The truck liability insurance market has grown smaller over the past decade. There are now fewer insurance companies writing this coverage — only 15 or so. In addition, depending on a fleet's risk finance and internal assumption of risk appetite — no deductible, low deductible, high deductible, self-administered liability high deductible, etc., the insurers willing to entertain the truck liability risk shrinks further.
To further exacerbate the issue of availability, primary insurance companies often attempt to lay off a portion of their insurance company risk to facultative reinsurers, which also have dwindled in number.
What all this means is that underwriters can be even more selective in who they provide coverage to, said Jack Gagliardi, vice president, transportation practice, for Marsh USA, one of the world's leading insurance brokers and strategic risk advisors, during his presentation at this year's Annual Refrigerated Division Meeting of the Truckload Carriers Association. Nevertheless, there are things a fleet can do to be more “appealing” to these insurance carriers.
In preparing for his presentation during the session, Making The Grade: How To Be On The A-Team From Your Insurance Carrier's Perspective, Gagliardi surveyed truck underwriters nationwide about what constitutes, from the viewpoint, a “top of the stack” truck liability insurance submission. Among the chief findings: First, underwriters want a long-term partnership, Second, they want to feel they have a reasonable chance and expectation to write a fleet's business.
Therefore, details about the rationale for the submission “are very important,” said Gagliardi. Along with supplying a clear, thorough submission, it ought to contain a description of the structure of not only the existing insurance risk finance program, but also a description of the desired program.
It is also helpful to include an explanation of why the submission is being sought. For example, is there dissatisfaction with the current agent, broker, or insurance carrier?
Time frame
A minimum of 60 to 90 days lead time, from the date the insurance underwriter receives a submission to the date a fleet wants a proposal back, not the current policy's expiration date, is essential. A short time frame will automatically eliminate most underwriters, Gagliardi said.
“With the help of your chosen broker or insurance consultant, cull the responding insurance companies down, and select a few top underwriters/insurance companies. You still need time from that decision point for the underwriter to send their loss prevention to visit. This may be avoided if your broker has, along with your safety operation, provided succinct and detailed information regarding your safety programs, driver hiring, and so forth.
“It may become very important however, once you narrow your choices to one or two, to meet with your potential underwriters in person.”
Gagliardi said underwriters want long-term transportation company partners who are financially able to sustain strong risk management programs and manage cost of those programs through aggressive loss control and claim administration practices. Therefore, current and historical financial statements; the quality of, and commitment to, loss control and safety practices; and trends in the historical loss and exposure information are very important.
Company overview
To make a good submission, “don't simply copy your web pages as an overview of your company. Those pages are formatted and placed there to attract your customers. While they contain useful information, the insurance underwriter is interested in areas affecting the probability of your transportation company having loss, frequency, and especially severity.”
Gagliardi recommended that the overview of the company be in a bulleted, easy-to-read format that gives an underwriter an “immediate flavor” of the operation. It should include:
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Length of time in business.
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Brief statement on the company's financial strength, and acquisitions history, if any.
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Highlights of the types of haul and lanes of business, including significant shippers.
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Number of power units, employed drivers, and independent contractors, if any.
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DOT rating and when it was obtained.
Biographies of principal officers and key managers should be included as an appendix.
“To stand out from the crowd,” said Gagliardi, “you want to provide information to show why your company is distinct from other transportation companies. Think what an insurance underwriter is interested in, not a shipper.”
Safety culture
He advised including brief statements in the company overview on the company's safety culture, emphasizing driver hiring and training protocols, driver turnover rates, number and kind of safety awards to drivers, safety related driver training and remediation programs. Also add information on any technology on vehicles that can help reduce loss, such as collision warning systems and electronic stability systems. Note if driver communication systems, such as Qualcomm or PeopleNet, are used.
“Underwriters love to see a process in place that reviews accountability and chargeability, especially if it involves drivers,” Gagliardi said. “That's a very positive statement about the value of safety in an organization.
“Underwriters are interested in a top-down safety culture that permeates a transportation company. A statement of commitment to safety from the chief executive officer, and evidence of top-down involvement on a frequent methodical basis is very important.”
He said all subjects contained in the company overview should be followed up with additional supporting detail as part of the insurance submission.
Historical data
The body of the submission contains extremely important information that underwriters use to evaluate risk, based on a company's historical losses. “Don't take this for granted and simply include your loss runs. It is extremely important to paint a picture that explains your loss history.
“Underwriters will compare this loss history to others in their book of business. But more succinctly, they will compare loss history to your growth as a transportation company.” Gagliardi suggested including five years historical information on power units, gross receipts/revenue, miles, and payroll.
To avoid delay and satisfy underwriters inquisitive needs, there must be specific information on any losses of a severe nature, a detailed paragraph on each of these losses, including what steps have been taken to remediate and prevent that particular occurrence from happening again. “Allow your broker to help you with what level of loss you should produce detail on.”
It is also important that a submission have the immediate prior five years of loss history, valued with current valuation dates. If a fleet has a deductible program or a self-insured program, its broker can help determine the efficiency - pricing and assumption of risk vs. levels of deductibles chosen - of that choice of deductible or self-insured retention through a retention analysis.
If a fleet is self-handling loss, it needs to include a copy of the claims-handling agreement with the current insurance company which dictates the levels of authority that the fleet operates under. There also needs to be a complete description of the claims-handling capabilities, staffing and their claims experience, current levels of handling by type of loss, a copy of the internal claims manual, and choice of attorneys that a fleet wants to continue to engage on its behalf.
Biographies of the claims-handling staff should be included in the appendix of the submission as well.
Gagliardi said to include a description of each entity in the company that is listed as a named insured, and touch upon each entity's scope of business, its locations listings, and business activity conducted at each location.
Fiscal data
Financial information is another thing that is very important to underwriters. They will not be willing to entertain a fleet's risk if its financials show a potential for negative results going forward.
“If you have made significant changes in your operations in the past financial periods that have affected your operations or expenses, then you should comment on that,” said Gagliardi. “For example, you may have purchased '06 tractors ahead of the '07 emission control standards in significant numbers and stored them awaiting drivers to fill them as your fleet turns over. This capital expenditure may have been a blip in your expense column.
“Comment on that, and any other significant explainable events. It may be important to offer to discuss your financials, from your CFO level to the credit management level of the insurance companies that you are considering, for a better potential to be considered by underwriters.”
When it comes to looking for insurance, the whole idea is to create a “top of the stack” submission to underwriters, concluded Gagliardi. This is achieved by making it easier for them to do their analysis and determinations.
“Choose a broker partner carefully to help you evaluate available insurance carriers, help you with your submission, and help you choose the insurance companies to approach in your quest to obtain underwriting consideration. This provides the best potential for structural and financial improvement in your risk finance program on your truck liability, physical damage, cargo, property, worker's compensation, and independent contractor programs.”
