The Insurance Report - October 2006

INSURANCE TRENDS
By Roland L. Enz - President, California Plus Insurance Service, Inc.

For those of you that have noticed, after all these years writing this article, I finally had a new picture taken. This more accurately represents me and where I am with my life now – grey hair, jeans, cowboy shirt and boots. But enough about me; let’s get on to the topic at hand which is “Insurance Trends – Past, Present and Future, in Regards to the Trucking Industry.”

Insurance underwriting and the premiums associated with the insurance products that you purchase traditionally fluctuate in a cyclical pattern. There are many variables such as demand, losses, interest rates and competition that drive this cycle. Over the past twenty five years, not only have I witnessed continued increases in premiums, there have also been down swings, but never lower than the previous period. The overall scenario is much like fuel prices (they soar to record highs and then slowly drop back down, but never as low as before the big increase hit).

Liability premiums have been stagnant for many years, ranging from $4,000 to $6,000 annually. This includes running from a local to unlimited radius, with an acceptable driving record. The market itself is healthy, but with so few companies writing coverage for the trucking industry, premiums remain high. There is talk of the insurance market softening. With a soft market, premiums should come down, but since so few companies are players in the Liability arena, premiums will remain flat.

Lately, there are more companies wanting to write Physical Damage and Cargo coverage than Liability. These rates are very competitive. As your insurance agent works on your account, he or she should take in the possibility of splitting the risk with a company willing to write the coverage at a lower premium. This may lower the overall premium. There is a little bit of risk in this, but if you are considering price alone, this is a possibility.

At this point, I would like to interject on the topic of getting coverage through Lloyds of London. The Lloyds market is very competitive in both the Physical Damage and the Cargo area. If you have purchased coverage with Lloyds, you should make it a point to understand their philosophy. Don’t get me wrong, there is a place for Lloyds, but it is important that you understand it. Lloyds has a price for all consumers. The Lloyds contract is specific to what they will do and what they will not do; it also outlines what your responsibilities are with regards to the contract. Many shippers will not accept cargo coverage insured through Lloyds of London. But for those of you who have had previous problems, such as losses, accidents or a lousy MVR, it is the coverage of last resort. When dealing with Lloyds of London, claims handling is slow, whether adjusting a Physical Damage loss or a Cargo loss.

Requested Cargo limits have remained the same for years, but at this time, there seems to be a general trend in companies requiring higher limits of coverage. Shippers are requesting cargo coverage limits as high as $250,000 for general merchandise. You can figure that your Cargo premiums will more than double if you are presently carrying a $100,000 limit and need to increase it to $250,000.

It is interesting that we are seeing more requests for General Liability. General Liability is business coverage and does not cover the truck or the truck’s operation. In general, it covers your business practices, which may include your business location. Many shippers are now requiring this coverage if you are going to pull product for them. If you are an owner-operator, the additional cost of General Liability coverage will range from $400 to $1,500. If you are a fleet operator, pricing may be based on the number of power units that you run or the number of employees on your payroll.

Overall premiums should not increase through the coming year. Underwriting results are good. Underwriters are requiring more information and experience. They tend to be spending more time underwriting as evidenced by the continued increase in requests for loss history. I have made this an issue over the years; request your Loss Runs each year when your insurance expires. Keep your insurance records for a minimum of four years. This will save you time and may even provide you with a break in premium when shopping for your insurance needs. New underwriters are not on the horizon, so the number of companies that write truck coverage will remain small. When looking for new coverage or a new insurance company, choose one agent and then keep your shopping limited. Since there are so few companies out there writing truck coverage, the majority of us are all using the same underwriter anyway.

We have a pamphlet that my office has put together that outlines some of the insurance concerns and issues with respect to trucking. If you would like to get one, contact my office and request a copy. And as always, if you have any comments or questions regarding truck insurance, feel free to contact me at California Plus Insurance Service in Modesto, CA at 1-800-699-7101. Thanks!