ATRI states in its latest annual Operational Costs of Trucking report<\/a>, issued in November, that with fleets incurring substantial insurance cost increases over the last several years, the industry may have \u201creached a ceiling in its ability to continuously cover annual double-digit increases in insurance premiums.\u201d<\/p>\n That cost study shows that truck insurance premiums fell for the first time since 2012, dropping from a historic high of 8.4 cents per mile in 2018 to 6.8 cents per mile in 2019.<\/p>\n ATRI’S Operational Costs of Trucking shows that truck insurance premiums fell for the first time since 2012, dropping from a historic high of 8.4 cents per mile in 2018 to 6.8 cents per mile in 2019. Graph: ATRI<\/p>\n<\/figcaption><\/figure>\n But that decrease came with a price. Insurance companies report, per ATRI, that \u201ctrucking fleets are assuming higher risk levels through higher deductibles, self-insurance, expanding use of insurance captives, and lower levels of excess liability coverage.\u201d<\/p>\n Looking forward, the research group\u2019s outlook on insurance is clear-eyed: \u201cBased on input from insurance industry experts, insurance costs will continue to increase in the near future, although at a somewhat lower rate of growth.\u201d<\/p>\n That somewhat slower rate of increases will likely develop from increased adoption of active safety systems and from positive changes resulting from state-level tort reform.<\/p>\n The latter effort is aimed at dampening the fuse of so-called nuclear verdicts \u2013\u00a0 enormous settlements for plaintiffs in post-accident liability suits. ATRI finds that \u201cthe size of truck-involved litigation verdicts is increasing dramatically over time.\u201d<\/p>\n On the plus side, the institute notes that Iowa, Louisiana, and Missouri already have legislated such reforms as limiting the discussion in court of a party\u2019s insurance coverage and limiting putative damages to combat \u201cphantom\u201d awards. Expect more state legislatures to take up tort reform this year.<\/p>\n Judges and juries aside, no one can overstate the impact that the day-to-day operation of a given fleet has on its own insurance costs. That includes everything from poor vehicle maintenance to bad driving that can drive down safety performance and thereby force up insurance premiums.<\/p>\n What\u2019s more, fleets that actively leverage risk-management strategies to prevent accidents in the first place will likely be even more successful at curbing insurance costs.<\/p>\n \u201cThe overwhelming belief among fleets and their insurers\/reinsurers today is that the commercial auto insurance market is not working,\u201d says Keith Dunlap, transportation practice leader for Gallagher Bassett, a global risk- and claims-management firm.<\/p>\n \u201cThe nexus between high verdicts and insurance premiums cannot be emphasized enough,\u201d he continues. \u201cOver the last few years, the total cost of risk has continued to rise by double digits. Runaway verdicts are no longer rare; they are commonplace in most states, even on incidents that do not necessarily generate a severe injury.\u201d<\/p>\n Dunlap reports that, since 2012, trucking verdicts are up approximately 330% compared to 2007-2012. He sees these verdicts as fueled in part by \u201cstate court judges, mostly prior plaintiff lawyers, being elected in many states with their election campaigns primarily funded by the local plaintiff\u2019s bar.\u201d In addition, \u201cLetters of protection are being provided by \u2018litigation investors\u2019 to medical providers that guarantee their inflated retail medical costs.\u201d And don\u2019t forget the ever-increasing\u00a0 cost of medical care.<\/p>\n Nick Saeger, Sentry Insurance\u2019s assistant vice president of transportation product, pricing and underwriting, also contends that these supercharged verdicts are not brewing up in a vacuum. \u201cI would start with attorney involvement, in general, as being a key contributor to the costs increasing,\u201d he says. \u201cThe frequency with which they\u2019re becoming involved in truck accidents is a problem \u2013 but more than that, the techniques that plaintiff attorneys are using to drive up verdicts and settlements is outpacing defense attorneys.\u201d<\/p>\n Saeger describes this approach as applying \u201cthe Reptile Theory, in which plaintiff attorneys appeal to the feelings of the jury by arguing about the trucking company \u2014 sometimes leaving out the facts of the case entirely. Tactics like those drive up the values of cases, leading to nuclear verdicts.