HANDBALL is a great sport for keeping one in condition, and itoccasionally has a significant effect on one's career–or at leastit did on mine. During a handball tournament with a friend some 23years ago, he learned that I was an insurance agent and Idiscovered that he was the controller of a trucking company. Thatencounter led to my first truck-insurance account and the beginningof a specialty in which I've been involved ever since. Today, I amthe owner of agency that derives about 90% of its $3 million inannual revenue from truck insurance. For the most part, we insuretrucking companies rather than individual owner-operators. In size,their fleets range from 200 vehicles to more than 1,000. We providethese clients with all the coverages they need, including autoliability, physical damage, cargo and workers compensation.

Most of our new business comes to us from referrals. When webecome aware of new fleets in our territory, we seek informationabout them from existing clients. For carriers that appear to begood prospects, we may ask our insureds for referrals orintroductions.

We are members of several trucking organizations, including theIllinois Trucking Association and the Indiana Motor TruckAssociation. Their rosters are useful for prospecting, but holdingmemberships in such associations is no substitute for“person-to-person” marketing and building strong relationships.

Qualifying accounts

The Safety and Fitness Electronic Records (SAFER) System Web site(www.safersys.org) is our primary tool for qualifying prospects.Included in the information available at the site, which ismaintained by the Federal Motor Carrier Safety Administration, arethe results of inspections performed at state weigh stations, bystate law enforcement organizations or by the U.S. Department ofTransportation. One thing we check is a prospect's “out of service”scores. They show how often a truck was put out of servicefollowing an inspection because of maintenance issues or because ofdriver issues (e.g., the driver had exceed his allowable hours ofdriving). The reports also show the national averages, which havebeen running about 23% for vehicle issues and 7% for driver issues.Obviously, trucking companies with scores below those figures makepromising prospects while those with above-average scores need tobe looked at carefully or rejected outright.

Submissions

Assuming a prospect checks out satisfactorily on SAFER andotherwise seems qualified, we seek an appointment. If it's grantedand goes well, we will make a submission to an appropriate market.We don't believe in “shotgunning” submissions. The personresponsible for directing them to the most appropriate market(s)formerly ran a truck insurance company and has great credibilitywith our carriers. Among the insurers we work with are RLITransportation, Sentry, Lincoln General and Zurich (via anMGA).

One of the key things underwriters expect is a complete set offinancial statements. Underwriters like to see a current ratio(total current assets divided by total current liabilities) of atleast 2:1. To operate safely, a trucking carrier must maintain itsvehicles; and if it is in poor financial shape, it will be unableto do so.

Most markets also expect loss runs going back four to five yearsfor all lines of coverage sought. They also require a reportshowing the miles driven by the fleet's vehicles, since that is akey rating base. The figures must be broken down by state, toreflect differences in liability loss experience from onejurisdiction to another. Motor vehicle reports for all the truckingcompany's drivers will be needed as well.

We also submit information about a prospect's safety and vehiclemaintenance programs, which, if favorable, can result inunderwriting credits.

Safety measures

Some of our clients have gone the extra mile to promote safety.Perhaps the most striking example is a large trucking company thatbought a $250,000 simulator that it uses for driving training. If acompany finds its accident rate goes up in icy weather, forinstance, it could use such a simulator to prepare its drivers forwinter road conditions. This client found the simulator so usefulthat it loaded it on a trailer and drove it to its variousterminals, so all its drivers could be trained on it.

Our clients also use other forms of high tech to reduce theirlosses. Some use governors to ensure that drivers don't exceed acertain speed, GPS systems to monitor their locations and devicesthat measure breaking force, which can indicate whether drivers arecoming up behind vehicles at excessive speeds.

We encourage all such safety measures and add some of our own.For instance, one way we've differentiated ourselves fromcompetitors is by hiring two safety inspectors, one of whom hasworked with DOT. When clients inform us that DOT intends to auditthem, our safety inspectors will help them prepare for the audits,be present when they are conducted and help them implement anyrequired action. Our inspectors also conduct “mock audits” forclients whose claims are increasing to pinpoint problems and helpthem take corrective measures. We provide all these services at ourown expense, which is atypical.

Some of the problems that can be uncovered by an audit includespotty vehicle maintenance. Another is the failure of drivers tomaintain logbooks properly or to stay within the maximum drivingtime allowed by law. We work with our clients to correct suchproblems. Some trucking companies, for instance, offer financialincentives to drivers who turn in their logbooks on time, attendall safety meetings and remain accident-free.

Special case: flatbeds

We encourage additional safety procedures for flatbed truckers, aclass in which I specialize. Most of my flatbed clients haul coiledsteel for use in the automotive industry. Flatbed drivers must beable to do more than simply operate their vehicles; they also areresponsible for ensuring their loads are properly secured, aprocess known as blocking and bracing. If the load is not securedand immobilized on the proper spot on the trailer, the truck andflatbed trailer easily could tip over, particular on highway offramps. The drivers also are responsible for properly covering thecoiled steel or other cargo with tarpaulins, to protect it fromrain or mist. We stress to clients that their flatbed drivers musthave proper training. Most of our clients require drivers to haveat least two years' experience with flatbeds before they willconsider hiring them.

