Underwriting To Tighten

FebInsPic2This year will usher in a new era of writing and renewing insurance for the trucking industry as the underwriters will begin sharpening their pencils. In 2013, we saw increases in insurance rates and a decrease in companies competing for your business. I believe that 2014 will bring about stricter underwriting in both new and renewal business, so be prepared. Underwriters will have new and stricter guidelines that they will adhere to this year. Let’s look at a few of these areas that will see changes to the guidelines, and the way insurance carriers will be looking at you and your business before accepting your policy.

In regards to driver qualifications, age, experience, driving records and employment history will all be considered. Expect to see tighter inspections on your equipment, as well. The age of your equipment will be a factor, and expect to see physical and mechanical inspections as part of the approval process. What they find (or don’t find) regarding the condition of your equipment will most-likely affect your premiums. Older equipment will be surcharged.

More than likely, you will be asked for Loss Runs when you are shopping for your renewal. Make it a habit to request your Loss Runs at the expiration of each policy year, and keep them for at least three years. A Loss Run is a formal acknowledgment, by your insurance company, that you do not have any losses associated with your insurance policy. If you have had losses, that activity and status will be indicated (make sure the information is correct). The standard for the industry is to go back three years when investigating Loss Runs on a company looking for coverage.

Financial stability will also be a part of the approval and renewal process. This will include ratings from various reporting and financial rating and reporting agencies. The insurance industry depends heavily on the Central Analysis Bureau (CAB) for much of its information. Additional information will also be gathered from the Department of Transportation (DOT) through their profiles, as well. You can see this on the safer website (www.safer.fmcsa.dot.gov). All in all, insurance underwriting will be stricter, and analyzing how you handle your money will become part of the process. If you are shopping your renewal or if you are a new venture, be prepared to provide complete and accurate financial information to your agent or broker.

I think that it is important that you know who the Central Analysis Bureau is. You know many of the credit rating agencies that affect your personal finances, but the Central Analysis Bureau directly affects your transportation business. They do not provide the public with information, but the insurance industry relies heavily on the CAB report for providing current information on the transportation industry. The following quote was taken from their website: “Motor carrier insurance is a very specialized industry and insurance companies have to rely on the CAB report for their expertise in financial analysis, specifically designed for the financial structure of motor carriers and the needs of the insurance industry. The CAB is the expert in regulatory requirements, safety issues, policy language and advises insurance companies in these areas.” They have been around for over 70 years, developing programs and data that have made them the experts in transportation that the insurance industry relies on.

Part of the information that the CAB provides is data developed by the Department of Transportation (DOT). The DOT compiles safety-related data on all of its active FMCSA motor carriers (MC). This data consists of a concise electronic record of a company’s identification, size, commodities carried and safety records, including safety ratings, roadside out-of-service inspection summaries and crash information. You can check this information on the safer (which stands for Safety And Fitness Electronic Records) website previously listed.

The information that is developed by the DOT is compiled and rated against a national average. Their rating categories are: Unsafe Driving, Hours-of-Service Compliance, Driver Fitness, Controlled Substances and Alcohol, Vehicle Maintenance, Hazardous Materials Compliance and Crash Indicator. This information is provided as a tool to evaluate a trucking company. Elevated scores, compared to the national average, may prioritize a motor carrier for further monitoring by the FMCSA. These scores are used by underwriters when quoting or renewing business. The report itself does not imply any federal safety rating of the carrier, pursuant to 49 USC 31144. Unless a motor carrier in the Motor Carrier Safety Measurement System (SMS) has received an “Unsatisfactory” safety rating pursuant to 49 CFR, Part 365, or has otherwise been ordered to discontinue operations by the FMCSA, it is authorized to operate on the nation’s roadways.

Keeping all of this in mind, underwriting will now be using all of its resources to better and more-accurately evaluate your current and future business before giving you coverage. If you are a multi-unit risk, prepare yourself for a personal visit by someone from the insurance company that will audit your account. Inspections have increased. Items that they will be asking to see will include driver employment records, DOT and BIT inspection reports, financials, any agreements with leased or hired sub-contractors, IFTA reports, and copies of your operating authorities. Cooperate with each request – you do not want the insurance company to become your adversary!

If you stay organized and keep your nose clean, 2014 could be your best year in a while. I encourage you to “get your ducks in a row” now and fix any mistakes you have been making (intentionally or otherwise), because the insurance industry will be tightening their belts, so you should, too! If you have any insurance-related questions or comments, I can be contacted through California Plus Insurance Service in Modesto, California at 800/699-7101.

About Roland L. Enz

Roland L. Enz has specialized in insurance for the truck and transportation industry for over 30 years and he has written exclusively for 10-4 Magazine since 1995. Roland is currently the president of California Plus Insurance Service, Inc. in Modesto, California.