Controlling rising insurance premiums

The saying goes that there are only two certainties in life: death and taxes. If you’re a commercial vehicle operator, though, you can add another: rising insurance costs.

After several years of slow to no growth in rates, the last few years have seen premiums skyrocket for carriers. Why? There are several factors, according to Fitch Ratings. To start with, like any business, insurance companies want to make money, and for six years running, since 2010, commercial auto insurance policies have lost money.

“Despite premium rate increases in 2016, commercial auto insurance results continued to deteriorate as unfavorable claims trends promote continued high loss ratios and increased adverse reserve development,” said James Auden, Managing Director, Fitch Ratings.

Auden noted that insurers have been plagued by poor pricing models in past years and slow recognition of shifting loss trends. That trend has started to reverse itself, though, as improvement in accident-year loss ratios have improved marginally the past three years, suggesting that insurers are getting better at forecasting loss.

The string of losses has caused several large commercial players to exit the market in recent years, reducing competition and driving up pricing. Large jury awards and claims have also bedeviled the industry, which is now turning to technology for help.

“Better data analytics and technology could boost the commercial auto insurance industry in the future as harnessing a wider body of information through development of more sophisticated algorithms and models could help improve underwriters’ risk selection and pricing,” Auden said. “Predictive claims models can improve effectiveness at identifying large claims that are likely subject to litigation, or for signaling circumstances that are indicative of fraudulent activity.”

Insurance is a significant cost for carriers and especially so for owner-operators and small fleets, which can see premiums totaling $10,000 or more per year. For new operators, the costs can be daunting – and even business-ending.

With an economy that continues to perform well, spot rates posting record highs, digital freight matching platforms increasing, and used-truck prices tumbling, the time is right for many drivers to strike out on their own. The last thing they want is to be stopped by a $30,000 a year insurance bill.

Reliance Partners, which offers several lines of transportation insurance, including new venture truck insurance and high-risk truck insurance as well as programs geared toward owner-operators and niche segments, offers a few tips to help lower your insurance costs:

• Implement driver retention programs
• Maintain your vehicles
• Keep equipment updated
• Create a culture focused on safety
• Train new drivers
• Continually educate staff

Reliance is not a cost-focused provider, but rather a “value added” provider. The company says that it will work with customers, regardless of risk, to try and find a policy and insurance market fit for their needs, even if that means a high-risk policy. Those sometimes come with stipulations, such as focused improvement on areas of concern.

If you are looking for new venture truck insurance, it’s important to understand what your needs are. If you are leased to another company, you may only need bobtail, non-trucking liability and physical damage insurance. If you are truly on your own, you will have different needs, including liability. An insurance agent can help you identify the policies that are right for your operation.

Insurance is expensive, and premiums continue to rise, but trained professionals can help any driver or small fleet identify the correct policies and work to lower costs.

Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.