In the past few years, the business press has been full ofarticles about private equity investors buying big companies andthen making them even bigger. Below the media's radar, however, thenation's small businesses continue to operate as usual and makesignificant contributions to the nation's economy.
This is particularly true in trucking, an extremely diversifiedindustry. While some major trucking companies operate fleets ofhundreds and even thousands of tractor-trailers, there are alsoplenty of small owner-operators, often one-person businesses havinga single rig. At United Insurance Group, these truckers constitutean important clientele. While we insure trucking companies of allsizes, owner-operators make up a majority of our trucking accounts,if not our volume. In this article, I'll explain how we provide theinsurance to these entrepreneurs that enables their businesses toroll along.
I joined United Insurance Group, which is one of the largestagencies in Maine, about four years ago. Before that, I had beenvice president of operations for a Maine-based trucking company,and I was looking for a change. While I wasn't responsible fornegotiating the trucking company's insurance program, I did takepart in insurance meetings and had some understanding of itscoverages.
When an opportunity arose to join UIG, I decided to take it. Atthat point, the agency had relatively few trucking accounts on itsbooks. We agreed that once I was on board and became licensed, theagency would work to develop this niche.
The decision has been a good one. We now market the agency'struck-insurance operation as UIG Transportation and have hiredproducers specifically for this specialty. In the UIG office inwhich I work, trucking insurance accounts for about 30% of the bookand that number is growing. Several UIG offices write truckinsurance, and we coordinate our activities. Typically, weascertain which office has a relationship with a prospect or acenter of influence who might get us in the door. Then we let aproducer from that office take the lead.
Our trucking book consists mainly of smaller accounts. Wepredominantly write in northern New England and New York. Maine hasmany owner-operators who have one or two trucks, and we write manyof them. Some have one or two employees; others operate on theirown. While some lease themselves out to fleets, the state'scommodities are such that many feel they can make a livingindependently, and so they obtain their own motor carrier number(essentially, their regulatory authority to operate as aninterstate trucker). They often partner with thelogistics/brokerage arms of Maine-based transportation carriers andhaul exclusively for them and their customers. Otherowner-operators focus on Maine's agricultural products, such aspaper and lumber. They often partner with freight brokers, who findloads for them to haul from a variety of shippers. While someoperate just within Maine or regionally, most are long-haultruckers.
Prospecting
Whenever we write or renew an account, we ask for referrals. Oftenclients also take the initiative to call in names of people tocontact. Our closing ratio on these prospects is probably 85% to90%, in part thanks to our qualification process, on which I willelaborate a little later.
Of course, one reason prospects call is to see if they can find alower premium, but it also could be that a prospect is looking forsomeone with greater expertise than his current agent. In fact, amajor reason for our success is that the producers in UIGTransportation have a background in the trucking business. Forexample, we recently hired for our New Hampshire office a producerwho has a 30-plus-year background in less-than-truckload (LTL),regional and long-haul trucking. To be able to speak the lingo,tell prospects you used to run a trucking company and offer themaccess to more truck insurance markets than most local agents canis a decided advantage.
Another way we market ourselves and prospect is throughassociations. I sit on the board of the Maine Motor TransportAssociation. I often answer insurance questions for members, or putthem in touch with current clients.
About a year ago, we created a brochure for our transportationunit. It provides information about the products and services weoffer, and lists the insurance markets we can access. We mail (ore-mail) the brochures to prospects, along with letters and businesscards, after making initial contact with them. We also give copiesof our brochures to truck and trailer dealers. In turn, they givethem to clients who raise insurance questions.
We also cold call. When I'm out traveling and see a truck of acompany with which I'm unfamiliar, I write down the motor carriernumber from the truck's side and use it to research the trucker onthe Federal Motor Carrier Safety Administration's SAFER site(www.safersys.org). At thesite, I can look up the prospect's “company snapshot,” whichprovides information about its out-of-service rates (how ofteninspectors have taken vehicles or drivers off the road) and howtheir rates compare with national averages. Then we take a look atthe accident detail. (The site reports the number of fatal andnonfatal crashes for the past two years.) The snapshot alsoprovides an overall safety rating: satisfactory (no evidence ofnoncompliance with safety requirements), conditional (evidence ofnoncompliance with one or more requirements), or unsatisfactory(substantial noncompliance). The snapshot also discloses the typeof cargo the company hauls.
