The Trucking Industry Is Changing
Technology and new regulations are adding to safety for the trucking industry but also adding considerable costs. The electronic logging devices (ELD) will help drivers more easily track their hours and it will also keep drivers from exceeding the hours behind the wheel. This should reduce accidents but will often cut into truckers' increasingly thin profit margin.
The trucking industry is changing with fewer single truck operators and fewer but larger carrier operations. The standard insurance companies are stepping away from this industry resulting in more business moving into the excess and surplus market. It is a great opportunity for retail agents who can partner with trucking specialists who not only know the coverage gaps but have available markets, can ask the right questions, and provide solutions.
Addressing Coverages, Safety Key to Trucking Insurance Success
Industry growth and change create opportunities for retailers
By Dave Willis
Fuel costs are down. That's good news for trucking firms. But other challenges remain. For example, "Increased regulation and screening out of non-compliant drivers is a major issue," explains John Altizer, CPCU, AIS, underwriter at Risk Placement Services.
From a regulatory and legislative standpoint, the past few months were extremely impactful to the industry, with the Federal Motor Carrier Safety Administration (FMCSA) adopting a final rule mandating electronic logging devices (ELD) and launching a phased rollout of a Unified Registration System, and the president signing the Fixing America's Surface Transportation (FAST) Act.
Tim Horgan, chief marketing officer of Canal Insurance Company, explains that the new ELD rule, while giving motor carriers two years to comply, "will cost them time and money to implement. ELDs are designed to help drivers be compliant with hours of service regulations and maintain accurate logs."
According to Teri Greenwood, chief underwriting officer at Northland Transportation, "Regulatory requirements, such as hours of service rule changes, may create more operational challenges that could contribute to an erosion of margins, which are already thin."
She points out that while some costs, including fuel, are down, others are on the rise. "Trucking firms face rising costs of equipment, an increasingly stringent regulatory environment, and increasing driver pay as they compete for qualified drivers amidst a general shortage," Greenwood notes. She warns that companies that deviate from their core business to compensate for lost revenue or clients increase the risk inherent in their operation.
Altizer says changes are taking place in the makeup of trucking firms. "We're seeing a trend away from the single-unit trucker, and we're seeing significant growth in the stronger, well-managed fleets," he observes. Horgan says he expects to see more consolidation and mergers among trucking companies.
Some segments of the business are growing. Robin Pisecki, CPCU, ARM, president of Willis Programs of Connecticut, who manages a program for petroleum distributors, says, "The domestic crude oil discovery boom-in Ohio, Pennsylvania and all over the country-has led to increased business for petroleum distributors. The use of biofuels, like soybean oil and waste oil, has also helped fuel growth."
She explains that, because crude is pulled from the ground and needs to be transported to refineries and then to customers, "It's a double transport." She adds that, as fuel prices have dropped, there's been some pullback, particularly on discovery.
Distracted driving is having a major impact on trucking firms and their insurers. "It's partly a driver issue," Pisecki says, "but the bigger problem is distracted driving on the part of the general public. That's affecting both the number of accidents and the severity. Everyone is just too comfortable behind the wheel."
Losses are having an impact on a large part of the market. "Significant losses are materializing in the reinsurance market," says Tim Turner, president and CEO of RT Specialty. "Standard companies are seeing loss ratio deterioration, which is causing business to be dumped into the specialty or E&S market."
He says a combination of factors is driving this trend. "Most significant is an inaccuracy in reserves," he notes. "It's pretty much across the board, but there are a few areas where it's more acute, such as long-haul trucking and anything in the livery classes."
Pisecki says fewer carriers are writing gasoline hauling firms. "Unless you're really good at the business and have a good handle on your safety program and loss activity, you may end up with very few choices of carrier," she notes.
In her markets, Lori Beaumont, CIC, CPIW, senior underwriter at Risk Placement Services, is seeing some price stabilization and increasing competition. "This comes after four or five years of moderate rate increases," she comments. "Insurance carriers are relying more on data mining and predictive analytic pricing models. We're also seeing increased use of telematics and cameras in the trucks."