<\/p>\n \u201cWe\u2019ve also seen evidence of litigation financing,\u201d he adds. This is where \u201cattorneys have their expenses financed by a third-party investor, which entices them to take cases to trial with an aim towards larger awards. Most times, the jury isn\u2019t even aware that litigation financing exists.\u201d<\/p>\n Even before a legal reptile might crawl onto the scene, there is much that can be done.<\/p>\n \u201cOne of the most important things for motor carriers to do right now is to implement \u2014 and follow \u2014 a detailed safety program,\u201d says Dan Clements, director of sales-transportation at Sentry Insurance. \u201cYour policies involving hiring, training, drug testing, firing, and more will become the focus in the event of a claim. Proving that your drivers and culture prioritize safety will be very important.\u201d<\/p>\n Expanding on that theme, Saeger points to the driver shortage\u2019s impact. \u201cUnderqualified drivers are hired to fill seats, and accidents become more frequent. Relaxed hiring standards \u2014 or even failure to follow solid standards \u2014 can fuel the use of the Reptile Theory as well.\u201d Also, he says distracted driving is causing more accidents. \u201cThat behavior increases the likelihood of a crash, even if a truck driver isn\u2019t at fault.\u201d<\/p>\n Gallagher Bassett\u2019s Dunlap says the type of attorney fleets engage also matters. \u201cCarriers often use defense lawyers that can only be described as \u2018generalists\u2019 to defend trucking cases. They are not often familiar with the issues faced today by the trucking sector or how best to defend these cases.\u201d<\/p>\n By contrast, \u201chighly skilled plaintiff lawyers focus today on aggravating factors associated with an accident, allegations of spoliation of evidence, negligent hiring\/training\/supervision, vehicle maintenance, hours of service violations, poor compliance with … safety regulations, and poor CSA scoring.\u201d\u00a0An attorney who doesn\u2019t specialize in trucking may not even know that CSA scores are how the Federal Motor Carrier Safety Administration rates motor carrier safety under its Compliance, Safety, Accountibility program.<\/p>\n \u201cCommercial auto insurance was largely very profitable in the early 2000s,\u201d says Sentry\u2019s Saeger. But, due to prices falling for years, \u201csoon enough, the results shifted to unprofitability. That happened just before the developments [in nuclear verdicts and worsening safety performance], which exacerbated and extended what has been a long slump for the industry.\u201d<\/p>\n He says the upshot is tighter capacity stemming from some players exiting the primary market in recent years, most recently a couple of risk-retention groups. \u201cStill, there are insurance companies that can service that layer,\u201d he says. \u201cCapacity in the excess layers, above $1 million, is tightening to a larger degree, though. And when that capacity can be found, increases have been even higher than in the primary layer.\u201d<\/p>\n \u201cThe best strategy [against rising insurance costs] is to work toward a developing a \u2018culture of prevention,\u2019\u201d says Paul Calhoun, vice president of Hub International, a global insurance brokerage. \u201cThat\u2019s means putting safety first, starting with driver hiring practices. Those trucking companies not doing this are being driven into a high-premium segment.\u201d<\/p>\n Calhoun says the insurance marketplace can be viewed as a two-lane highway, plus the breakdown lane on the right.<\/p>\n He says fleets with poor safety performance, bad CSA scores, etc., are stuck in the breakdown lane, where they pay \u201ccrazy\u201d premiums for coverage. By contrast, In the left-hand \u201cpassing\u201d lane are fleets \u201cmoving along to best-in-class\u201d safety practices, so they are presented with the most favorable premiums. It is in this most-favored lane that the capacity of insurance coverage is the tightest.<\/p>\n Then there is the right-hand \u201ctravel\u201d lane. \u201cThat\u2019s where insurers are looking at fleets that are on their way to the left-hand lane or at least, should no longer be kept out of the middle of the road,\u201d thanks to their improved safety scores.<\/p>\n Calhoun says he \u201cdoesn\u2019t know how some fleets stay in business in the face of what they are being charged to be insured.