Omnitracs' Road Ahead blog

ATRI: Focus on Insurance Cost and Availability

As stated in our previous two blog posts, the American Transportation Research Institute (ATRI) prioritized 10 issues that surfaced in its 16th annual survey. In our last blog post, we focused on Truck Parking. This post focuses on Insurance Cost and Insurance Availability. It’s likely everyone knows why.

Insurance Costs first appeared on the Top Industry Issues Survey in its inaugural year (2005) when it ranked number three overall. Now, 16 years later, Insurance Cost / Availability is back in the Top 10 as the number five issue overall.

Trucking Insurance Premiums Rising insurance costs have been documented in several ATRI analyses, including the annual Operational Costs of Trucking that recently found insurance costs per mile increased 18.3% over the last five years.1 The costs are even more dramatic among smaller fleets, which experienced insurance premium costs per mile more than three times those of larger fleets.2 Rising insurance costs and availability have also been cited as a reason for multiple fleets going out of business.3

At least 795 trucking companies failed in 2019, with 24,000 trucks removed from the nation’s capacity, according to Donald Broughton, principal and managing partner of data firm Broughton Capital. That’s more than double the number of failures recorded during 2018. This is a trend likely to continue through 2020.

Further adding to the growing pressures, insurers are forced to be ultra-selective with buyers due to the heightened costs of potential lawsuits and increased risk. Even the safest fleets need help to combat these challenges.

A common question heard throughout the transportation industry is, “Why are my rates going up when I’ve had great loss experience?” Unfortunately, it’s not just your loss experience that determines your insurance rates. It’s important to understand what motivates insurance companies, how their decisions are made in pricing and the information that’s used in pricing particular risk. And since all of these are out of your control, it’s imperative that you understand what areas you can control and where you can create an opportunity to perform better.

When it comes to your renewal, there are several steps you can take to prepare. But no matter what steps you take, don’t take your eyes off the frequency and severity of your incidents. Why are they occurring? How are they occurring? And, most importantly, what mitigation plans do you have in place to prevent bad incidents from occurring?

Unfortunately, too many fleets leave money on the table when it comes to insurance opportunities. It’s important to be creative to mitigate past, current and future losses around claims. By innovating, you can drive value by finding dead dollars – or compressing those dollars – in claims that you may not even realize are sitting in your files … ultimately boosting your bottom line.

Many fleets have seen great results with a video-based safety program. Leavitt’s Freight Service, a leading specialized flatbed carrier, installed the Leavitt's Freight ServicesSmartDrive program with SmartDrive 360 and Extended Recording. Within its first year of use, Leavitt’s experienced an unprecedented 122% reduction in insurance loss ratios when compared to the previous four years. In addition, with SmartDrive’s proactive approach and comprehensive program, the fleet realized:

  • 88% improvement in its SmartDrive Safety Score
  • 10% improvement in preventable crash rate per million miles driven
  • 11 driver exonerations

“SmartDrive has further ingrained safety into our company culture and the results have validated it. Prior to SmartDrive, we were paying out on claims where we knew we should have been exonerated. During the July 2018 – Jun 2019 time period Leavitt’s Loss Ratio came in at 13% compared to the previous 4-year average of 135%—this is phenomenal.
– Billy Dover, Senior Risk Manager, Leavitt’s Freight Service

Lastly, the main difference between great companies achieving better-than-average results and the average fleet muddling through, is that the great companies treat their risk management insurance program like a business. They’re actively engaged throughout the year and continually look for opportunities to improve their program. Typically, insurance is one of the top four or five expenses for a fleet. Unfortunately, too many people look at their renewals and see what’s above the water. But what they need to do is focus on the much larger opportunity that lies below the surface. For instance, when do you think about your renewal? If it only becomes a priority 90 days before your renewal, you’re going to get market-level results. This is part of your business. It must be managed aggressively and thought about strategically.

For more insights, download our eBook, 10 Actions You Can Take Today to Avoid Skyrocketing Insurance Premiums.”

 

1 Murray, Daniel and Seth Glidewell. “An Analysis of the Operational Costs of Trucking: 2019 Update.” Arlington, VA. American Transportation Research Institute. November 2019.
2 Ibid.
3 Chang, Brittany. “The 10 Largest and Most Unexpected Trucking Bankruptcies in Recent History.” Business Insider. January 27, 2020. Available online: https://www.businessinsider.com/10-largest-trucking-bankruptcies-in-rec…

 

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