Most of you will be well aware of the tightening market for trucking insurance in some parts of the country, the worst region being the Ontario market.
I think it is well known that higher repair costs as a result of new technology in vehicles, and higher claims as a result of lawsuits, have had a significant impact on loss rates with insurers. It may even be well known that years of a hyper-competitive insurance market resulted in a number of insurers underpricing their risk exposure, resulting in underfunded reserves for claims.
But what isn’t as well known, is the loss of premiums, and claims being paid for uninsured trucks as a result of fraud being conducted by not only some trucking company owners, but also being willingly and knowingly done by a number of insurance brokers.
The fraud involves underreporting the number of vehicles a company is operating, and underreporting their exposure to the U.S. market, and in some cases the volatility of the freight they are hauling. In most cases, the fleets are placed under facility insurance, a last resort to get insurance.
The truck owners do this to try and keep their insurance rates lower than what they should be, and the insurance brokers do it mainly to get paid a commission on the point of sale by the insurance company. They know they won’t get the sale if they report accurate information on the fleet.
All of these factors have resulted in poor loss ratios and the tightening of the insurance market to the point where it is stifling competition. I understand that insurers must make a profit, and I fully support them vetting their clients and refusing to insure carriers who have poor safety records, poor loss records, and very poor and unsafe management practices. I think we all agree these types of carriers and drivers need to be removed from the industry.
The problem I have is the spin-off that has brought us to where we are now. Massive increases are being seen by even safe and compliant carriers.
Some carriers who haul dangerous goods, or other high-risk freight, that have good safety ratings and records, are being refused normal insurance and are having to go under facility. One such Ontario carrier, who has a CVOR rating of 15%, was told to go to facility in the last few months.
On top of this, insurers are now refusing to insure any new start-up company, regardless of driver experience, unless they have a history of having a vehicle they owned under an existing fleet policy for at least three years.
In some cases, even with this, they are still refusing to insure them as their own stand-alone entity. This, in effect, is shutting down the free market system, and reducing competition. Any driver who wants to own their own truck and have a chance at starting their own trucking company, is in essence forced to take their truck and lease it on with a fleet for at least three years to get their required insurance experience before an insurance company will even look at them. This is wrong, and in fact gives larger fleets a major, and unfair, advantage over potential small to mid-sized carriers, which are the backbone of this industry.
The trucking and insurance industries have formed a task force to address these issues, and are doing great work to address some of the fraud and facility misuse issues, which is sorely needed. I applaud the effort and work that is being done by this group, however it is not addressing the closure of the market to safe or new carriers, and the competitive imbalance it is creating.
Some potential safe new carriers, and some current ones, are being punished for the failures of a small group in the insurance industry to properly monitor and vet companies prior to insuring them, and the insurance brokers they do business with.
Hopefully the task force, and the spotlight that is being placed on this, will flush the non-complaint brokers and carriers out of the market, and we can move a step closer to having only good carriers, brokers and insurers, working together to make our industry the best and safest it can be, all on a level playing field.
Mike Millian is president of the Private Motor Truck Council of Canada, the only national association that represents the views and interests of the private fleet industry. He can be reached at firstname.lastname@example.org