\u201d On the other hand, he sees \u201cthe best offense for getting insurance costs in line is to become a well-run company.\u201d<\/p>\n One sure-fire way to demonstrate that a fleet\u2019s safety program is well-managed \u2014 to insurance carriers and, if need be, in a court of law \u2014 is to \u201cinvest in telematics, automatic emergency braking, and collision-avoidance systems,\u201d says Gallagher Bassett\u2019s Dunlap. \u201cThese are key to avoiding risk and loss.\u201d Yes, he says, more than 85% of all commercial truck insurance customers today \u201clack this game-changing technology.\u201d<\/p>\n In-cab cameras are also widely cited as a tool that can help prove a company\u2019s commitment to safety, improve its safety record through driver coaching on events captured by the cameras, and often exonerate a driver who was not in the wrong.<\/p>\n A new tech option that could be helpful to better-managed fleets is data-sharing.<\/p>\n \u201cNew digital-based programs are like those offered with some personal auto insurance plans,\u201d Hub\u2019s Calhoun explains. \u201cThe insurance carrier partners with the truck fleet to share certain safety data, such as what can be pulled from an electronic logging device, that can be used to assist with coaching drivers. There\u2019s a definite trend to focus more on data then say, five years ago. But it\u2019s not a widespread development yet.\u201d<\/p>\n Sentry\u2019s Saeger points out that the traditional guaranteed cost policy, in which the premium does not fluctuate is \u201cthe most expensive of the insurance options. But for most trucking companies, which are typically five units or less, it\u2019s the only option. Guaranteed cost provides full coverage with no unexpected costs to cover. Costs are higher, but they\u2019re also defined at policy inception.\u201d He adds that various financing options are available to spread the cost over the duration of the policy.<\/p>\n Noting that \u201ctrucking bankruptcies have almost tripled over the last 18 months,\u201d Gallagher Bassett\u2019s Dunlap contends that \u201cmany fleets today simply cannot afford a straight guaranteed-cost program that effectively transfers all risk to the insurance sector for a reasonable premium.\u00a0In fact, a significant number of fleets are now forced to forego excess coverage, struggling with just the premiums on their primary layer of coverage.\u201d<\/p>\n One way around the expensive premiums of guaranteed-cost options is to opt for a large-deductible program, with deductibles ranging from $100,000 to $5 million depending on the size of the carrier.<\/p>\n With these programs, explains Dunlap, \u201cthe carrier\u2019s claims department is likely to manage the losses, thereby making the buyer subject to the strengths or weaknesses of that claims department. Juxtapose a large-deductible plan with a program where an insured takes a large self-insured retention (SIR) under a commercial carrier\u2019s policy.\u201d<\/p>\n He says the latter approach \u201callows the insured the ability to control the claims process, either internally or through the retention of a qualified claim administrator.\u201d Then the carrier can \u201ctruly manage the process by hiring its choice of counsel; implementing its litigation philosophy; controlling its claims data, and learning risk mitigation efforts from its losses.\u201d<\/p>\n Fleets may also look at setting up a captive-insurance plan, which traditionally insure a parent company or affiliates. \u201cCaptives afford companies the opportunity to manage their own underwriting risk,\u201d says Dunlap. \u201cDepending on whether the captive formation is wholly owned, a group captive, or a \u2018rent-a-captive<\/a>\u2019 [in which the captive insurance company can be used by unrelated insureds], the initial and ongoing capital outlay will vary. \u201c<\/p>\n He adds that fleets should bear in mind that the resulting \u201cinsurance companies\u201d are regulated and have attendant costs, such as legal, actuarial, underwriting, and claims handling. \u201cWhen done well, a company can earn underwriting profit that can be applied to offset future premiums.\u201d<\/p>\n Fleets, including those setting up a captive insurance plan or seeking to be self-insured, may opt for a \u201cfronting\u201d insurance policy.