The Insurance Report - October 2002

INFORMATION FLOWS
By Roland L. Enz - President, California Plus Insurance Service, Inc.

The insurance market continues to shrink. Many carriers have stopped writing truck business or have initiated moratoriums on new business. Many of you are receiving non-renewal letters from your existing insurance carriers. Premiums continue to soar in all areas of coverage. Those select insurance companies that are still writing transportation related coverages are being overwhelmed with submissions. Underwriting has become a major issue with underwriters. There are so many submissions with so few companies writing business that they can pick and choose, taking only what (or who) they want.

Currently I have been seeing risks non-renewed or submissions declined because of a company's unsatisfactory rating by the Central Analysis Bureau. The Central Analysis Bureau (CAB) services the transportation industry, providing financial and statistical data, on insured’s and prospective insured’s, to the insurance industry for use in underwriting. Underwriters include this information in their calculations to determine the probability of writing coverage or continuing coverage on an existing company or individual.

I have always indicated, to my clients, my reluctance to the dissemination of financial information. “If the company wanted it they could ask for it.” In this day and age of instant information, nothing is sacred. Information moves from one entity to another at a split second pace. Information flows and the CAB is that conduit and depository. In the past you might have been contacted, by letter, requesting financial information on your company by the CAB. You probably ignored it.

Recently I had a short interview with the CAB so I could better understand it’s position in the greater scheme of the insurance equation. Out of that came an important observation. If you do not provide current and factual financial information to the CAB, they will base their conclusions on information that they have ascertained from their resources. As I indicated earlier, information flows from one source to another. Information, both financial and factual, comes from past insurance carriers through the CAB to prospective new carriers and back. The CAB also includes information gathered from various state and government regulators requiring financial information. Many motor carriers also file annual financial reports with the DOT's Bureau of Transportation Statistics. In short, they have you coming and going. Like it or not, there is no hiding from your past anymore.

Your financials are supposed to reflect the condition of your company. What you include in your financials and how and when you book income and expenses is you and your CPA’s business. If you are submitting financials to the CAB, always submit a cover letter outlining your conclusions, especially if the statement indicates a loss or change in operations.
Not only does the CAB provide your financial information to the insurance industry, it provides statistical data on your operation as to safety violations, “out of service” orders, unsatisfactory safety ratings and failure to pay fines that are issued through various government regulators. They do not include this in their rating.

As an additional service the CAB provides a continuous flow of regulatory information, as it relates to transportation, to the insurance industry. Current and future legislation is included in the service. If you have an interest in government and insurance issues, as it relates to the transportation industry, and if you have the desire, the CAB’s website is full of interesting information. Their site can be found at www.cabfinancial.com.

If you have any comments or if you would like to discuss insurance related issues, Roland L. Enz can be contacted through California Plus Insurance Service, Inc. at 1-800-699-7101.