Victim or Victor?

Let’s talk insurance. It’s not a well-kept secret that I have had my share of dust ups with many an insurance executive. During my tenure at a couple of carriers, I witnessed many circumstances that thoroughly reinforced my staunch belief that more money can be stolen with a briefcase than a gun and that most insurance companies prove that theory. I put “most” in there because there are always exceptions in the trucking sector. Not many, but still, I need to give myself a little wiggle room.

My blood would boil when we would start negotiating our insurance renewal. After having a good year with minimal losses we would then have to listen to the insurance company suggest that, yes we have been clean, BUT odds are the big one is just around the corner and as a result, we were in line for a premium increase. Or how about this one; the total dollar amount of claims is very low but your frequency is up, SO here comes the increase.

I remember one year we were completely clean. We had no instances or reportable accidents. We were winning safety awards and working extremely hard at being the best we could be. We were proud of our year. During renewal I was expecting to have these folks eating out of our hands. That’s when I was informed that we did in fact have a single claim against us. We had a car run into the side of our truck in a construction zone in the St. Louis area. The driver of the car was charged but our truck was not damaged and soon moved on after the police cleared our vehicle of any wrong doing. The driver of the car sued us for damages. I forget the amount now but as I recall it was under $10K. Sounds like it would be easily defendable right? The insurance company made the decision to pay the claim with no contest because the price to defend the action would have been greater than just giving the driver of the car the money. Man I lost it right there. Insurance fraud costs us all because of decisions like this. It might make financial sense in a micro situation but in the big picture, this is what propagates the ridiculous amount of fraud that exists in this world.

The sudden increase in off shore insurance captives in the trucking industry is a direct result of what I have outlined above. The opportunity to get out of the yearly fencing match with the insurance industry is very appealing to trucking companies who have had to deal with the moving target called renewal. Ingenious brokers devised a way to extricate their clients from the financial uncertainty of the typical insurance markets and let them manage their own risk and claims in a pooled fashion. For your information, much of the savings you receive when joining an off shore captive is made through reduced administration cost which is typically half what the large insurance company’s cost base is.

I’m going to reveal an unguarded secret that exist for many small and medium sized carriers. I have seen this revealed on many consulting jobs and it has a dramatic effect on your renewal rate. I was at a small carrier not to long ago and this 12-truck fleet saved $80K by simply moving from a victim mentality to that of a valued customer mentality. During my interview with the owner I found out that he paid a rather high insurance rate and also the fact that the company had never had a claim. Moving on from there I found out that his broker has led him to believe that the insurance company he had been with for years was actually doing him a favour by even writing the business!

For the sake of brevity I will condense all the work that was done, but crucial to the savings the company enjoyed was in this case, a paradigm shift from the owner’s prospective to the fact that not one, but many companies would like a crack at his company’s business. We immediately started assembling an insurance submission. The company’s submissions in the past were done through an insurance broker who really didn’t know the industry, nor were particularly interested in their client’s best interest. It consisted of a list of equipment and drivers, period.

So here’s the drill. When you apply for insurance it is like your selling yourself, plain and simple, if you were an insurance company and you were receive nothing but a list of drivers and an equipment list, there isn’t to much to go on as far as determining risk, is there? Now pretend it’s the same company but what you receive now is a nice, neatly laid out binder, which is tabbed with the following content. Driver’s List, Drivers, abstract, your onboarding process including a copy of your orientation, your safety manual, all of your policies and procedures that pertain to drivers and operations, your last five years trailing loss ratios, your detailed equipment list, (including current actual cash values), a copy of your IFTA reports as well as your current SMS ratings and Level 11 CVOR showing your updated safety violation score. From there you round out the submission with anything else that you feel might paint your company in a better light, such as your industry association involvement, company newsletters, any social media efforts, charitable efforts, community involvement, company social events, Christmas parties, Driver awards, longevity programs etc.

Now go find a broker who knows the industry – one that has access to the available markets, one that brings more to the table than just rates. A good broker has access to information on the industry, they have safety knowledge, they can provide content for safety meetings or even conduct a meeting, and they share industry knowledge. They should also spend time doing a “mock insurance survey audit” prior to the insurers themselves visiting, which they will typically do before providing a quote. Once the insurer sets the survey, your broker should be there to support you and partner with you during this very important step. What they are not is a person you see once a year when renewal roles around, they are folks who bring value to your business.

If your not doing what I have just laid out you are playing the role of victim when you could easily be in a position of power and have some degree of control when it comes to this significant business cost. Need a good broker? Drop me a line – I know where to find a few…

Safe Trucking!
Ray J. Haight
Haight Consulting Group
Past Chairman TCA
rhaight10@gmail.com