Loss Control Lowers Risks---And Rates

Mr. Byrne also said he believes high driver turnover has the potential to result in a high number of accidents.

Dan Stenger, director of safety sciences at Sentry Insurance Co., a Stevens Points, Wis.-based insurer that writes commercial auto policies covering Federal Express trucking fleets, agreed.

He said hiring and retaining good drivers are critical in order to promote safe driving and minimize losses at trucking companies.

Drivers without prior trucking experience and those with moving violations are more at risk to replicate that experience in the future, Mr. Stenger said.

In addition to increased driver retention, trucking firms with an extensive safety plan in place fair better from an underwriters perspective.

"Of all things that go into the underwriting practice, the more parts of the puzzle you have in place with respect to comprehensive safety programs, the better risk you are–and the better premiums you have," Mr. Stenger explained.

Key areas that underwriters look at include an organizations driving record, maintenance and upkeep of the fleet, and care of support equipment, he said.

"It is helpful to define your safety program through manuals that delineate driver policies and procedures and that provide a framework for safety practices anywhere from hiring procedures to training policies," he added.

Dale Schueffner, vice president of marketing at Northland Insurance, confirmed that truckers can reduce their insurance costs via loss control and strong safety plans, but he could not say how far insurance premiums would be reduced.

"It is very difficult to take one factor and tell you that this going to make a $5 dollar difference, or any number like that," he said.

One loss control device that truckers use to reduce highway risk of loss is a collision avoidance system, Mr. Byrne said.

Such a system is the Eaton VORAD (Vehicle On-board Radar), EVT-300, a proximity detection device that uses infrared beams placed around the truck designed to send a signal to the driver if any vehicle or object gets to close, Mr. Byrne explained.

Other collision avoidance measures include equipping the trucks with fender mirrors and reflective striping tape for higher visibility to other motorists, he said.

Indeed, a trucking risk outfitted with a comprehensive safety program is music to an underwriters ears, however, a complete strategy must cover all of the firms business operations, said Wayne Johnson, group director of risk management for Ryder System, Inc., in Miami, Fla.

"Corporations must implement safety and health management systems that operate within the framework of continuous improvement. The systems must engage all levels of the organization and be integrated into the overall business process, as well as provide flexibility," Mr. Johnson said in an electronic message sent to National Underwriter.

Mr. Johnson also said sound safety practices applied to a trucking firms operations will eventually improve loss experience and ultimately lower costs for the trucking company. But he also said that accomplishing a complete plan does not happen overnight.

"It takes time to implement and show results of the safety programs that will ultimately result in lower premiums from the insurance company. One thing that can have an immediate impact is providing a complete and thorough, high-quality submission that clearly outlines your companys loss experience, loss prevention and loss control strategies and exposures. A credible, high-quality submission can go a long way in mitigation rate increases," Mr. Johnson explained.

Mr. Johnson said insurance rates for trucking firms are climbing and those with poor loss histories are seeing the largest price hikes.

He said the companies that have smaller increases are those that have had good safety programs in place and have a culture of safety year-in and year-out, in soft markets and hard markets.

For the most part, he said, brokers have conditioned customers to expect increases, but not to the levels being seen today.

"In general, I would say the rates have climbed beyond what was expected," Mr. Johnson said.

Mr. Byrne pegged premium increases for commercial auto rates in a range between 10 and 30 percent.

But those increases may be affected by the departure of several inexperienced insurance carriers who covered high-loss trucking firms with affordable rates, according to Mr. Schueffner.

"These people are going out and trying to find another carrier," he said, referring to the trucking firms with unattractive track records. "They are looking at carriers, such as Northland, who have maintained a lot of pricing integrity while others were dropping [prices] a lot lower," he said. "They are not used to these types of prices," he said.

Also, non-traditional carriers who jumped into the trucking market for a quick profit are not holding onto their clients, Mr. Byrne noted.

"A lot of trucking companies are not getting renewed by a lot of insurers who have been in the market for only 5 to 10 years," he said.

Tom Donnelly, senior director of transportation at Sentry Insurance, expressed similar concerns.

He said too many inexperienced insurers are selling coverage below market value and their quick entry and exit has impacted the market.

But Rich Curtis, executive director of the national accounting and finance council at the American Trucking Association, Alexandria, Va., disagreed. He said that premium increases are small and trucking firms are not overwhelmed.

"Insurers in the trucking market are not seeing a significant uptick in losses," he said.

In terms of loss prevention plans aimed at lowering premiums, Mr. Curtis believes a good track record reflecting few mishaps is the ideal risk for insurers.

"Good loss history is probably the best way a trucking firm can turn a trucking risk into good risk," he said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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