We don't automatically rule out prospects that have adverse stats;sometimes there are explanations for them, but we want to knowabout these issues upfront. After checking the data on SAFER, wemay call the insured to review what we have found and ask whatsteps they have taken to improve their rating(s).
Some of our markets also provide marketing assistance. One of ourinsurers has gathered a lot of helpful data about prospects,including their motor carrier numbers, current insurers andexpiration dates, and put it into an Excel spreadsheet for us.While all the information is available from various governmentsites, having someone else compile it for us is a greatconvenience. A major wholesale broker, Swett & Crawford, alsopartners with us by providing information on truckers.
Coverages
Owner-operators need a variety of coverages. Following is a summaryof the major ones and the data we need to approach themarkets:
–Truckers liability: To obtain a quote, we need to knowthe prospect's radius of operation, major city exposures andregular routes. Additionally we must have the year, make and modelof their equipment, and a percentage breakdown of the type of cargothey haul. Of course, motor vehicle reports for owner-operators andany drivers they employ are required.
On fleets with more than 25 power units, underwriters like to seecurrent financial statements. For owner-operators, we can usuallyforgo such information. We collect interstate fuel tax reports(IFTAs) on all our clients, although not all underwriters requirethem, particularly for owner-operators who have three or fewertrucks. They often have dedicated runs from, say, Maine to Texasand their routes don't vary much. For larger trucking clients,however, who may operate throughout the lower 48 states, the fueltax reports can be an important underwriting tool. They indicatehow many miles an insured logs in each state, which will be ratedseparately on the basis of traffic congestion and other factors. Insome cases, fuel tax reports help us document that a client isdoing most of his driving in lower-rated states, or that asignificant percentage of his trips are shorter than 100 miles,which also can reduce rates.
After obtaining the information, we determine which two or threemarkets best fit a client's operation. We customarily write $1million liability limits for all clients, which satisfiesregulatory insurance requirements for interstate truckers and, ifpossible, matching uninsured motorist limits.
–Physical damage: A major issue here is selecting a properdeductible. While many owner-operators opt for a $1,000 deductible,they sometimes can reduce their premiums by accepting something abit higher–maybe $2,500. We also make sure the client's coverageincludes towing and a combined deductible, rather than one thatapplies separately to the truck and trailer.
For most owner-operators, we try to include “downtime,” or rentalreimbursement, coverage as part of their physical damage insurance.The product functions something like business income insurance.After an owner-operator's tractor is out of service a certainnumber of days–the period may range from one week to 30 days,depending on the policy–the coverage pays the trucker a certainamount per week until the owner-operator's truck is restored or thelimit is exhausted.
When one of our clients is put out of service by an accident inwhich he was not at fault, we help pursue downtime charges from theother party's insurer. We write the carrier a letter in which wedocument our client's actual revenue loss and extra expenses. Onmost occasions, the insurer of the at-fault party has agreed tocover them.
–Insurance for nontrucking use: A minority of ourowner-operators annually lease themselves out to larger truckingcompanies. Such a client becomes part of the company's fleet,operates under the company's motor carrier authority and is coveredby the company's auto liability insurance–but only while he isunder dispatch by the company. For these clients, we provideinsurance for nontrucking use, which covers an owner-operator'sauto liability at other times.
–Trailer interchange insurance: We have some clients who,in the course of business, exchange trailers with other truckersunder the terms of a written contract. That contract can alter theliability a trucker otherwise would have for a nonowned trailer.Trailer interchange insurance is the proper product to cover thisexposure. Of course, a key document we must have to obtain it is acopy of the trailer interchange agreement.