Flatbed drivers also need proper training to minimize workerscompensation claims. Unlike other drivers, they need to get up onan open flatbed trailer and block and brace the load. Then theymust chain it down and cover it with a tarp that may weigh 50 to 75pounds. A driver with insufficient training (or in poor physicalcondition) easily could be injured.

Retaining risk

During the hard market, truckers' liability insurance ratesincreased so much that many trucking companies implemented orincreased deductibles in an effort to keep costs in line. Some ofour larger clients now have aggregate liability deductibles as highas $250,000. Insurers will provide reasonable credits for higherdeductibles, and we help our clients select a deductible level thatmakes financial sense for them, given their loss histories.

Some clients save even more on their premiums by accepting amaintenance deductible on their physical damage coverage as well asan aggregate deductible.The maintenance deductible applies to eachvehicle (it could be $5,000, $10,000 or some other figure) afterthe aggregate deductible has been satisfied.

Interstate trucking companies that use large liabilitydeductibles must put up a cash deposit and letter of credit tocover the potential exposure for the year ahead. Insurancecompanies require such security, since the Motor Carrier Act of1980 makes them ultimately responsible for their insureds'third-party bodily injury, property damage and environmentalrestoration claims.

Things to point out

We take pains to ensure that our clients know what they arepurchasing. With many opting for higher deductibles, they need tounderstand how those deductibles work. Some physical damagedeductibles apply per unit, which actually means the deductibleamount applies separately to the truck and trailer. Other PDdeductibles apply per conveyance, which certainly is preferablebecause then the deductible applies just once to the entirerig.

In regard to cargo coverage for our flatbed clients, I takepains to explain the tarpaulin warranty. Trucking companies haulingsteel and other metals must have coverage for damage caused tocargo by rust and condensation. While such coverage can benegotiated, the trucking company will have to accept a tarpaulinwarranty, which requires the cargo to be covered properly by atarpaulin in good condition.

Relationships

As I mentioned before, we stress the importance of developingrelationships with prospects–and that certainly goes for clients aswell. We make it a point to visit with insureds several times ayear. Some calls are primarily social–to take them to a ballgame orto play a round of golf. Sometimes we bring along an underwriter.But in connection with these visits or others, we also often talkwith the trucking companies' safety directors to learn of anydeveloping problems and discuss ways to respond to them. Sometimeson these visits, clients have asked us if we know of any truckingcompanies interested in selling their operations. Occasionally, wehave brought together potential buyers and sellers.

We recommend that clients accompany us on visits to renewalmeetings with underwriters. If there are any gray areas, having theclient on hand to resolve them can be invaluable. One such issuemight be the client's exposure base. A trucking company might have500 trucks–but that doesn't mean all of them are in service at anygiven time. Some trucks may be down for maintenance or could beidle because of drivers' vacations, illnesses or injuries. Ourinsured may be able to document to an underwriter that at any giventime 10% of the fleet's vehicles are out of service, meaning thatthe exposure base should be 450 trucks.

There are other ways we try to ensure that clients are paying nomore than necessary for their coverage. For instance, we stressthat fuel surcharges should not be included in the revenue theyreport to insurers for the purpose of calculating liability andcargo insurance rates. With fuel costs skyrocketing and surchargesbecoming increasingly common, this is particularly important topoint out.

We encourage our trucking companies to keep us informed of majordevelopments. If an account were to lose a large client, forinstance, it could have a significant impact on their revenuerating base. We might be able to get the change reflected midtermvia endorsement, reducing the client's premium. We also can reportsignificant reductions in mileage or vehicle counts midterm.

State of the market

The insurance market certainly is becoming more favorable fortruckers. I'd estimate that liability rates are down 6% to 10% froma year ago, and that rates have decreased a bit more than that forphysical damage and cargo coverage.

A few years ago, it was extremely difficult to arrange excessliability insurance for truckers, particularly for the first $1million excess of $1 million in primary coverage. The coverage thatwas available typically had to be obtained from the E&Smarketplace. Now, some admitted insurers, including RLI, areoffering $2 million in primary coverage, which can be an excellentselling point for us.

As I hope this article has made clear, insuring truckingcompanies is definitely a “hands-on” business. Fleets are notaccounts that can be written and forgotten about until the nextrenewal. Rather, they require continuous monitoring. The ability toprovide meaningful loss-control service is a must. Above all, thisis a relationship business. The ability to develop rapport with,and to instill trust and confidence in, clients and insurers isessential to any agency hoping to make it very far down the road inthe truck-insurance niche.