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Beware, Be Very Aware: Carriers Must Keep a Close Eye on What They Buy

TORONTO, Ont. - Grumbling about skyrocketing insurance rates is nothing new. But recent grumbling amongst Ontario carriers may indicate matters in this province are getting even worse.


BUSTED: Accidents like these can result in costly settlements in courtrooms south of the border.
BUSTED: Accidents like these can result in costly settlements in courtrooms south of the border.

TORONTO, Ont. – Grumbling about skyrocketing insurance rates is nothing new. But recent grumbling amongst Ontario carriers may indicate matters in this province are getting even worse.

Some carriers claim truck insurers aren’t willing to write insurance policies for them because they have a conditional safety rating.

To avoid finding themselves in this situation, carriers should be monitoring their CVOR/accident/inspection performance on an ongoing basis.

Even so, some would say it’s a good thing that companies with poor safety ratings are having a hard time getting insured, says David Bradley, president of the Ontario Trucking Association.

“That’s just a way of regulating for safety. The down side is that some companies with clean records go out and buy smaller companies and then discover all of a sudden they can’t get insured.”

Smaller companies with conditional safety ratings can make good companies look bad to the Ontario Ministry of Transport and therefore to insurers, Bradley explains.

“Basically the parent company inherits the safety rating of the company it buys.”

To get a reasonable rate, the company which finds itself in this position must (1) take the appropriate actions to improve the safety performance of its new acquisition and (2) get the Ontario Ministry of Transport to conduct a do a follow-up audit to bring the safety rating back to satisfactory.

But how do companies that find themselves in this position avoid paying costly insurance increases in the meantime?

“There are options,” says Mark Ram, president and CEO of Markel Insurance, an insurance company specializing in the trucking industry.

“The most important thing for a carrier thinking of buying another company is to contact its insurance company first. Depending on how much expertise the company has in the trucking industry, it can let the carrier know just how much the new company will affect its insurance rates. Then a solution can be discussed.”

Solutions could range from simply not purchasing the company in question to operating it as a separate company with a separate insurance policy until such time as its safety rating is restored.

Of course, the bottom line is liability.

“A company will definitely have more difficulty if it owns and operates the smaller company under the same name – in other words if it absorbs it and basically incorporates it in its daily operations,” explains Steve Smith, executive vice-president and chief operating officer Kingsway General Insurance.

“That’s because, with the purchase of the conditionally-rated company, there’s been a material change in risk.”

Smith also recommends carriers consult their insurance companies before buying other carriers.

As for the generally high price of insurance, Smith explains it’s at least partially due to what goes on in courtrooms south of the border.

“There’s limited expertise in the field here and enormous exposure to risk in the U.S.,” Smith says.

Bradley, for his part, hopes the market will eventually drives rates down.

“The insurance industry is market driven, just like everything else,” Bradley says.

“Insurance companies have been getting out of the trucking business and so prices for the remaining ones have been going up.

“Sooner or later, some other companies will decide to get in on the action because there’s room in the market and the prices will get driven down again.”

In the meantime, all carriers can do is make sure to keep their ratings high and their insurance companies informed.


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