As the economy improves, 2015 will see more financial changes for the trucking industry. As we put 2014 behind us, everyone in every profession should take some time to reflect on their business and, more importantly, to develop a business strategy for the coming year. You have to use your own crystal ball, but regardless of the facts and figures that you use, it will give you a good idea where you stand.
You may ask, “What does this have to do with insurance – insurance is a constant that we have to live with?” That’s true, but it is how you treat the factors that make up underwriting that creates the premiums you pay. Insurance, in itself, is a major expense on your financial statement, and it impacts your bottom line, as well.
Insurance premiums will continue to increase in 2015 – some more than others. How can you save on premium? As underwriting continues to harden, your MVR will be a major factor in getting your insurance, renewing your insurance, or having to replace your existing carrier with a company that will accept your driving record, if it is bad. Of course, this creates higher premiums, as well. Year after year I have preached the “holy doctrine” of protecting your driving privilege and profession by taking the time to simply pay attention to your driving habits – and that’s still true. Simply put: your driving habits will determine your MVR and your MVR will determine your rates!
For those of you that have a comment about this, and I hear it every day – that you drive thousands of miles a year and citations are a fact of life – I don’t agree. Some of you believe that, though, and you get your nose out of joint when you’re taken to task for your driving habits. I look at MVRs every day, and every day I can tell you what kind of account we will have based on that MVR – both your driving habits and financial habits are exposed by your MVR. It is not unusual to see truck drivers that have never had a citation on their MVR, even after decades of professional driving – it can be done.
The impact of a poor MVR will not only cost you more in regards to premium, but it may also jeopardize your ability to find coverage that is even practical (from a financial standpoint). But, by making some small changes in your driving habits, you can create savings, not only in your insurance, but also in your company’s bottom line.
We talked about the importance of protecting your MVR through controlling your habits – here’s one example: driving aggressively increases the possibility of damaging your driving record, it increases your fuel and tire costs, and will lead to additional mechanical repair costs. So, changing this one bad habit, aggressive driving, could not only help protect your MVR (which will save you money), but it will also save you money in regards to wear and tear on your truck.
Workers’ Compensation is another factor that can affect your bottom line. Whether you are an employer already having to deal with Workers’ Comp or if you are just starting to have employees, you need Workers’ Compensation Insurance. Out of all of your insurance needs, going without Workers’ Comp can jeopardize your personal finances the most in the event of a claim. Big Brother can come after you with both guns blazing if you fail to provide your employees with this coverage. There are several factors that impact either your ability to get coverage or the rate. The rate is a product of your payroll. The rate for the truckman class, for small accounts, is around $30 per $100 of payroll (30%), but it can go up or down. For small accounts, under $100,000 in premium, the market is limited. The only market that may be available is the State Compensation Insurance Fund.
One year ago, the State Fund changed their method of selling insurance through the insurance broker system. Small producers have been bundled into using general agents to funnel their business through. This is a major headache. By removing direct access, the Fund has removed the ability of the producer to communicate directly with the Fund. Communication is basically non-existent, and conflict resolution really does not exist. The State Fund has a monthly direct bill program with a semi-annual audit. They will collect fees and a premium deposit when the policy is started.
The State Fund has had industry safety groups or programs for specific industries. As an example, there were several groups that the trucker would fall into. Beginning the first of this year, these programs will be discontinued. Instead, they have now gone into a three-tier system. This will allow them to increase or decrease the rate as their underwriting will allow. There are markets available for mid-sized
accounts that may be available, if payroll and payroll withholdings are funneled through the program. Many times rates are reduced, but there is a fee charged for handling the payroll. If you have an accountant, he/she should be brought into the conversation.
If you currently have Workers’ Comp coverage and are shopping for lower premiums, you will have to provide at least three years of “Loss Runs” from your previous carrier. It is a good idea to always request loss runs from your insurance agent at the end of every policy year. If your payroll is in excess of $100,000, the Workers’ Compensation Experience Rating Modification Factor is available through the Rating Bureau. This simple form provides a factor that the insurance company will use on their rate to increase or decrease the premium. The modification factor is developed by using your loss history and the probability of a loss by using industry standards.
I can’t stress it enough – your driving habits, in one way or another, will not only affect your insurance premiums, but also your company’s overall bottom line. In the end, it could be the difference between you driving for a living or sitting at home, wishing you were out on the open road. If you have bad habits, now is the time to break them. If you have any questions or comments, I can be contacted through California Plus Insurance Service in Modesto, California at (800) 699-7101. Happy New Year!