Looking to save money on your coach liability insurance?

Although insurance rates for motorcoach operators have been relatively stable the past few years, now might be a good time to consider ways to trim insurance costs before they begin edging upward.

Companies that specialize in transportation insurance suggest that the soft insurance market could begin turning as they and their reinsurance partners continue to miss critical investment goals and begin looking at raising premiums to bolster reserves, revenues and rates of return.

"Given that most insurance companies rely on investing in the market to make money and the market is as low as it is, you can expect premiums to start rising over the next year," said Michelle A. Silvestro, assistant vice president and national marketing manager of National Interstate Insurance Co.

Ben Cook of Transportation Insurance Brokers agreed, noting that reinsurers that have had a rough time in the investment markets could begin soon raising the rates they charge other insurance companies and that action will trickle down to the operators.

"But right now it is all speculation," he added.

If it does happen, though, motorcoach operators that are suffering from recession-caused business and revenue declines of their own can be expected to begin looking for ways to reduce their costs.

'Traditional' dominance

Currently, most operators possibly as many as 95 percent carry traditional auto liability policies that shift most of the risk to the insurance companies, and generally cost the most in premium. Its simple, the more risk you transfer to the insurance companies, the more premium you will pay.

Traditional or "first-dollar" policies generally contain no deductibles for liability coverage and varying deductibles for physical damages to the policy holders own equipment.

This results in the insurance companies taking the full risk and paying the first dollar for damages that their policy holders cause to other vehicles or property and sharing part of the risk with operators for repairs to their own coaches.

One of the reasons this coverage remains the most popular is the peace of mind it brings. An operator can transfer all the risk to the insurance company and focus their resources on operating and building their company without worrying whether a claim could harm their cash flow or alter their business plans.

To reduce premiums, insurance experts say operators can introduce deductibles to their liability coverage and increase the deductibles they carry for physical damages.

Some have already begun moving in that direction, according to Randy ONeill, senior vice president at Lancer Insurance Co., who said his company is seeing more of its mid- to large-size operators looking at liability deductibles as a way to reduce their costs

"To those who are not risk averse, liability deductibles are a great way to control costs, especially when an operator has an idea of what his claims costs are each year," ONeill noted.

How's your risk appetite?

The amount of the deductible is the key, though, and the operator has to be comfortable with the amount of money he or she would have to come up with when it is needed to cover a claim.

While the operator may realize a reduction in premium after adopting a deductible, the operator generally must secure the added risk with a letter of credit or some other security. Experts point out that an operator will not realize the true savings until time has passed and all the claim situations are known for each particular policy year.

"What option an operator chooses depends on their risk appetite how much risk they are willing to take," stressed Silvestro.

In addition to juggling deductibles, some insurance companies offer policies mileage- and revenue-based among them that can help make paying premiums easier. These plans base the monthly premium payments on bus miles and company revenues, so when business is slow the monthly payments are smaller and when it is busy the payments are higher.

"They are fantastic for some operators because they can put money away for the lean times and it becomes easier for them to make their payments," said Cook.

However, not all insurance companies advocate such plans.

"We do not recommend mileage- or revenue-based revenue options because they are double-edged swords that cut both ways," said ONeill. "We believe that linking premium to mileage or revenues increases the unpredictability of premium cost and causes further budgetary concerns in this tough economic environment."

Back to basics

While changing policy terms by adding and increasing deductibles is seen as a good start toward reducing insurance costs, the insurance specialists emphasize there is no substitute for bus safety programs and safety equipment to curb accidents, claims and costs.

"The surest way to lower your rates is to reduce accidents and the claims associated with them," agreed Ken Presley, a former insurance executive who now is the vice president of the United Motorcoach Association and a strong advocate of bus safety programs. "And once you have a favorable loss record, demonstrate in writing how your safety program has directly reduced your claims and the potential for claims."

Cook suggested that a combination of bundling policy changes with a strong, quantifiable safety program could reward operators with premium reductions of as much as 10 percent.

However, he cautioned that it is difficult to project savings because each motorcoach business and regulations from state-to-state differ so much.

In setting premiums for operators, insurance underwriters generally go back five years and examine all facets of a companys operation from loss history, to driver backgrounds, to bus conditions. They pay particular attention to loss history, though, because it generally is a tip-off as to how well a company is being run and how much emphasis an operator puts on safety.

"Favorable loss history is usually a result of good safety programs being in place, thereby helping in keeping rates down," said ONeill.

Gizmos = savings

Most of the insurance experts suggested, too, that operators consider installing accident event recorders on their coaches as another means of reducing their expenses.

"These can not only make them safer operators by the behavior modification that occurs and, in the long run, potentially decrease their insurance premiums, they can also have an impact on fuel consumption and vehicle maintenance costs," said Silvestro.

ONeill pointed out, too, that onboard cameras are excellent tools to prevent fraudulent claims and manage driver and vehicle performance and, as such, their installation and use are effective ways to control premiums.

Of importance, too, the experts maintain, is the relationship an operator builds with its insurance agent.

Before making drastic changes in their policies, said Silvestro, operators need to work closely with their insurance brokers to see what is available and to make sure they understand each and every option before making any decisions.

"We believe the more predictable (frequent) risks can be effectively managed by operators with the guidance not hands-on claims management of their motorcoach insurance specialist," added ONeill.