One of the most important actions operators can take during the economic crisis brought on by the COVID-19 outbreak is to manage their cash flow by dramatically reducing expenses.
Two big ones are often insurance and financing costs. Understanding the severity of the situation for their clients, lenders and insurance companies have scrambled to put together programs to temporarily reduce or defer payments.
Industry experts offered tips for quickly accessing these relief measures during the “Leading your company through the COVID-19 crisis,” an online Town Hall meeting held March 19 hosted by the United Motorcoach Association. UMA’s Town Hall meetings are held on the Zoom online platform each Thursday at 2 p.m. ET.
UMA’s priority is to help members navigate these difficult times with the latest and most accurate information available. That’s why UMA will be holding hour-long weekly sessions as a resource for members, said Larry Killingworth, UMA’s interim CEO and president.
If you missed the first session or looking for a summary of what you heard, here are five takeaways from the experts:
Relief packages. Insurance companies are offering immediate relief to clients that range from 45-60 days. They are likely to be extended if social distancing measures remain in place.
“We know in 45 days this isn’t going to be over, so we’re evaluating what comes next,” said Michelle Wiltgen, assistant vice president and national marketing manager for National Interstate Insurance Company. “It’s such a fluid situation that changes by the minute. We’re trying to at least get something out immediately. Help us help you by getting that information to your brokers so we can get some relief for you.”
Suspending vs. dropping insurance: A big question for operators is figuring out whether to suspend or drop insurance. For vehicles under lease or financed with loans, it’s important to talk to lenders first before suspending or dropping insurance coverage. Operators should also check with their insurance companies and brokers to discuss the best option for deleting or decreasing coverage on their vehicles.
Maintaining specified perils coverage is essential so the vehicles are protected from things like theft, weather damage or natural disasters.
“We want to know that the vehicles are protected in most cases,” said Matt Hotchkiss, bus division sales manager for Wells Fargo Equipment Finance, adding that the specified perils coverage is often the least costly insurance.
The requirement that federally regulated carriers carry $5 million in coverage remains in effect as required by FMCSA, Wiltgen said.
Evaluate fleets ASAP. Operators should work with their brokers to evaluate fleets to determine which vehicles are going on the road in the next 60 days, what vehicles they want to maintain flexibility with through the insurance suspension program and which ones they want to drop insurance on.
“The hardest decisions might be the portion of your fleet you want to fully un-register and take off the plates just because the outlook is so uncertain. All those decisions need to be made with your broker and figured out fairly quickly,” explained Tim Delaney, Lancer Insurance Company’s senior executive vice president for passenger transportation underwriting.
Deferring vehicle payments: Many lenders are offering the option of deferring payments up to three months on principal or both the principal and interest. Those payments will be added to the end of the term. Wells Fargo will evaluate market conditions in 90 days to determine if more is needed, according to Hotchkiss.
“It’s obvious that when your revenue goes away overnight in its entirety, it’s not your fault with this pandemic. We fully understand the situation and we fully intend on being here to help our customers. I believe that other lenders in the industry are doing similar things, especially those that are active in the motorcoach and bus space,” Hotchkiss said.
Simplifying the application process: To speed up the application process, Wells Fargo is using a one-page application, which is required to approve and generate the contracts to enact the deferment. Unlike with traditional deferment requests, there are no fees or changes to the interest rate. In most cases, applicants won’t be asked to provide financial statements and the deferred contracts won’t be reported as late.
After filing the form requesting the deferment, you will receive approval documentation. You have to sign documentation that outlines the deferment term for it to take effect.
“We’re not making this an arduous process. We’re trying to make it as simple as possible understanding the many challenges our customers are facing,” Hotchkiss said.
Wells Fargo is responding to a significant backlog of requests for deferral by re-assigning and training staff to increase the capacity for review. This is currently taking up to three weeks to process.
“We are turning off ACH payments on customers requesting deferment as we work through this backlog,” said Hotchkiss, noting the company is canceling automatic payments for clients who defer, but it may take a few days to happen after the form is returned.
“We’re working to expedite that as quickly as possible. If you are on auto payment, and you’re able to cancel it on your end with your bank, you should do that.”
For insurance and lenders, helping their clients through this global economic crisis is uncharted territory for them so they will be coming up with solutions as issues come up. The key is to stay in contact with them. If you have questions, give them a call or reach out to the UMA.
The secret to survival will be staying informed because things are changing quickly. Make plans to take part in UMA’s weekly Town Hall meetings every Thursday at 2 p.m. Go to www.uma.org for details on how to participate in the Online Regional Town Hall meetings.