Insurance Premiums are Going Up

Insurance premiums are going up, and when I say up, I don’t mean by just the rate of inflation. Oh no! Not just two or three percent. No No No. I see rates going up in some cases by one hundred percent! I’m seeing trucking insurance rates doubling in many cases and I see more and more situations where insurance is just not being offered. And no renewal terms are being offered. Why is this happening? Why are some trucking companies not even getting offers on renewal terms?

To explain, I recently discussed this with a well-connected insurance underwriter. And although the answers didn’t surprise me as I worked in the insurance industry for 15 years, I hope this information will help you.

In the discussion, I got right down to the meat of the matter. Why are rates going up twenty and thirty percent for good companies and going up as much as one hundred percent for other companies?

I was told that insurance companies have not been making a profit for years and therefore, rates need to rise. Ok, no surprise in that answer. But by comparison, trucking companies have not been making a profit for years and yet the trucking companies have not been able to raise their rates.

Not relevant says my underwriter. He explained that recently, a major insurance company decided to leave the market. They decided that because they were losing money in the trucking market, that they would be better off not being in the trucking insurance industry at all. I was told that it is never just one thing for an insurance company to leave a market segment. Claims settlements are still rising by huge numbers on both sides of the border; more in the USA but on both sides.

If you’re reading this, you see an insurance company leaving the market and claims going up and companies not making a profit for years. But why are the actual rates going up by such a large percentage? What was said next was revealing. This underwriter told me that if his company soon doesn’t make a profit, that they too would consider leaving the trucking industry. So this underwriter now feels lots of pressure to deliver a profit. In his company, if the parent closed the trucking insurance division it would likely mean about one hundred and fifty people being laid off. This underwriter is fearful of being on the street and looking for a job as a trucking specialist. If companies are leaving the industry, then the underwriter will be hard pressed to find a job. So the staff at most insurance companies are under lots of pressure.

So now I asked, how do you pick the trucking companies that receive a twenty percent increase and those that go up by one hundred percent (and more)? The answer should not surprise you. “Simple”, he said, “claims and safety scores”.

Let’s look at claims first. Do you as a trucking company calculate your ‘Loss Ratio?’ If you don’t, you really should. This is what the insurance companies are doing and it likely has the greatest effect and impact on your insurance rates. There is much more to the calculation but for brevity let me say sixty percent. If your claims ratio is above sixty percent for the past three years, I’ll bet your rates are going up and, going up by a lot this year.

Safety scores affect how the claim gets handled and the amount that will be paid out. Clearly, a trucking company with poor safety scores will have their claims settled at higher prices than a company with good scores. So if you have a poor safety rating, you need to get it fixed. Alerts on the SMS affect your insurance premiums and a “Conditional” on the provincial profile affects the rate that you will pay for insurance.

Those two items are the ones that affect your premiums the most. Claims and Scores. Simple to say but difficult to fix.

So what can you do to have a positive effect on your premiums and perhaps keep the coming increase small? Firstly, have fewer collisions. Easy to say isn’t it? One way to have fewer crashes is to change driver behavior by training and using technology. An example is Dash-Cams, as fewer incidents will affect the claims and safety scores directly. Less bad situations have the greater impact on insurance rates because it affects both the claims ratio and safety ratings. Secondly, lower your safety scores. Again this comes down to driver management and driver behavior.

Well, there you have it. Insurance rates are going up and you need some ways to mitigate the increase. If you would like to discuss your solutions, please feel free to call me.

Please be safe out there.

Chris Harris
Top Dawg, Safety Dawg Inc.
@safety_dawg (twitter)

About Chris Harris, Safety Dawg

Chris has been involved in trucking most of his adult life. He drove truck for and worked in various office/management positions for a major truck company. His last position of 5 years in the safety department where he was responsible for the recruiting of Owner Operators and their compliance. He joined a trucking insurance company in 2001 and has been in the insurance side of things until making Safety Dawg a full-time endeavour.