In 31 years of writing insurance for the truck and transportation industry, many events have dictated and shaped the insurance business, as it relates to your industry. When I first started in the insurance industry, one of the first axioms that we learned, at that time, is that the industry is cyclical. Actually, every business subscribes to the same concept, good times and bad, ups and downs, however you want to look at it, there are swings in trends and the business climate. In politics they call it the swing of the pendulum, when the climate shifts from liberal to conservative, or vice-versa.
The reality of these business “cycles” is that they never go back to their original point. So, the concept of “cycles” is very short-sided, and the true direction of business is in the long-term view as trends. Insurance premiums, from that point when I started 31 years ago, continue to increase. Even when we see periods of decreased premiums, the trend, overall, is that rates are going up. Today, we are seeing overall rates down from one or two years ago, but we will soon be seeing increases in premiums. Consider, as an example, local liability rates have increased 330% and long haul liability rates have increased more than 500% over the years since I first started in this business!
Case in point – look at gas prices (I’ll end this article with a thought about this topic). Each year, prices increase and decrease, but never to the level that they were the year before. So, the trend is that gasoline prices will always go up. There is another factor, in this example – the product itself is diminishing. Everyone thinks that electricity is the answer to our energy problems, but just wait until the government figures out a way to tax it.
Currently, we are seeing liability premiums at their lowest in several years, but we are also seeing other trends in the market. If you currently have insurance and you are just out shopping for another broker or for lower premiums, you should be aware of the current trend of increased underwriting. Underwriters are underwriting each risk with a sharper pencil. Driver standards and experience are being looked at with greater concern. Almost always you will be asked for three (possibly four) years of Loss Runs. We have talked about loss runs in the past, but, surprisingly, most people still do not understand the request.
Loss runs are provided by the previous insurance carrier or carriers. Even if you have not had a loss, the request is made and the insurance company will confirm it in writing. Insurance companies are mandated to provide this information to you. You should keep a file of your previous insurance policies along with those corresponding loss runs each year. In the future, it will be paramount that you have these records at hand. It is a pain if you have to go back to previous brokers and agents for these records, so keep all of your insurance records for at least five years.
If you are a new venture (a so-called “green pea”) looking for truck insurance for the first time, you will be asked for particular information, such as vehicle identification numbers and driving history, and many times the underwriter will require this information prior to even giving a quote. I have many underwriters that require a completed application prior to quoting. Each of the underwriters have their own preferences and requirements on quoting a new venture, but all of them want to know as much as possible up-front about your driving history, including your motor vehicle record (MVR). Many new ventures with marginal MVRs find that they are excluded from many preferred programs. You might not have a problem with being covered on an existing policy, but as a new venture you will have problems finding coverage. Nothing can hurt the bottom line more than having your insurance costs doubled by having only substandard markets available to you.
As a trend, your driving record will be scrutinized more so than at any other time in the past. Be prepared to provide the information that is requested from you by the insurance agent or broker (nothing is more disturbing to us than having to deal with an arrogant prospect that is unwilling to take the time to provide complete information for a quote). Your ability to drive is solely related to the activity on your MVR. Consider this as one of your most important driving concerns when you get behind the wheel of any vehicle. Your driving record is your passport to making a living. Whether you are behind the wheel of your private passenger car, motorcycle or truck, your driving habits will directly affect you monetarily.
As I mentioned at the beginning of this article, I have some thoughts on gas/fuel prices. The transportation industry is one of the most important economic parts of the greater economic health of our nation. Everyone, not just the trucking industry, has a stake in this nation’s economic future. There are several helpful associations and trade organizations out there, but many of you do not want to belong to them and/or think they are a waste of your time and money. I would urge you to reconsider this opinion – we all have a stake in this (fuel prices). Consider your involvement in one of these groups as an investment to protect the industry that supports you.
The numerous associations, independent non-associated truckers, as well as the general public, should all come together as one, and strongly voice their concerns in regards to the trucking industry and fuel prices. As you probably already know, it is difficult at best to pass on all of these additional costs to the shippers – they can only handle so much, especially right now. I believe that all levels of our government, state and federal, should come together and develop a strategic fuel strategy. The current administration is considering the option of opening the federal oil reserve. If it is opened up, it should first serve those that will provide for the future economic growth of the country.
Take the time to know and communicate with all of the many state and federal elected representatives that serve you. In this day and age, you cannot afford to sit idly by without voicing your opinion. And don’t get too caught up in the day-to-day changes in this industry – look, instead, at the big picture and make your decisions based on the overall trends. If you have any comments or questions, I can be contacted through California Plus Insurance Service, Inc. in Modesto, CA at (800) 699-7101.