TORONTO, Ont. – Insurance industry representatives are telling trucking companies the days of low premiums are over and higher rates will soon be a reality.

John Chippindale, president and chief operating officer of March Canada, says the insurance industry typically goes through hard and soft cycles every four to five years.

“But we’re into about nine years of a continuous soft cycle that may be setting us up for a fall,” he says.

“Ideally, an insurance company tries to break even with operating income and investment income,” contends Mark Ram, president and CEO or Markel Insurance Company of Canada. “But it’s been more than a decade since the insurance industry has been able to do so.” And, he adds, in longhaul trucking the losses are great.

Ram said that the general insurance industry’s net profit on the dollar is six cents.

“This is nothing stellar. In the banking industry, it’s as high as 18 per cent,” says Ram. But in longhaul trucking insurance, 40 cents is lost on the dollar for insurance operating expenses, which, when coupled with the insurance industry’s investment income for 1999 at 13 cents, means a loss of 27 cents in longhaul, Ram explains.

The object and purpose of insurance is essentially spreading the losses of the few with what’s collected from the many. Factors that drive the frequency and severity of claims are the design of the company’s insurance program, claims management, economic conditions, tax issues, the risk profile of the operation, legal trends, social factors, and the competitive environment (for example, the fight for market share of your insurer in Canada).

But Chippindale says that trucking companies should be aware that there is a lot of innovation in insurance products, in terms of financial products that can help business, not hinder it.

“Insurance can be an effective mechanism to run a good business, from a tax standpoint,” he says.

“If you don’t have the capability from your insurer, it will end up catching up with you. Canada has seen premiums rise only about three to five per cent, but that’s changing.” n