Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice. This article is from Emerge and offers tips for trucking companies to decrease their insurance premiums.
The number of accidents in the trucking industry is up, and so are insurance premiums. In a report released earlier this year, ATRI (the American Transportation Research Institute) stated that premiums have rocketed up 47% per mile over the last decade.
While accidents are part of the reason, the complete explanation also includes rising medical and litigation costs, catastrophic losses, an escalation in inexperienced truckload capacity entering the market, and nuclear verdicts—all of that plus the economic performance of the industry itself.
Trucking companies need to manage many layers of safety and compliance, and while insurance is just one of them, it’s also among the most important and expensive. So, in an era of escalating costs, carriers need to always be on the lookout for ways to cut costs while maintaining proper and sufficient coverage.
The amount your company pays for insurance will largely depend on the size of your fleet. As an example, from data taken from the ATRI report, in 2020 a small fleet of fewer than 20 trucks would have paid about three times as much as a large fleet with more than 1,000 trucks. This is based on a cost of $0.125 per mile for a small fleet and a per-mile cost of $0.037 for very large fleets.
This doesn’t mean smaller fleets are destined to pay unreasonable premiums, however. It is possible to get the proper coverage at lower costs. But that depends on the quality of the carrier’s safety and compliance operations and giving insurance providers additional transparency (more on that to come).
Agencies Advocate Tort Reform
As an industry, trucking associations are advocating tort reform. In 2010, the average-sized verdict for a crash involving a truck was $2.3 million. By 2018, the average grew to $22.3 million—that’s a 1,000% increase. According to ATRI, “Tort Reform seeks to minimize the harm to the industry caused by excessive civil judgments, whereby financial liability far exceeds negligence. The trucking industry, along with many other industries, seeks tort liability reform to ensure that punitive damage awards are reasonable and directly related to negligence.”
Where and How to Find Savings Within Your Company
Unfortunately, also according to the ATRI report, one of the most common cost-cutting strategies that carriers used—as insurance costs escalated—was to cut wages and bonuses. Fortunately, there are several alternative strategies that won’t kill the morale of your workforce.
Review Your Insurance Policies
First, and in line with the tort reforms mentioned above, ask your insurance carrier if they have a Consent to Settle clause.
Nearly all insurance companies have Consent to Settle clauses built into their policies. This allows them to settle a suit if it would be cheaper than fighting it—they want to keep their costs down too. However, settling means there’s a judgment against you. If your policy has such a clause, ask your insurance carrier for better coverage.
Next, take a look at your deductible. Can you lower it? Do you have any unnecessary coverage? Just don’t be too quick to make changes, leaving yourself open to some unexpected future event that could end up costing you more.
An interesting benefit cited in the ATRI report was that cutting back on coverage led to improved safety for most fleets.” It makes sense that with less coverage, fleet managers would want to tighten safety measures.
To read the full article, click HERE.