At times, for whatever reason, you might be put into the position of not being able to purchase insurance for your truck or trucking business through the preferred insurance market. Many things make up your ability or inability to purchase insurance. Your experience (or lack thereof), your driving record (MVR) and/or your loss history are just some of the qualifying factors when buying insurance. There are some substandard markets available, but they also have underwriting standards. So, if you are an owner-operator that needs or is in the situation of having to use the Assigned Risk Plan for your liability insurance, be prepared.
The California Assigned Risk Plan is the last resort for those of you that need liability coverage if there is no other insurance plan available. In the past, the Assigned Risk Plan was okay, but in March of this year the premiums were increased by as much as 30%. Up to that point, premiums were excessive, but tolerable. With this recent increase, an $8,000 premium is now $10,400 and a $10,000 premium is over $13,000! In this discussion, keep in mind that this is only Liability coverage, and no other coverage, such as Physical Damage and/or Cargo. The limit of liability, for those of you that provide non-hazardous service, is $750,000. However, many of you are required to have even higher limits of coverage by your prime carrier, shipper or broker.
The majority of you require limits of at least $1,000,000. With the Assigned Risk Plan, the only way that you can have higher limits would be through the purchase of an excess policy over the primary limits that the Assigned Risk Plan provides. Up until the first of this year, that policy could be purchased for slightly over $1,000. By coincidence, those rates have increased by as much as 300% as of late.
The Assigned Risk Plan has three distinct radius qualifiers: Local (0 to 50 miles); Intermediate (50 to 200 miles); and Long Haul. This seems pretty simple, but it is not. Premiums for local and intermediate operations are based on your garaging territory (where you park your truck). Each territory is assigned a rate, and that rate was developed by the Plan in the order of its potential risk. As an example, metropolitan areas have higher rates than rural areas. Long haul premiums are even more convoluted than the local and intermediate rates. They start with a rate that is developed by the garaging territory and then factor in the highest rated territory that the vehicle travels through or travels to as its destination. We have now established a premium, but we are still not done. Each driver is assigned points developed through his/her driving record to include any chargeable accidents. This will develop a surcharge that will be added to the initial premium.
The policy provided by the California Assigned Risk Plan includes two additional coverages – “Hired Auto” and “Non-Owned Auto” – which are not usually provided by a policy written through a standard market. The Plan rationalizes the inclusion of these coverages by the fact that they are making the filing that supports your operating authority with the DMV or FMCSA or both. There is some validity to their thinking, but for most of you that operate only one vehicle or those of you that do not use hired or non-owned vehicles, the point is mute. The premium associated with this coverage is an extra expense that does not contribute to your business. But, the coverage is mandatory, and a part of the coverage that is provided by the Assigned Risk Policy – like it or need it or not!
If you must purchase your coverage through the Plan, be prepared for the worst. The Plan will inspect your operations within two months of the inception of the policy. For the most part, they will review your trip tickets and accounting (they want to know where you go and if you pay any money out to any other companies or sub-haulers). They are looking for vehicles that were not included in the policy. This inspection may increase or decrease the premium that was originally provided to you by the insurance agent that provided the quote and coverage.
The following is just information that you should be aware of. Your operating authority is supported by a “Filing” or Certificate of Insurance provided to the DMV or FMCSA. Without this filing, your authority is inactive. The filing or certificate does not indicate the vehicles that you have insured. The filing makes a representation that all vehicles that run under your authority are insured, whether on the policy or not. With this representation, insurance companies that write coverage for the trucking industry will require that all of the vehicles you own be on the policy.
If you are involved in an accident, make sure that you get all of the pertinent information that is available at the scene – this includes the identity of the responding police officer and the case number. Take the time to make sure that the police have all of the facts. Lately, I am seeing more accident reports that have inaccurate information or conclusions that are vague or lacking in a clear, definitive conclusion. Don’t let that happen – especially if you were not at fault. Always request a copy of the accident report and keep it with your insurance file. Your insurance records and history are important, and should be kept for five years.
Although participation in the California Assigned Risk Plan can be painful, if it is your only option to continue working, you are just going to have to suck it up and bite the bullet – or change careers! Work hard and be safe – that is the best way to ensure that you do not have to deal with this high-priced headache. If you have any insurance-related comments or questions, I can be contacted through California Plus Insurance Service in Modesto, California at (800) 699-7101.