Insurance: It’s just crazy enough to work

by James Menzies

RED DEER, Alta. – With trucking companies facing insurance premium hikes of up to 1,000 per cent since the Sept. 11 terrorist attacks in the U.S., fleets and owner/ops are exploring creative new ways to insure their rigs.

To this end, the Alberta Motor Transport Association (AMTA) is kicking around the idea of introducing a reciprocal insurance exchange (RIE) for its members. The relatively new concept has gained in popularity since the terror attacks, but if the AMTA proceeds with the plan it will be the first of its kind in the trucking industry.

Representatives from Marsh Canada (a subsidiary of the world’s largest insurance broker) were on-hand at the AMTA’s annual general meeting in April to pitch the idea to the membership.

Basically, it’s a self-insurance plan, that gives members, or subscribers, better control over their costs and allows them to cut out some of the expenses associated with buying insurance the traditional way.

Under the proposed plan, AMTA members could pay into the system, forming a pool of money in turn used to pay out claims. Whatever’s left over at the end of the year is redistributed among the fleets.

Dean Marchon, vice-president of Marsh Canada in Edmonton, says “A reciprocal insurance exchange is potentially a solution that allows you to take control of your own destiny to some degree. You are basically able to manage your own money.”

Fleets taking part can expect to see savings of up to 18 per cent when compared to traditional insurance costs, according to Marsh’s estimates.

Peter Cleyn, managing director of Marsh’s Calgary office, says the timing is right to explore a reciprocal plan, due to continuing increases in insurance rates.

“The insurance market has been turned upside down,” says Cleyn. “We need a structural solution to these issues and one such solution is a reciprocal insurance exchange. The timing is right for these structural initiatives because the days are gone of trying to get a better deal from your friendly neighborhood insurance dealer.”

Marchon predicts the situation will get worse before it gets better, with fewer insurance companies willing to gamble on providing insurance to the high-risk trucking industry. He also indicated that until the investment market rebounds, insurance companies will continue to increase premiums to compensate for that lost income.

Marchon says there are more advantages to an RIE than just cost-savings and enjoying more control over your money. Fleets would also have the chance to save money by cutting their broker out of the picture. Traditionally, brokerages work on a commission basis and thus collect more money from customers as premiums rise.

“Because of your misfortune, your broker is getting a raise,” points out Marchon. “There’s a huge potential for savings just on that area alone.”

Another advantage is members would control who has access to the plan, preventing high-risk carriers from joining and potentially draining the pool.

Currently, there are four RIEs in place in Alberta, and several others running throughout the country. But no Canadian trucking group has taken the plunge as of yet. The Marsh representatives say all other similar RIEs have been successful, proving the system works.

In fact, they go on to say the groups will probably only use up all available funds in the pool about once every 19 years, and even then there is a re-insurance element to absorb the risk.

Marchon insists the vast majority of the AMTA’s 13,000 members stand to benefit from the program, and the success of the RIE will depend on how many take part. About 1,000 trucks and trailers must sign up for the RIE before it’s worth pursuing, and then there’s no limit to how many companies can join.

“You don’t need a lot of critical mass in terms of numbers to make this proposal work,” says Marchon.

Should the AMTA go ahead with the program, it would take about a year to implement. Since it is a long-term commitment, the association is calling on its members to provide some feedback.

Interested truckers and fleet managers looking for more information should let Peter Vaudry, AMTA’s director of member services, know. He can be reached at 403-214-3438.

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