Serving clients
Agents and brokers can help trucking insureds in a number of ways. One is addressing potential coverage gaps. "Many trucking firms don't carry excess limits, and often they have insufficient towing limits," Beaumont remarks.
"I'm seeing more carriers being unwilling to offer full uninsured motorists coverage," Pisecki notes. "They'll only offer the statutory limits. With workers comp being primary, that may not be that big a deal. However, many owner-operators may not have workers comp, particularly in tougher economic times."
According to Altizer, "Cargo forms vary among markets, and there are sometimes coverage gaps based on operations or commodities hauled."
Horgan warns: "Because some insurance companies sell primarily monoline commercial auto liability, agents may place physical damage or cargo with another insurer." He says there's value in having the auto liability, physical damage, cargo and truckers liability coverages with one insurer. "If there's a loss, it's best for the insured to have one deductible and one insurer vs. multiple deductibles and insurers on one accident," he asserts.
Beaumont encourages retail producers to help their clients by understanding and explaining the various coverage forms. "Be sure to sell coverage in addition to price," she says. Altizer encourages agents and brokers to quote excess limits and GL on all accounts and provide higher towing limits when available. Pisecki says agents should look for programs that offer uninsured motorists coverage at the policy limit.
Turner says that continuing deterioration of primary and lead excess auto experience and a tightening market provide an incentive for agents and brokers to get out in front of renewals. "Be prepared to market risks extensively," he says, "and involve a wholesale specialist that can bring deeper knowledge and understanding of the risk, along with access to the alternative marketplace, including E&S providers, MGAs and MGUs."
According to Greenwood, agents and brokers should make sure their clients don't experience technology gaps. "Some trucking firms aren't making the most of available automation, including electronic onboard recorders or telematics devices that can help them minimize their operating costs," she points out.
Technology can help truckers increase efficiency and accuracy in tracking hours of service, Greenwood adds. "This can free up resources they can redirect to other aspects of the operation." She says better hours of service tracking can mean fewer out of service issues, which translates into increased productivity. Also, using telematics data to coach drivers on behaviors can help reduce accident frequency and resulting costs."
Greenwood encourages agents to connect their clients with carriers that have a risk control staff that can help them recognize the benefits of telematics and, through effective coaching, obtain both driver buy-in and management support. Beaumont concurs. "Agents and brokers can benefit by partnering with companies that specialize in transportation and can offer clients in-house loss control services and specialized claim handling," she notes.
Pisecki also stresses the value of solid safety programs. "Driver training, including defensive driver training, should not be overlooked," she says. "Trucking firms need to have a strong program for rewarding good drivers; if they don't have good drivers, they don't have a good business."
She points to the need for frequent and ongoing training and follow-up. "Drivers need reinforcement, and not just on procedures," she asserts. "They need to be constantly reminded that, because they're out there driving among all kinds of people who aren't always paying attention, they need to focus on avoiding accidents at all costs."
Cellphone policies are important, she adds, "and we can help customers enforce them." Her company is working with a firm that uses technology to help trucking firms eliminate the risk of employee misuse of mobile technologies behind the wheel of a moving vehicle. "It's being used by a lot of large auto fleets," she notes. "I've used the technology myself, and it works."
Horgan encourages agents and brokers to help motor carrier clients stay up to date on all regulations and issues facing their industry. "If they don't have internal resources to handle this," he adds, "they need to find an outside resource such as the risk management services division of their insurance company."
He adds, "The best way for agents and brokers to help their trucking customers is to become experts in their industry. They should know and understand the business of a trucking firm and the many safety and operational challenges it faces daily. They need to help keep insureds up to date on the latest regulatory changes and, most important, know which insurance carriers will best meet their needs.
"Ultimately," he concludes, "it's the motor carrier's responsibility to make sure it is always compliant. But agents and brokers can help clients formulate or improve on existing safety and operational controls and procedures that minimize accidents, keep insured trucks on the road and make sure drivers arrive home safely."
The author
Dave Willis is a New Hampshire-based freelance insurance writer and regular Rough Notes magazine contributor.
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