Specialty Lines Markets

Trucking markets see beyond problems to opportunities

Pursuit of specialty truckers, providing extra services pays off for retailers

By Dave Willis

Feeling down about how your insurance business is going? A short chat with someone in the trucking business may be just the pick-me-up you need.

“The economy has really taken its toll on the trucking industry—especially owner-operator, single-unit guys,” says Paul Wilson, vice president of commercial transportation for Alpharetta, Georgia-based Southern Insurance Underwriters, Inc. “We’ve seen fleet operators go from a couple dozen units down to three.”

“Freight demand has dropped off the table,” says Joe Hutelmyer, CIW, president of AmWINS Transportation Underwriters, Burlington, North Carolina. Wilson agrees. “In Atlanta, they closed the Ford plant,” he explains, leaving trucks empty. Other shippers are shutting down operations, leaving motor carriers with large, uncollectable receivables.

The credit crisis has affected both shippers and carriers, Hutelmyer notes. “They can’t get financing to buy or lease equipment.” What’s more, a glut of used equipment entered the market when operations shut down.

Some consolidation has occurred, as trucking firms seek efficiencies that let them remain, as Hutelmyer describes it, “marginally successful.” Many weren’t successful; some 3,000 trucking firms filed bankruptcy in 2008, followed by another 2,000 in 2009. Survivors are trimming costs where possible. “Unfor­tunately, sometimes they’re cutting back on safety and driver training programs, which will affect them later,” Hutelmyer points out.

Ironically, the trucking business has been further depressed by a lack of natural disasters in 2009. “Generally, after bad storms, construction materials need to be moved,” Hutelmyer explains. Not last year.

Government budget cuts also come into play. “With public rest stops being eliminated, truckers need to find other places to park at night,” Hutelmyer adds, “and they’re easier prey for cargo thieves.” The value of thefts is increasing as thieves can better identify shipments with greater value and marketability.

Not all gloom and doom

One bright spot for trucking is in Bentonville, Arkansas. “Some areas are more vibrant than the others, like carriers contracted with Wal-Mart, Dollar General, and Home Depot,” notes Wilson.

Grocery hauling is a mixed bag. “For the most part, it’s holding its own,” says Hutelmyer. “Still, more loads are being rejected.” Products ordered months ago in anticipation of an economic rebound, which didn’t happen, remain on store shelves. “We’re seeing an inordinate amount of loads rejected; the receiver may say, for instance, that instead of goods arriving at 42 degrees the temperature was 43 degrees, so they won’t accept it,” he explains.

Another positive factor is that finding labor is no longer a problem for trucking firms. “With the economy down, people are out of work,” notes Kevin Cunningham, Atlanta-based president of Construction & Transport Insurance Services, part of NationsBuilders Insurance Services. “There’s no longer a driver shortage.” This can boost safety because better drivers tend to be more conscientious about following the rules of the road.

Some segments of the trucking business are doing well, such as specialized transport, which covers oversized, overweight loads of turbine generators, construction equipment, and hospital equipment like MRIs—high-value cargo that is rarely transported on open-trailer, lowboy truck beds. “Trucking for power plants and petrochemical plants is holding its own,” says Cunningham, whose operation serves this market.

“These plants often re-engineer work during downturns,” he adds. “They need big cranes and rigging and heavy specialized transports to move generators and smokestacks.” Growth in the wind energy industry has been another positive for specialized transportation firms, Cunningham notes. “Turbine transport, moving blades and towers, is a big and growing business.”

Even for specialized haulers whose revenues are down, there is a silver lining. “They’re upgrading maintenance and equipment that’s sitting in the yard,” Cunningham says, noting that these operations usually have the resources to handle downturns.

“Commercial auto seems to be holding its own,” Wilson says, observing that government-backed social service agencies, church buses and similar entities have suffered less than trucking firms.

Tom Polsinelli, president of New York-based Park Insurance Company, sees the same trend in his locale. His firm specializes in traditionally underserved businesses, including ambulette operators, with commercial auto fleets ranging from five or six vehicles up to 75 or 80. “These are vans and small vehicles that transport elderly or other people who can’t take mass transit to the doctor’s office or the store,” Polsinelli explains. “They provide door-to-door service.”

His firm also finds success insuring heavy trucks in metro New York. “We are doing owner-operated and startup operations, including one-truck companies,” Polsinelli notes.

Hutelmyer calls trucking “a better write than it has been at any time in the past,” in large part because of federal information available to truck underwriters as well as improvement in vehicles themselves.

According to Wilson, opportunities exist in the public sector, including transportation for Head Start programs, senior transport and other non-emergency operations. “Standard markets are not as heavily involved there as in other commercial auto,” he says. Some such operations are tied in with Medicare, so there are good controls in place. To get involved, Wilson suggests that agents approach contracting carriers in each state to get a list of subcontractors.

Wilson also encourages agents to look at garage liability as a related opportunity. “Due to the economy, used car operations are thriving,” he notes. “We’ve seen a steady increase there. Plus, on the garage side, repair shops are doing well.” That’s because many people are repairing existing vehicles instead of trading them in for newer models.

