Insurance rates are governed mostly by the economy. Growth rates, interest rates and your loss history will determine your future insurance premiums. This corresponds to the natural economic swings in the general business environment. The downturn in the economy, starting in 2008 and continuing on into 2013, created several interesting scenarios for the trucking industry with regards to insurance premiums. This five-year period of time, even though we have experienced other major economic cycles in the past, created greater challenges because the magnitude of it was as disastrous as the great depression.
So, what is in store for the owner operator in 2015 with regards to insurance and insurance premiums? The following information is only my opinion about the coming year and reflects only those coverages associated to the owner operator and small fleet owner. Based on the insurance trends I have observed over the years and throughout 2014, the information in this article does not consider any outside studies by the insurance industry as to future underwriting and rates.
Throughout the economic downturn of the past several years, our owner operator business shrank by 60%. The majority of that 60% went out of business, parked their vehicles or leased to a prime carrier just to continue to work. Those operators that stayed in business have experienced rates that remained consistent with their previous premiums or, in many cases, found coverage at a reduced rate. At that time, there was a need by the insurance industry for premium dollars which provided for stable or reduced premiums during that period for the trucker. But, now we have entered a period of economic stability and growth, so the pendulum has swung.
Moving into a positive economic area of growth that started in 2014, the insurance industry is now experiencing what is called a “hardening of the market” (aka increased rates). I view this a little differently from the industry that I consider my profession. As long as I have been in this industry, I have never understood the rationale of some of the insurance companies’ major policy decisions. This industry seems to be blind to their relationship with the insured – they have no loyalty to their existing client or book of business. Generally, they continue to raise rates, driving the quality client away, leaving them with only those that I consider marginal. This practice, overall, degrades their book of business and drives “Loss Ratios” higher. In many of these cases, throughout my years in this business, insurance companies have left the trucking market altogether. Any loss in the market typically breeds increased premiums for the consumer.
The following comment is directed to those insurance companies that provide coverage to the trucking industry, and more particularly, the owner operator. There should be incentives for the client, and more importantly, in the sale of insurance to this particular part of the trucking industry, there should be devices offered to make the client vested in their insurance program, assuring success to the companies’ goals. Does that make sense? I think so!
I have seen the insurance market “harden” throughout 2014. Rates have risen, underwriting continues to be scrutinized and, in some cases, companies have gone out of the trucking business. In 2015, that trend will continue as the market hardens even more. Insurance companies are taking full advantage of this economic swing with increased rates, but I expect that the pricing of quality accounts will remain pretty much the same as it was in 2014, or with only a small increase to their coverage.
In all cases, underwriting, first and foremost, is the major hurdle to overcome in the process of buying coverage. Consideration is given to both existing insureds (those that have been in business for more than two years) and those that are new to the ownership of vehicles in the trucking industry.
Loss history is paramount in the purchase of truck insurance. If you have been in business, it will be a requirement that you provide your insurance agent/broker with documentation from your previous insurance company or companies of your loss history. These are called “Loss Runs” and even if you have had no losses, this document will be required. If you are new to the business and have had no insurance in your name, your MVR and experience will be the window that the underwriter will use as the basis of providing your insurance. Accidents will require a police report. At fault accidents will eliminate you from getting insurance from a preferred company, but insurance is always available – at a price!
Your Motor Vehicle Record (MVR) is by far the most important document in the renewal or purchase of insurance that you are associated with. This one document is your passport into (or out of) the trucking industry. Your MVR will either make you or break you. I know I have said this numerous times, but I cannot stress this enough. If you consider driving as your profession, consider the ramifications of a tainted driving record as the end of that profession.
New ventures will experience overall increases in both their liability and physical damage rates. Never compare your buddy’s rates with your own – rates are determined and considered differently for each and every individual. Rates also vary from company to company. Cargo coverage continues to remain stable, and those rates should remain the same this year, barring any adverse history. There is an increased demand for General Liability (a business coverage) for many of you that are leased or contracted to a prime carrier. Some facilities that you service are starting to require the coverage. The cost is not great but, again, it is yet another cost to consider. General Liability can usually be purchased for about $600.
Generally, insurance rates are increasing, but it depends if you are an existing or new business. “Shopping around” should be kept to only a few agents or brokers – the industry is small and, for the most part, if you are shopping, the underwriter has already looked at your risk. If you have any questions or comments, I can be contacted through California Plus Insurance Service at 1-800-699-7101.