Inflation and vehicle devaluation are adding extra layers of complexity to insurance renewals, according to a panel of experts who offered guidance as buses are getting back on the road.
“Commercial auto remains a struggle for the industry,” said Steve Blankenship, Vice President of Passenger Transportation for National Interstate Insurance Co., noting the auto line of business has been losing money for years. “Our short-term view really is continuing to focus on pandemic support but also continuing to try to be diligent as the industry attempts to figure out the commercial auto struggles.”
Blankenship offered his insights during a recent United Motorcoach Association Town Hall as part of a panel discussion about commercial passenger vehicle insurance. Moderated by UMA’s Ken Presley, the panel also included Tim O’Bryan, Owner of Service Insurance Agency in Richmond, Virginia, and Steven O’Shea, Marketing Director for New York-based Lancer Insurance Co.
‘Real systemic change’
“We’ve seen a real systemic change in risk factors. Claims costs have risen exponentially for a variety of reasons, which, in turn, will affect pricing. That’s what we’re seeing now, and we expect this trend to continue,” said O’Shea. “Our outlook, both short and long-term, remains the same as it’s been for the past 35 years…we are dedicated to this industry and the businesses we serve.”
The insurers say they plan to continue their short-term COVID-19 suspension plan as operators are getting back on their feet.
“We’re committed to providing support, and being as flexible as possible for our customers and the industry as a whole,” O’Shea said.
Blankenship encouraged operators to focus on their safety culture. “Don’t talk to your broker just about procuring insurance, talk to your broker about things that really matter, about improving your risk profile and making you look more attractive to the insurance market.”
Declining bus values
Another big issue coming up with renewals is declining bus values.
“The market has fallen off so drastically in what these buses are worth, which is causing a big problem for a lot of people,” said O’Bryan, encouraging operators to work with their bus manufacturers to get a realistic price point for their upcoming renewals.
In some cases, vehicles are being valued at about half their price, and below the value of their loans.
“It’s only in the event of a total loss where this gets to be a real problem with the suppression of the market,” said O’Bryan. “Claims that normally would have been settled now become total losses, because you’re hitting the 70%-80% threshold of the value of the coach at the time of loss.
“I’ve run into this a couple of times and it’s not fun. That’s the scary thing that’s happening right now, with the way the market is.”
To see the full presentation, watch the recorded video from the Town Hall session.