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INSURANCE
UPDATES
By Roland L. Enz - President,
California Plus Insurance Service, Inc.
There is no end in sight
for the “hard” insurance market. Rates remain high and companies that
once were in the market are reluctant to come back into transportation.
Many companies that provided coverage for the industry no longer even
exist.
Insurance cycles, as with past business cycles, have had definite
time frame movements. We now live in a different age. Our economy
no longer reflects our nation’s ability to stand alone. As a nation,
we now rely on the health of our trading partners. If one of them
coughs, the United States gets the flu. Our nation’s business health
has been damaged with the decline of the equity market. The .com collapse,
aided by the fraudulent business practices of the likes of Enron and
World Com, has virtually wiped out investment return. With the downturn
of the equity markets and low interest rates, insurance companies
now have to rely entirely on premium to stay in business.
The insured and the pool that is represents is the major resource
for the survival of the insurance industry. To put it in simple terms,
in the event of one liability loss, paid out to the limit, it would
take approximately 260 insured’s to pay the loss. This does not take
into consideration expense and any profit to the company. Insurance
is a game of chance with the companies betting on the come and that
they will take in more than they pay out. The industry is driven by
odds, calculated by accuracies much the same as a bookmaker looks
at a bet. Only when profit comes back into the equation will we see
rates come down. For those of you that have been in business for a
while, you saw the insurance premium cycle similar to this at the
close of the eighties.
High insurance rates, singularly, have not picked out the trucking
industry. Rates have risen for every business, home, property and
auto owner. As cycles go, rates will come down. With this cycle, only
time will tell as to when. The when is: when companies can have the
ability to make money. At that point, competition will return and
companies will be standing in line to collect your premium dollars.
The tragedies of 9/11 ushered in a major change in the stability of
our money market. The cost of deposing Saddam Hussein and the war
on terror will continue to be a drain on our economy for years to
come. Red ink is flowing around all sectors of government - city,
state and federal agencies are all hemorrhaging. Gross national product
needs to increase, demand for goods stimulated and jobs created before
any essence of normalcy will return.
The worker’s compensation market is in the tank. Few companies are
offering coverage. The State Compensation Insurance Fund, one of the
last remaining companies writing business, has come under scrutiny
by the Department of Insurance. At this time they are a market of
last resort. The agent has to demonstrate that The Fund is the only
company offering coverage to the insured. This makes for a long process
in writing new business. The last truckman rate that was quoted for
one of my insured’s was $30.00 per $100.00 of payroll. That is absolutely
obscene!
With the market being so tight, companies are picking only those risks
that meet their very strict guidelines. Several things should be remembered
when you are out there looking for coverage. Be prepared. If you are
a first time buyer of truck coverage, know what is needed. Employment
history is important. If you are shopping your existing coverage,
have at least three years of insurance information available for the
agent. Also, it is important to ask your existing agent for loss runs.
Almost all coverage written today requires these loss runs.
Cancellations for non-payment continue to be a problem. Now, more
than at any other time, insurance companies are seriously looking
at delinquencies. Accounts that continue to be delinquent will not
be renewed, and if you are consistently delinquent, you may find yourself
facing a midterm cancellation. Don't let that happen to you - stay
current.
If you have any comments or wish to discuss any insurance issue, I
can be contacted through California Plus Insurance Service at 1-800-699-7101.
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