<\/p>\n Bobby Hanlon, partner and trucking practice co-chair of law firm Goldberg Segalla LLP, explains that \u201c\u2019fronting\u2019\u00a0insurance policies allow motor carriers to reduce premium costs and maintain control over their claims while at the same time ensuring compliance with federal and state financial\u00a0responsibility regulations.\u201d<\/p>\n Under fronting policies, he says, which are sometimes also referred to as \u201cmatching deductible\u201d policies, \u201cthe trucking company remains responsible for its own defense and losses, and the insurance company acts merely\u00a0as a surety [a guarantor of the debt.]\n \u201cSince the company is responsible for its own losses, the premiums are lower than they otherwise would be for the same policy,\u201d\u00a0he continues. For example, consider a fleet with a $1 million policy. \u201cIf it retains essentially\u00a0all of the risk with a $1 million deductible,\u201d Hanlon points out, \u201cits premium will be much less than if it retains just 10% of the risk with a\u00a0$100,00 deductible.\u201d<\/p>\n While a fronting policy may sound like self-insurance, Hanlon is careful to point out that is not, because\u00a0the insurance company is there to guarantee payment of the loss if the motor carrier becomes insolvent. In defending trucking cases for over 15 years, he says he\u2019s never come across a truly self-insured motor carrier.<\/p>\n Everyone likes lower premiums, but there\u2019s a risk to higher deductibles. He recommends that a fleet determine what level of deductible it can tolerate, \u201cfactoring in that deductibles\u00a0are usually per occurrence, and so the company could potentially be on the hook for more than one.\u201d<\/p>\n That means that even a relatively low\u00a0deductible\u00a0of\u00a0$100,000\u00a0per\u00a0occurrence\u00a0could put a smaller company out of business if it is involved in multiple crashes. \u201cThe upside of assuming a greater amount of the risk through higher deductibles is lower premiums, but the downside is the potential for financial ruin,\u201d says Hanlon. \u201cIt\u2019s\u00a0a balancing act.\u201d<\/p>\n Chris Cavallo, partner and transportation coverage group leader of Goldberg Segalla, says that deductibles may be \u201cper accident, married to a limit but also have an aggregate limit set for the year. So, it could be $100,000 per incident, but with a maximum amount of $500,000 deducted for the year.\u201d<\/p>\n The surety provided by the insuring company on a fronting policy \u201cmeans the insurer stands behind the motor carrier,\u201d says Cavallo. \u201cIt\u2019s not self-insurance, because the insurance company is on the hook [for the rest of the risk]. But the first impact is on the motor carrier. Only if they cannot pay it does the insurance company handle the obligation under the policy.\u201d<\/p>\n Some words of caution: \u201cA trucking company with a higher matching deductible needs to be in contact with their insurance provider\u00a0[should a crash occur],\u201d Cavallo says. \u201cThey cannot let stuff sit around and not get where it\u2019s needed, such as\u00a0making\u00a0sure to\u00a0send the insurer any time-limited demands\u00a0made by a third-party claimant or their attorney that the motor carrier pay money as a result of bodily injuries or other damages allegedly sustained by the claimant.\u201d<\/p>\n Another road to consider traveling is to set up a risk retention group<\/a>. These are member-owned liability insurance companies established under the Liability Risk Retention Act that allow businesses with similar\u00a0insurance\u00a0needs to pool their\u00a0risks.<\/p>\n Yet another approach is to set up a risk purchasing group<\/a> under the Risk Retention Act of 1986. That law allows a\u00a0group\u00a0of insureds that are engaged in similar businesses or activities to\u00a0purchase insurance coverage\u00a0from a commercial\u00a0insurer.<\/p>\n Sentry\u2019s Saeger recommends looking to providers with trucking expertise.<\/p>\n \u201cBeing an expert [insurer] is important,\u201d he says. \u201cExperts provide the proper coverage and products, have safety professionals to help a motor carrier\u2019s own safety program, and have claims handlers who have handled nothing but trucking claims and know how important it is to get back on the road.\u201d<\/p>\n Fleets with fewer than 26 power units reported insurance costs of over 15 cents per mile in 2019, ATRI officials said. Graph: ATRI<\/p>\n<\/figcaption><\/figure>\n Insurance cost is among the industry top 10 issues, as determined by the American Transportation Research Institute, and it\u2019s one that cuts across all segments of trucking.