing the hiring process, ensuring safety programs are strictly adhered to, complying with all the rules and taking whatever steps necessary to reduce violations and crashes. Moretti said working with a broker that specializes is trucking is critical, as is staying in touch with them.

“If you needed medical attention, would you just deal with any sort of doctor or would you want a specialist?” he asked. “We meet with clients quarterly to provide advice. The client can then make an informed decision.”

And insurers themselves also want to be closer to their customers, according to MacGillivray.

“Do they know who their underwriter is?” he asked of trucking companies, who he said often do a better job managing relationships with their equipment suppliers than their insurers, despite insurance being one of their largest operating costs. “Arrange a meeting with your underwriter and have them come visit your facility. Have an open and honest discussion about what your true exposure is, so you can get down to the key driver of the rates. We want our underwriters to be visible and to be out in the marketplace. Our goal is to never have any surprises with pricing changes.”

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