This past 60 days has created more telephone calls from our readers throughout the US than I have received, in total, since I first started writing this article. Calls have come in regarding a vast spectrum of topics – some of them made me feel like Dear Abby. But the majority of the calls that I received were from those of you that are just getting started in the trucking business, have issues with experience, or problems with your driving records. So, I thought that these might be some good issues to discuss this month.
If you fall into one of these categories, insurance is available, but you have to be prepared to pay for it. In many instances, cost could be two or three times more than what is available to the preferred insured. Insurance rates are based on age, experience, location and equipment. Keep in mind that for the purpose of this article we will be talking about Liability only. Physical Damage and Cargo are always available in a specialized or alternative market. The insurance industry, in general, is in the process of firming up their underwriting requirements on all trucking risks. With this, we are seeing some increases in rates, but the majority of you that have renewals will still see rates in the area of the previous policy year. For the rest of you, with some issues, here is what you can expect.
New ventures with experience (25 years of age and three or more years with a CDL): many insurance companies have put moratoriums on new ventures, or in many situations put radius restrictions on that class of business (it is easier to write a risk that runs California only, or within a 1,000 mile radius). If a long haul radius is required, you may pay 20% more for your Liability coverage. This is not a deal breaker, and in time, your agent should be able to move you into a preferred market.
New ventures with no experience: there are several ways of going with this one, but the best way is to keep it simple and confine your operations within one state. There are two distinct areas that you can find coverage. Those insurance companies that have this appetite will surcharge the risk from 20% to 200% or more. If you find the right company and you run intrastate, the rates will run from $6,000 to $8,000. The alternative to these types of companies is the “California Assigned Risk Program” – I’ll come back to this later.
Problem driving records or loss experience: again, there are many companies that have an appetite for this type of business. The majority of these companies will only write risks that confine your operations within one state. Rates are generated by the accumulation of the driving record and/or the loss experience. These rates can be significant, and when they are considered, you should compare them with the California Assigned Risk Program. It is not uncommon to see Liability rates in the $12,000+ range! Add to that your costs for Physical Damage and Cargo coverage, and you will have some real money on the table.
The California Assigned Risk Program: the Assigned Risk Program will only provide limits of $750,000. It is important that you understand the program and its idiotic way of generating premium. It has its place. The rates are generated by many underwriting factors. Radius is broken down as follows – Local (50 miles), Intermediate (200 miles), and Long Haul (over 200 miles). Local and Intermediate rates are higher than the long haul rate.
You might ask yourself, “If this is the case, why wouldn’t you write everything as Long Haul?” Well, they audit your trip tickets, and if there is a difference, the risk will be re-rated to the correct radius or location. Also, rates are generated by the zip code where the risk is garaged (Southern California is higher than the Central Valley). Also, as part of the rating for the Long Haul risk, they will rate it in the worst territory (the area with the highest fee/risk) that the truck drives through or delivers in. Included in this process, points are assigned to citations and accidents, which of course will generate additional premium (cost).
The Assigned Risk Program offers a direct bill plan of 25% or $2,000 (whichever is greater) as the down payment, and then nine (9) monthly payments. They add a small processing fee to each payment, making it more affordable than financing the premium with a premium finance company. But, here is the kicker. Since they only offer $750,000 of coverage and the majority of you have requirements imposed by your broker or shipper of $1,000,000 of coverage, additional coverage is needed to get to that limit. You can purchase excess limits of $250,000, taking your Liability limit up to $1,000,000. Generally, the cost of this coverage ranges from $1,000 to $2,500 so you will need to figure that additional expense into your insurance budget.
If you are caught in one of these predicaments, be prepared to put out a great deal of money. At some point, you will be forced to make a decision – is it worth the sacrifice just to be in business for yourself? Take the time to discuss your problems with your agent before you go forward. Nothing is impossible, but sometimes it just won’t make fiscal sense to go forward! But that will be your decision to make. If you have any questions or comments, I can be contacted through California Plus Insurance Service in Modesto, California at (800) 699-7101.