A big cost for operators is commercial vehicle insurance. It’s become an even more important financial issue as operators watch every penny through the pandemic.
Michael McDaniels of Shriver Transportation Insurance and Tim O’Bryan of Service Insurance Agency recently joined a United Motorcoach Association Town Hall to talk about what is driving the increases and strategies for getting the lowest premiums.
Most of the insurance companies out there that specialize in commercial auto have not seen a very profitable year in about a decade, due to the cost of claims, McDaniels said. Driving up claims is third- or fourth-party financing for litigation, skyrocketing medical bills and the rising cost of repairs. Tort laws in several states also play into rising premiums, as does fraud.
O’Bryan added the 2019 numbers showed that, for every dollar the motorcoach insurance industry took in, it cost $1.09 to underwrite that dollar.
Insurers ‘responsive’
Still, despite increased costs, the insurers also understand the industry has been hit hard by COVID-19-related shutdowns. Both say rates have been fairly flat for their clients since March.
“I think they’ve been pretty responsive to know what the people are going through right now. I haven’t seen a lot of increases, to be quite honest,” O’Bryan said. He added that trucks — which haven’t been affected by the pandemic slowdown — are seeing 10-15% premium increases.
Added McDaniels, “I’ve actually had a couple of small reductions. I had a handful of double-digit increases. If you’re in Los Angeles or New York City, they’re getting higher rates right now. It’s just a brutal territory to operate in or settle claims in, and the carriers feel that’s the price that is warranted for the risk in that territory, but most of our stuff has been relatively flat in the past six months.”
Steps to take
While operators can’t control everything, there are actions they can take to address climbing premiums:
Invest in technology. Onboard cameras can help protect against frivolous or fraudulent claims. Video recordings can establish the facts of a crash. “I strongly suggest getting event recorders and things of that nature, just as a way to protect ourselves,” O’Bryan said.
Start the renewal process early. McDaniels recommends calling your agent at least 100 days out, so you can begin working on gathering the paperwork that underwriters want to see. “Ideally, we want to have our submissions to our carriers around the 60- to 75-day window. You want to give ample time for the underwriters and actuaries to review each risk on its own basis,” he said.
Don’t delay on any paperwork requested. “Our biggest challenge is getting everything back in a timely fashion so that we can put it together, create the narrative, and have discussions with the various underwriters about that individual risk. Just update your information when your renewal is coming up, whether that is driver records or equipment values,” O’Bryan said.
Don’t be sentimental about vehicles. Work with your manufacturer to get an updated value of what the equipment is worth. O’Bryan advises keeping sentiment out of the valuation process. Liability has been being reduced down to the minimum levels, but the physical damage piece is going to be a big expense. “Getting a current valuation is the way to save some money, or get a better reflection of what the vehicle is really worth,” he said.
Be prepared for vehicle depreciation to affect coverage. “I know the valuation today might be $100,000, where six months ago it was $180,000, and a year from today it could be back to $250,000,” said McDaniels. “You have to at least protect yourself if you have a lien on the vehicle for what is owed on the vehicle. If you have vehicles paid off, I’d actually recommend dropping coverage as low as you possibly could, or what the fair market value is. Now, if you were to have a claim and you owe money on the vehicle, that could really backfire, so it’s a fine line.”
Look at taking a higher deductible. O’Bryan says he has a few clients who are taking a $20,000 deductible to save money. “They’re going to fix most of the little claims themselves. They’re really just going to ensure some kind of catastrophic total loss,” he said.
Be prepared to provide more information. “I’ve had a lot more conversations with my underwriters this year than on any accounts we’ve worked on in the past,” said McDaniels. “I think they all have the best intentions of helping our customers out, but different ways of getting there. They all are trying to do the best they can while maintaining their own business. It’s definitely a fine line.”
O’Bryan added that every carrier has different requirements as to what they want. Some companies require financials. Some want driver medicals. The sooner that information is completed and back to the underwriters, the sooner the agents can start the dialogue.
“None of us want to wait until the last minute and drop a big increase on somebody,” he said. “That’s just not good business.”
Ken Presley, UMA Vice President, Legislative & Regulatory Affairs & Industry Relations/COO, who moderated the panel discussion, also had some advice. He encourages operators to approach the insurance renewal process by being proactive, providing a clear picture of operations including who runs the company and past experience, hiring practices, maintenance, driver and mechanic training, etc.
Operators should address any negative inspection scores in FMCSA SMS by explaining the steps taken to mitigate future losses. If there haven’t been any losses, then detail the safety efforts taken to produce positive results.
“React quickly to any requests for additional information. Most of all, remember you are selling the underwriter on the idea that your company deserves a premium reserved for their best insureds,” he said.
