What is going on in the insurance market?

I’ve had recent discussions with several different insurance brokers and they are telling me that the insurance companies are beginning to behave quite differently. So I decided my article this month will be about insurance companies, what they are doing and what you as a trucking company can do about it.

The insurance company world in 2018 appears to be very different from last year.  The best way I can convey what appears to be happening is to give you some real-life examples;

·      A large fleet of a few hundred trucks has received notice of a mid-term cancellation. The reason:  a historically high loss ratio

·      A smaller company with a very good loss ratio, great safety scores and a long history is threatened with non-renewal of their insurance because they did not pass the insurance company safety audit

·      A company that does 80% of their business in the USA has a conditional CVOR rating; even though it has a good loss ratio it has been denied renewal because they received a “conditional” CVOR rating

·      Also, a rumour has surfaced that another trucking insurance company is getting out of the trucking insurance market. Reason:  heavy losses

The first three examples above are all different Insurance companies. It appears that it is not just one company that has changed their underwriting criteria. Many of the traditional insurance markets are currently tightening up their underwriting rules and enforcing existing rules that they have paid little attention to in the past.

The first example being the large fleet: in this case cancellation may be justified. However, it is very unusual for an insurance company to cancel midterm. In healthy markets, the company would have waited until renewal time and then not offered a renewal quote. At the time of writing this article, this fleet is still in business and is just two weeks from their cancellation deadline. It remains to be seen if they will be able to secure insurance at a reasonable price. As you may know, you can always purchase insurance through “facility,” but the premiums are astronomical. Insurance brokers are telling me that for trucks going into the USA, the facility market is more than $30,000 per year, per vehicle. This is likely unaffordable.

The second example, the smaller company with a good loss ratio: in this case the trucking company failed to have paperwork such as adequate driver files and written company policies. These safety items are required by MTO, DOT and the insurance industry. If this company were to have a significant event, it would cost the insurance company more to settle the claim because of the lack of compliance. In past insurance markets, this would’ve been justification for perhaps a higher premium or merely a slap on the wrist. In today’s market the company is being forced to take action and fix their non-conformance. I don’t think this is a bad thing for the company to do but in the past, no insurance company would dare put a group like this out of business because of non-conformance. In this case, the insurance company is making money on the account; the CVOR is rated satisfactory, the US safety scores called SMS are all satisfactory and they have no alerts assigned to them. In a normal insurance market, this would not even be an issue. The fact is that this company has been run in the same way for more than ten years, has been audited in the past by different insurance companies and they have been offered coverage at a reasonable price. In today’s market, they are being threatened with non-renewal which will put them out of business.

The third example:  the company has a “conditional” rating on their CVOR. Losses are reasonable, the company passed a safety audit and the insurance company is making money.  The conditional rating is a result of a failed MTO audit from more than ten years ago. The current overall violation threshold is less than 35%. This company is being threatened with non-renewal because of the rating. Again, in this example, in past markets, this has never been an issue.

The insurance brokers for these three fleets are taking these fleets “to market” (going to market means taking the trucking companies insurance request to different insurance companies and asking for a quote) and the doors are being slammed in their faces.

The above three examples are not the only ones that I’ve heard of in the last 2 to 3 months. They are simply examples of what I’m seeing in the trucking insurance marketplace. At a time that trucking finally seems to be getting traction with rate increases and driver wage increases, it appears that the insurance rates are going to take it all back and maybe more.

Why is this happening? Losses from the major insurance companies in the trucking insurance area have been staggeringly large. In other words, trucking Insurance companies are just not making money. They needed higher premiums to make a profit and like all companies, they deserve to make a profit.

Most importantly now is what can you do about it? You should take a hard look at your own company and see if there are any chinks in your armor. You may even ask an outsider to come in and give you an unbiased report. Yes, you need to talk to your trucking insurance specialist broker and discuss what is going on and what it is that you can do to get through these changed times and make sure that your insurance company does not take harmful action against you. Indeed, any company with a “conditional” rating as a result of a failed audit should be asking MTO for a voluntary review so that they can get the rating changed.

If your paperwork is not in compliance with all regulations and you don’t generally follow best practices then you need to up your game.

I look forward to your comments and questions.

Chris Harris

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.