Insurance: Don’t let your broker break you
TORONTO, Ont. – The truck insurance market in Ontario is without question a unique one, in that it demands a specialized knowledge from not only the insurer, but more importantly, from the broker. Underwriting and marketing practices differ considerably from those of other classes of insurance. The extreme liability exposure, coupled with stringent government regulations, combine to put truck insurance in a class by itself.
In 1986 United Canada Insurance Co. became insolvent and forced hundreds of trucking companies, previously members of United Canada, scrambling for coverage. Because these fleets were dealing directly with United Canada, they now found themselves in the unfamiliar position of having to find a broker dealing in trucking. At the time there were very few who would qualify and even fewer companies actually writing truck policies. Since then a small number of insurance brokers and companies have come together to form what is considered to be the nucleus of this niche market – or boutique line as it is commonly described in the insurance game.
In order for a trucking company to survive, it is crucial that it develop a positive rapport within this limited insurance marketplace.
It is the responsibility of the broker to educate and advise clients on this matter.
The broker must instill in his client the importance of maintaining proper files and records that comply with the insurance company’s requirements and guidelines. Insurance companies employ safety engineers to work with the trucking company to make sure they are in compliance with these procedures as they work to meet all transportation safety standards and practices.
Because the broker is the trucking company’s only liaison with the insurance company, it is imperative they work as a team, keeping the insurance company informed of any and all changes to the operation that may impact the company’s exposure to risk. Changes in drivers, equipment, radius of operation, or commodities hauled, all contribute to the underwriter’s overview of the risk to be faced, and any claim based exposure previously unknown by the insurer could result in a catastrophe for the trucking company.
Because it is typical for a trucking company to make numerous changes to its fleet over the term of a policy it is important that the broker check to make sure correct premiums are charged and correct refunds given on endorsements before they are invoiced and sent to the client.
(It is also important that provincial sales taxes are properly apportioned, as they are only applicable to miles travelled in Ontario.)
In the event of a claim, the broker must certainly get involved and work on behalf of his client to effect a speedy settlement.
There are two main issues here: First, damaged equipment must be repaired or replaced with the utmost diligence; and second, issues regarding liability must be properly addressed.
For example, is the claim recorded as; at fault, not at fault, or direct compensation? Is the jurisdiction where the claim occurred a no-fault jurisdiction? If the incident did occur in a no-fault jurisdiction, what is that jurisdiction’s definition of no-fault and how does it affect subrogation? A claim not properly set up, or incorrectly charged against the client, can be disastrous at renewal time.
There is nothing more critical to the survival of the trucking company than proper execution of the policy renewal.
This is where all three parties – trucking company, broker and insurer – must all come to the table. Because the insurance company is under no obligation to renew the policy it becomes imperative the broker correspond with the company long before the renewal date. If the insurance company refuses to renew, the broker will need enough lead time to work with his client to find sufficient coverage elsewhere. Regardless of the situation, the broker has an obligation to his client to not misrepresent himself with respect to his markets, but to advise his client accordingly as to what other markets (i.e. insurers) are available, including those he does not actually represent.
Due to the limited number of markets available to a trucking company, given the opportunity, it is certainly in its best interest to stay with the same provider. Insurance companies frown on flip-flopping shoppers. This is where the broker can play a key roll.
If the broker has represented his client accurately to the insurance company, making sure all guidelines and practices have been met throughout the policy term, the renewal should go smoothly. The insurance company would certainly prefer to have its renewal quote, or a copy of its registered rejection letter, in the broker’s hands as early as possible.
The reason being if the fleet is operating in the U.S. and is for-hire, then the insurance company has to comply with the terms of a certificate of insurance, which it is forced to file with the Federal Highway Administration in Washington, D.C., at the inception of the policy.
This certificate, written on a prescribed BMC 91 form, for bodily injury and property damage, and a BMC 34, for cargo, contains a clause requiring the insurance company to give 30 days written notice to the FHWA should the policy be cancelled mid-term or not renewed.
This keeps coverage bound for a full 30 days after notice has been received by the FHWA or until another insurance company has themselves filed on the clients behalf. It is therefore in the insurance company’s best interest to push for a decision on the renewal as soon as possible. Otherwise it could conceivably be on the hook for a month or longer after the policy has expired – without receiving any premium for time on risk.
The insurance company thus provides the broker with renewal instructions, or a notice of non-renewal, including an up-to-date copy of the fleet’s claim history, at least 60 days prior to the renewal date. Should the broker not receive anything along these lines he should immediately contact the insurance provider. It is critical that enough time exists to allow the broker to properly re-market the account and/or allow his client to contact other brokers accordingly.
If the account is to be re-marketed the new insurer will insist on a minimum of 30 days, and in most cases 60 days, lead time to consider the new risk. This allows time for the safety engineer to audit the carrier and provide a detailed report to the underwriter.
This report will document procedures regarding hiring practices, driver files, maintenance files, accident files, and more importantly, safety and continuing education programs currently in place. They will require a copy of the fleet’s loss runs for the preceding three years, before they will even look at the account or order the safety report. Without the loss runs absolutely nothing will happen.
It is only reasonable that the client be also given 30 days to consider their options and to make an informed and appropriate decision regarding coverage. Should the premiums be higher than the previous year he will need time to re-negotiate his contracts with owner/operators and, in theory, to adjust the rates paid by shippers to help offset the increase.
Therefore if your broker isn’t starting the procedure 90 days prior to the renewal date, you may be left in the lurch.
Although these are not obligatory regulations, they do represent what a professional truck insurance broker and/or company should deem to be normal. Given the competitive nature of this business, coupled with the dire consequences a trucking company would face should its broker be negligent in his duties, brokers are clearly in a position of paramount importance.
People’s livelihoods are always on the line, and the trucking industry in general, which is this country’s economic engine, depends on this intricate network of professionals to do their jobs properly and in a timely fashion
So if you’re not getting the support you deserve from your broker, maybe it’s time to consider your options and deal with someone responsible.
– Wayne Noftle first entered the insurance business i
n 1971 and is now a respected industry consultant helping small and medium fleets deal with many compliance issues. He can be reached at 416-201-7185.
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