<\/p>\n Big or small, insurance is going to cost you. But fleet size (see chart) all by itself \u201cplays a substantial role in how insurance costs and risk are managed, according to ATRI in its latest Operational Costs of Trucking report.<\/p>\n \u201cBreaking down the insurance cost per mile by fleet size, it is clear that the smallest fleets, those with fewer than 26 power units, reported insurance costs of over 15 cents per mile in 2019,\u201d says ATRI. \u201cIn comparison, fleets with over 1,000 power units reported insurance costs of 5.3 cents per mile.\u201d<\/p>\n Not surprisingly, highly specialized fleets reported the highest insurance cost \u2013 7.5 cents per mile. \u201cThese carriers oftentimes haul more dangerous freight, and their insurance costs reflect that,\u201d notes ATRI.<\/p>\n Then there are the private fleets, which have seen their insurance costs and claims decrease every year since 2017. Insurance cost \u201cstabilized\u201d at 9 cents per mile, per 2019 data. \u201cPrivate fleets, as units of larger, non-trucking companies, have many more tools and strategies for hedging insurance cost increases,\u201d ATRI points out.<\/p>\n<\/div>\n <\/p>\n by David Cullen<\/a><\/p>\n Source: https:\/\/www.truckinginfo.com<\/a><\/span><\/p>\n<\/div>\n<\/div>\n The audit is a key tool to know the overall status and provide the analysis, the assessment, the advice, the suggestions and the actions to take in order to cut costs and increase the efficiency and efficacy of the fleet. We propose the following fleet management audit.<\/p>\n Illustration: HDT\/Armie Bautista There\u2019s no simple way to slip the grasp of rising insurance costs \u2014 it takes everything from running safely to shopping smartly. Even if a trucking fleet were never to have a crash or injury, it still must be insured \u2013 adequately insured, and at the lowest reasonable cost. That is getting…<\/p>\n","protected":false},"author":3,"featured_media":10634,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[18],"tags":[103],"_links":{"self":[{"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/posts\/10633"}],"collection":[{"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/comments?post=10633"}],"version-history":[{"count":1,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/posts\/10633\/revisions"}],"predecessor-version":[{"id":10635,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/posts\/10633\/revisions\/10635"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/media\/10634"}],"wp:attachment":[{"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/media?parent=10633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/categories?post=10633"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-json\/wp\/v2\/tags?post=10633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"ATRI'S](\"https:\/\/fleetimages.bobitstudios.com\/upload\/trucking-info\/content\/article\/2021-02\/truck-insurance-premium-__-720x516-s.jpg\")
Of Nuking and Reptiles<\/h2>\n
\u201cMany fleets today simply cannot afford a straight guaranteed-cost program that effectively transfers all risk to the insurance sector for a reasonable premium.\u201d \u2013 Keith Dunlap, Gallagher Bassett<\/h3>\n
Safety Matters<\/h2>\n
\u201cThe best strategy [against rising insurance costs] is to work toward a developing a \u2018culture of prevention.\u2019\u201d \u2013 Paul Calhoun, Hub International<\/h3>\n
Capacity Crunch<\/h2>\n
Best Offense<\/h2>\n
\u201cYour policies involving hiring, training, drug testing, firing, and more will become the focus in the event of a claim.\u201d \u2013 Dan Clements, Sentry Insurance<\/h3>\n
Setting Deductibles<\/h2>\n
\u201cThe upside of assuming a greater amount of the risk through higher deductibles is lower premiums, but the downside is the potential for financial ruin.\u201d \u2013 Bobby Hanlon, Goldberg Segalla LLP<\/h3>\n
The Fronting Approach<\/h2>\n
Size and Mission Matter<\/h2>\n
![\"Fleets](\"https:\/\/fleetimages.bobitstudios.com\/upload\/trucking-info\/content\/article\/2021-02\/atri-operational-cost-of-trucking-__-720x516-s.png\")
CUT COTS OF THE FLEET WITH OUR AUDIT PROGRAM<\/strong><\/a><\/h3>\n
![\"\"](\"https:\/\/advancedfleetmanagementconsulting.com\/eng\/wp-content\/uploads\/sites\/3\/2020\/04\/nueva-ley-auditoria.jpg\")
<\/a><\/p>\nFLEET MANAGEMENT AUDIT<\/strong><\/a><\/h3>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"