Preparing for an Insurance Audit

Thanks to your insurance provider, your safety department is one of the most critical areas of your company. It doesn’t matter if your ‘safety department’ is the owner of a small trucking company who also wears 12 other hats or a full-fledged, large company, twelve-person safety department. Your insurance company demands that you have a strong safety department.

Why? Insurance is in hard times in a hard market. That means that rates are going up and, it is challenging to get or retain your insurance. Insurance will be expensive if available and perhaps it will not be available at all. What! No Insurance? What do you mean? Not possible! A hard market means that the insurance companies are not making a profit (I know, it’s hard to believe that with what they charge but it is true) and they are trying to clean up their accounts or ‘book of business’.

This hard insurance market means that an insurance audit is going to have a significant effect on your renewal and your rates. So if your company has a bad or perhaps a horrendous ‘loss ratio’ (meaning too many expensive claims), a high crash frequency rate or a bad safety rating, you need to be prepared for the “Insurance Audit.” I know many of the insurance companies prefer to call the meeting a ‘review’ but I prefer to call it what it is; an audit. The audit can affect your company’s insurance premium easily by twenty percent. If you pass the examination but don’t do well, the insurance company could increase rates up by 10% or, if your audit knocks it out of the park they could easily knock off 10%. That is a twenty percent swing. 10% up or 10% down. You know how much you pay for trucking insurance so I’m sure you agree this is a substantial amount of money.

What can you do to prepare for this company-defining day? One way is to perform a pre-audit. You can do this yourself and/or bring in an outsider. Many companies use an outsider; a person from outside your company to give a complete review. After all, if you perform your own audit and you are not aware of everything the insurance provider is going to review and each detail of the review, you may miss critical information.

What will the insurance auditor be looking for? There are many items so I will just discuss the major ones and this list is not in any order as they are all critical;

• Driver Hiring and Process – what are the standards for drivers and what training is provided during new-hire orientation

• Driver Files – complete with application, references and road evaluation

• Hours of Service management and reviews

• Maintenance Statement and interval

• Maintenance Files, full/total and meeting the maintenance interval

• Training

• Collision files

There is so much that they can review such as how are you investigating each collision, what steps did you take after a crash and what steps are you taking to ensure that a similar collision will not happen again or is less likely to happen again?

You need to be prepared, be trustworthy and know that you are going to hit this review/audit out of the park. It is so important. The return on investment will be gigantic, enormous and humongous. Yup, it is that important.

How should you prepare? Be ready for the safety insurance person. Have as many of the documents, policies and files available as you possibly can and all within reach. You know what is going to be looked at so get it ready. Show the insurance reviewer that you care about the insurance relationship, that you understand how important safety is and demonstrate that you are taking action. The key to a successful insurance meeting is to be ready and have all regularly reviewed items in place and available.

Lastly, if you have had previous audits from the same company, then be ready to show how you have taken any previous suggestions seriously and what you have done to address the recommendation. This may be the last point but it is hugely important. Your prior actions demonstrate your commitment to safety if you have acted on the recommendation(s) and if you haven’t done anything, you’re inaction also speaks loudly.

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.