On the trucking side, things may be looking up. “Over the past few months, some of the individual owner-operators have started putting their trucks back on the road,” says Wilson. “We’re quoting some new ventures, which is encouraging.”

The specialized transport business offers opportunities, too, notes Cunningham. “It’s local business,” he explains. “Local agents and brokers are involved.” His firm currently works with 300 or so producers, “and more and more are coming in as our products have gotten more popular,” he adds.

Creative Underwriters, an MGA based in Carmel, Indiana, also works with retail producers. “We generally look for ones who focus on trucking and transportation insurance,” explains Doug Setters, president of the firm. “We write much of our business in Indiana, Ohio and Illinois, but we plan on becoming a little more aggressive in other states over the next year or so.”

Heed the experts’ advice

Setters encourages agents to find underserved or neglected accounts. “If they haven’t seen their agent in a few years, they might value someone taking time to answer their questions,” he explains.

David Pohle, transportation specialist for Jimcor Agencies in suburban Philadelphia, suggests that agents “emphasize the quality of carriers, financial strength and differences in coverages” and advises them to look closely at prospects’ operations. “Perhaps they could benefit from a fresh survey,” Pohle comments. “If changes occurred, agents could find holes in existing coverage.”

In Cunningham’s segment, external factors are affecting existing coverage. “Mobile equipment—cranes and concrete pumpers, for instance—has gone through a lot of change,” he explains. “It’s now categorized as ‘auto.’” Previously, it was covered under general liability and inland marine.

“This causes challenges for standard underwriters,” Cunningham explains, adding that it also creates opportunities for agents and brokers to find specialists that don’t underwrite mobile equipment based solely on gross weight. “They can get customers better rates, while making sure no coverage gaps exist.”

Polsinelli of Park Insurance Company advises agents to pursue trucking business only with a good market behind them. “It’s a difficult risk to place,” he says. “Relationships can help sell the trucking company.”

So can good data. “Accuracy is very important,” Polsinelli asserts. Too often, too little information is provided to allow for accurate pricing. Agents should pay special attention to prospects’ financial strength. “Down payments, finance agreements and ability to pay are important,” he says, noting that financial pressures sometimes translate into poor maintenance.

Certain data is available from public sources, including the federal government’s Safety and Fitness Electronic Records System (safersys.org), explains Hutelmyer. “It really helps if agents look at data beforehand. For instance, the insured may say, ‘I haul general commodities,’ but the agent may learn he also hauls explosives.”

Other Internet sites also yield valuable information. “You’d be amazed at the truck lines presented to us where agents say they operate in a four-state area, but the Web page shows they’re in 48,” Hutelmyer says. “Most underwriters look online.” Agents should, as well.

Hutelmyer also advises focusing on dollars and cents, but not just rate. “If agents can find insurers that offer no-interest installments, that’s a big plus,” he explains. “Also, know the age of equipment and make sure values are accurate. Insureds don’t need to over-insure.” This is particularly important today because used equipment prices are down dramatically.

Pohle encourages agents to ask questions: Does the present carrier offer all coverages needed? Does it process claims in a timely manner? Are ID cards issued and endorse­ments and filings completed correctly and quickly?

Risk management provides another entrée. Agents should have access to resources—internally or otherwise—that can help insureds with vehicle safety, DOT compliance and legal issues related specifically to trucking, Pohle explains. “Can you make available seminars or classes that educate truckers on such important issues?”

Hutelmyer echoes that advice. “Many firms are cutting back on safety,” he says. “Place coverage with markets that offer loss control and driver monitoring services. Costs may be slightly higher up front, but savings over time could be in the millions.”

“Know your craft,” Setters advises. “Know your forms and coverages, so when questions come, you’ll have answers.” Knowledge is important on the carrier and MGA side as well. “I really stress continuing education,” he explains. “People talk about providing the best service, but with greater knowledge you can provide better service.”

Make use of resources

According to Hutelmyer, retail agents and brokers have allies in the truck specialty MGA and underwriting arena. “We can help novice agents and experienced ones,” he explains. “We can help them through some of the pitfalls because we’ve been there. Tap proven specialists, rather than naïve capacity.”

Look beyond the policy, too. “We have quarterly safety meetings with insureds,” says Polsinelli. “We want to make sure the business owners support it. On renewal, we look at the total picture—claims history, performance and how they embrace safety.”

Cunningham’s firm offers a comprehensive risk management support system for insureds. “Smaller, family-owned businesses often lack full-time risk management resources,” he explains. His organization offers practical tools for safety applications and a litigation control claims model, which can help if a loss occurs.

Some firms, including Wilson’s, offer training on various coverages and market segments. “We work with agents because there’s a lot in trucking, commercial auto and garage that is hard to understand. We spend a lot of time on that.”

Technology is playing an increasingly important role in trucking and transportation insurance. “Our ability to respond is better than ever, because of the Internet and the systems we have available,” says Setters. “If a firm needs something done right away, if they have loads to haul, for instance, we can turn endorsements around quickly.”

Serving the trucking and commercial auto markets is serious business. “If it were easy, everybody would be doing it,” Setters notes. “New players jump in and learn, in fairly short order, that you can’t just write a piece of business and not see it until renewal. When you write it is when the job starts. It’s a high-touch business.”