While the premiums generated from writing transportation risksmay seem tempting to insurers, experts in the field warn that acertain level of expertise is required to turn those premiums intoprofit.

David Dunn, president of RLI's Transportation Division inAtlanta, said while customers pay sizable premiums, the risks alsohave potentially sizable losses. He noted that a carrier may haveone individual account that may not have a loss, and on that risk,the carrier can make money at any price. But he said if a carrierprices its entire book of business under that premise, money willbe lost.

Companies underpricing risks because they don't understand thefull value of claims remains a challenge in the transportationinsurance sector, he said.

Shawn Young, senior vice president, transportation practiceleader of NIP Group, a Woodbridge, N.J.-based specialty brokerage,said newer companies sometimes do not know how to ratetransportation risks. Sometimes, he said, an insurer will, forexample, rate trucking risks as fleet auto, which is written atlower rates that do not reflect the higher risk of trucking.

Mr. Dunn noted a claim could look much different if an accidentinvolves a truck rather than a car.

The transportation insurance market, Mr. Young said, is“typically very aggressively priced,” which can frustrate somecarriers. The market is also susceptible to “rogue markets” thatwill come into the transportation market and underprice every othercarrier.

Larry Kalior, of California-based Transportation InsuranceBrokers (TIB), a brokerage dedicated to the passengertransportation industry, said a common mistake for new entrants is“hooking up with people who don't know what they're doing.”

Some carriers give underwriting authority to managing generalagents, he said, and if those MGAs do not properly understand orprice the risks, the insurance company suffers.