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MARKETING
Trucking specialists adapt to changes
Economy-sensitive trucking business confronts new safety rules, tech innovations and higher fuel
By Dave Willis
C-S-A, C-S-A, C-S-A.
What might sound like a chant from angry protesters or rowdy college sports fans is actually a nearly unanimous response to the question, "What's impacting the trucking industry these days?"
"The ongoing rollout of CSA (Compliance Safety Accountability), a new safety program mandated by the Federal Motor Carrier Safety Administration, continues to be a hot topic in the truck and bus industry," says Chris Mikolay, director of marketing at National Interstate Insurance Company. "This safety initiative places a heavier emphasis on the driver, as opposed to the fleet, and may affect driver hiring practices, safety programs and, ultimately, insurance rates and trucking capacity."
Adds Amy Zettel, senior vice president at United Brokers, "The new CSA is having a profound impact on the hiring and maintaining of good drivers. The scoring of drivers follows the insured well after the driver may have left the organization."
"We are waiting to see the impact of the new CSA Safety Management System," says Doug Setters, CPCU, president of Creative Underwriters. "We are watching the underwriting response from our markets, as well as the loss control response. It will be interesting to see how the trucking insurance industry will use these new tools." Adds Tom Polsinelli, president of Park Insurance Company, "From a regulatory standpoint, CSA stands to be an ongoing challenge as its further implementation and evolution continues."
Implementation of the program comes on the heels of what one observer describes as "the doom and gloom of the economy, slow velocity of commerce, lower freight tonnage and fleet reductions."
According to Polsinelli, 2011 has gotten off to a nice start. "The economy seems to be headed in the right direction, and Park Insurance Company is starting to see trucking fleets expanding again and hopefully this will continue throughout the year," he says.
"While the economy continues to slowly recover," he adds, "freight issues still are a concern, particularly within certain classes of the trucking industry. The effects of fuel prices and health care also are putting financial pressures on transportation companies." In addition, he says, companies are again having a tough time finding qualified drivers.
Mikolay sees this, too. "With CSA focusing primarily on the driver, truck and busing companies are concerned with potential driver shortages and their ability to maintain good drivers," he says. "In addition, sharp diesel fuel price increases over the past few quarters are challenging trucking companies that were able to weather the economic downturn."
Insurance and risks
According to Mikolay, there is still excess capacity in the trucking insurance marketplace. "The environment remains highly competitive," he explains. Polsinelli sees this continuing. "It is expected that the market will remain as it is for the balance of 2011 and, at least, into the beginning of 2012," he says.
In this competitive marketplace, insurance providers are working to attract or retain business. Zettel's company, United Brokers, has maintained a long-term presence in the owner-operator arena by having a nationwide direct bill, monthly pay plan for risks needing physical damage, cargo or bobtail. "By allowing customers to pay only one month down, we can avoid having to constantly be the cheapest in order to write the business," she explains. "On those same programs we have combined and disappearing deductibles, which keep customers happy and renewing."
The company also expanded its offerings. "One of our newest markets considers risks that haul hazardous materials or hazardous waste 25% of the time or more," she says. "This is a national program for us and we have a better-than 50% hit ratio with risks we have quoted." Being a one-stop shop helps the firm better serve retail agents, she adds.
In an era of modest growth in work, truck owners are facing higher costs from more state rules and regulations, higher fuel prices, advancements in truck and business technology and more, Polsinelli notes. "This all translates into increased operating costs for owners. This puts pressure on insurance companies to keep rates low, as the owners look for any means to help defray costs."
To save money or cut expenses further, his firm is seeing more clients looking for lower limits or other ways to reduce premiums. "Our people are very good at working with our clients to ensure that they receive the most appropriate coverage at a competitive price for their needs," Polsinelli says.
An overall shift is taking place in the trucking business marketplace, Zettel notes. "Insurance companies are relying heavily on factual data that is now at their fingertips through the CSA," she explains. "We see some companies pre-inspecting risks over a certain number of power units. Many carriers are looking for flat renewals or slight increases, even on risks that a year ago might have enjoyed a slight decrease. With investment income still being an everyday battle, the insurance companies must continue to emphasize underwriting profits."
Polsinelli's firm, which does much business in the claims- and lawsuit-prone New York State Ambulette business, sees technology helping the business. "More and more of our insureds are using newer technology, such as rearview mirror-mounted cameras, inside their vehicles to ensure and monitor both passenger and driver safety," he explains. "This can help in evaluating and, at times, eliminating claims, which can translate into lower operating costs."
Other technology is coming into play in the trucking arena, as well. "With onboard computer systems, electronic log book record keeping and satellite tracking systems, truck business owners are able to keep a closer eye on their drivers and manage them more efficiently," Zettel notes.
"The use of new technologies in the cab may have long-term effects on safety and, ultimately, insurance rates," says Mikolay. "In-cab monitoring devices, such as accident event recorders, lane-departure warning systems and electronic on-board monitors are becoming essential tools for accident avoidance and improving driver behavior."
"It's the trucking company's job to maintain driver quality and provide the means of training new drivers as they are brought on board," Tony Glotzbach, CPCU, president of United Brokers, explains. "The trucking insurance industry must continue to recognize that those who use the new technologies to the fullest will become the best insurance risks."
"We have already seen a reduction in claims for companies using accident event recorders, provided to our insureds through National Interstate's affiliate, SCLS," Mikolay notes. "In addition to enhancing driver performance, a recorder acts as an irrefutable witness when a driver is not at fault in an accident."
CSA could well have added positive impact on loss experience. "The new CSA system will cause more self-policing among motor carriers, as there is now a clear focus on drivers," says Setters. "The Feds have figured out, among other things, that drivers with poor driving practices and high out-of-service rates cause accidents.
"Issues like poor driver physical fitness and driver fatigue get more focus with the new system," he adds. "Highway safety should improve, as should risk quality and trucking industry professionalism, as this change is rolled out.
"Then again, there is always going to be a foggy night at a train intersection or black ice on the overpass," Setters notes. "The trucking insurance industry will be there to pick up the pieces."
Retailer opportunities
In this market, specialization and partnerships count. "Our more successful agent partners focus on one segment of the transportation industry or in a particular type of product," says Mikolay. "For example, we've partnered with agents who have expertise in alternative risk transfer programs. This lets them offer prospects something different. Additionally, any agent who can bring added value by offering new risk management tools will have a competitive edge."
Mikolay encourages agents to develop long-term partnerships with strong carriers, "not just ones that are currently offering the cheapest rates. Agents should look for the companies that have a strong track record of financial strength and stability and that are committed to the transportation industry.
"Work with MGAs who provide opportunities in several states and who have multiple companies," Zettel suggests. "Also, find MGAs that offer efficiencies," including online real-time quoting functionality.
According to Setters, in trucking insurance, service and knowledge are key. "What you know counts," he explains, "and informed producers are better producers." Look to partners for education. "Information is available online," adds Zettel, "and seminars are available throughout the year to help educate retail agents."
Setters says that CSA implementation provides an opportunity for agents to differentiate themselves. "In marketing, you always look for turmoil and how to make a difference," he explains. "Producers who are up to speed on the CSA system will have an advantage moving forward." His firm is offering continuing education events to help producers in this regard and is focusing on the issue at its annual trucking insurance seminar in mid-May.
Once educated, retail agents will be able not just to join the chants of C-S-A, C-S-A, but to lead them, as well.
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