–Cargo insurance: For owner-operators who haul under theirown motor-carrier authority, we pay a lot of attention to cargocoverage. In addition to obtaining a percentage breakdown of thetypes of cargo they haul, we ask if they need to insure it to valueand what limits they require, which can vary. For instance, oneshipper may require an owner-operator to carry particularly highlimits. In that case, we could write a $100,000 cargo policy withan endorsement that increases the limit to $200,000 whenever theowner-operator hauls a shipment for that particular client. We alsoask clients if they need any other special coverages, like “refer”breakdown for refrigerated-trailer haulers.
–Other coverages: We make sure that we offer clients threeadditional products. The first is an excess liability policyproviding increased auto liability coverage. It's quite expensive,however, and not often bought. Another is a general liabilitypolicy, which for a typical owner-operator working out of his homeusually costs $500. A few of our clients have garages; in that casewe certainly want to make sure that they have a CGL to cover theirpremises and other exposures. We will also write the propertycoverage on the garage and its contents. Last, if theowner-operator routinely hauls trailers of others, but not under aninterchange agreement, he may need nonowned physical damageinsurance to cover that exposure.
Servicing accounts
When arranging coverage for our accounts, whether new or existing,we complete the transaction at least three to four weeks prior tothe X-date. One reason is because we don't want to go down to thelast minute on the client's regulatory insurance filings, whichmust be made for the liability and cargo coverages. Once we get thebinder or the order to renew, we send the information to theinsurer or MGA issuing coverage. They make the necessary filingswith the Federal Motor Carrier Safety Administration to documentthat the trucker has the required limits of coverage.
Another reason we wrap things up early is to make sure we have timeto process certificates of insurance. Most of our truckers haveextensive lists of clients, loss payees, brokers and fleetoperators to whom they must provide evidence of insurance. Whencoverage renews, we must update the certificates with the newpolicy numbers, among other things. Taking care of such matters inadvance also allows us to more easily accommodate last-minutechanges for clients.
We do not provide loss-control services, although that's one of ourlong-term goals. Whenever we write or renew clients, however, wemake sure they have accident kits. Some, but not all, insurersprovide accident kits, so we created our own. The kit contains theinsured's policy numbers as well as a toll-free claim reportingnumber and after-hours numbers. They also include cameras tophotograph details of an accident. That's critical, since it'sextremely difficult to document an incident after the fact. The kitalso contains a pen and tablet for note-taking. We provide a kitfor each truck, as well as a few extras in case onedisappears.
State of the market
In today's truckinsurance market, premiums are falling but not as dramatically asin the standard property-casualty market. On renewals, we'retypically seeing decreases of 4% to 6%. And, as I noted earlier, wetry to get a commitment from clients to renew early. Often if atrucking company knows you can lock in a lower rate prior torenewal, they'll accept that and finalize the transaction.
We represent a variety of truck insurers and each has its area ofexpertise. Some focus on local or short-haul operations, otherslike regional carriers that operate within a 500-mile radius, andstill others focus exclusively on long-haul operations. Our goal isto find the right fit for each of our insureds.
When working with underwriters, we are completely candid with them.If we encounter an account that may “have a little hair on it,” wemake our submission complete, so we don't have to repeatedly goback to the underwriter with additional information, a frustratingprocess for all concerned. We try to anticipate and have answersfor any questions an underwriter may have. For instance, if atrucker's SAFER stats show that its driver or vehicleout-of-service rate is above average, we will provide anexplanation. Doing so demonstrates to underwriters that we've doneour homework and gives them more confidence in us.
Our owner-operator clients wear many hats. They're truck driversand sometimes mechanics as well. They, or their spouses, have to beknowledgeable about a variety of business issues too. Insurance,however, isn't one of them. That's where they can rely on us todeliver the goods.
Ed Therrien is vice president oftransportation for United Insurance Group. UIG has headquarters inFalmouth, Me., and operates out of 15 offices in Maine and one inNew Hampshire. The agency, one of the largest in Maine, has grownprimarily by acquisition. At each of its offices, it has retainedthe original name of the agency it acquired. Mr. Therrien joinedUIG four years ago after working at a trucking company for 12years, where he was vice president of operations. He works out ofUIG's office in Presque Isle, Me., which does business asHayden/Perry Insurance Agency, from where Mr. Therrien manages UIGTransportation.