Insurance: Diminishing Returns

At a time when the world is in so much turmoil, you want to know that things are going to be all right. Even if you have to pay for that peace of mind. That’s what insurance is about. Trouble is, these days insurance is the source of so much consternation.

Fleet owners are bracing for another round of higher premiums for all types of truck-related insurance, but mostly for liability coverage, especially for operations in the United States. Even if you haven’t had a claim this year, expect to pay more. The principle of insurance is that the losses of a few are paid for by the premiums of many. Since you’re compelled to have insurance, you’re going to fall into one category or the other. Either way, you’re paying.

The biggest complaint is how few alternatives there are. Ten years ago, insurers came to the trucking market in a convoy, attracted by the high premiums. That’s great if you’re a customer. It’s fantastic if you run an insurance company and your bonus is paid on top-line revenue.

Unfortunately, claims in trucking are big, too, and often in U.S. dollars. You can ride a 140 operating ratio writing trucking insurance for only so long. Many quietly pulled out of trucking and the market got hard as ice and just as cold.

The few companies that still have a trucking portfolio can afford to be choosy. Indeed, they have to be.

One reason is how adept lawyers representing accident victims have become at collecting on liability claims, especially in the United States. They can turn a parking lot fender bender into awards that can run $750,000 or even $1 million because the plaintiff claims a neck injury.

One way they do it: claims of “negligent hiring” or “negligent entrustment.” Even if your truck driver doesn’t cause an accident, his less-than-perfect record can bring blame on you for allowing a “dangerous” person to operate your trucks. This is why insurers are looking at the drivers you hire with a lawyer’s mentality.

It’s putting the squeeze on smaller operators.

A five-truck carrier in Brantford, Ont., wanted to bring on a driver with two years experience. He’d compiled a good record hauling eight-axle rigs into big-box retailers.

According to the fleet’s insurance broker, the driver could not be added to the policy because he had less than three years in the profession. He could, however, complete a driver-training course accredited by the Canadian Trucking Human Resources Council and get coverage (the driver had graduated from a Truck Training Schools of Ontario program). Perhaps not coincidentally, the insurance company, Markel Insurance, runs a school that uses the CTHRC curriculum. It’s happened several times to this fleet, where the insurer has rejected a driver with less than three years on the road and a clean record only to see the driver hire on with a larger outfit seemingly without a problem.

Sometimes a driver’s experience isn’t the issue. It’s the type of work. I got a phone call earlier this year from a 25-year-old log truck driver in Northern Ontario. He was phoning on behalf of his father, an owner-operator whose annual insurance premiums jumped 150 per cent over the previous year.

“My dad is 55 and would love for me to step into his position, and I could make another $30,000 a year doing exactly what I’m doing now with my own truck,” he told me. “But there’s no way. I checked with our broker and didn’t even give the brand of truck, what I’d be doing with it, my record-I was told to expect to pay $18,000 a year to start, with no guarantee that I’d be insured past one year.”

The mill he and his dad haul to in Thunder Bay is 150 trucks short on any given day. “That’s hard to take when I can name 10 guys off the top of my head who are gonna go broke or burn their truck or go driving for a large company where they can get fleet insurance,” he said. The work is there. The coverage isn’t.

“There’s a pile of 55-plus guys hauling into this mill who are saying this is their last truck, and there’s another group of young guys like me wondering why they should get into this business when you have to go begging to the bank in order to pay your premiums,” he said.

That’s one hard reality. Another is that where you operate and what you haul are the two basic tenets of your risk profile, which insurers use to determine the likelihood of a claim. Toss in who’s behind the wheel and you get a picture of how an insurer sees you. If you’re a small fleet with an undeveloped safety program, or you haul freight through Deep South backwaters where the local cop and judge are brothers, or you sneak your kid onto your policy and let him bomb around in the company pickup, it’s not pretty.

These days you have to show-and I mean prove-that you’re worth the risk. In this hard market, that means raising your hiring and training standards. Or your rates, to cover the cost of the higher premiums and labour. Or both.

Despite this season of giving, you’ll get no quarter from your insurer.

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