Buyers of commercial auto and trucking coverage have reason to celebrate, as a line that usually is one of the last to soften is now a "buyers' market," according to those placing coverage for this exposure. "I think everybody held the line right after [Sept. 11, 2001], and for trucking, that has lasted up until about right now," said Dave Pohle, manager of trucking and transportation at Montvale, N.J.-based Jimcor Agencies, an excess and surplus lines wholesaler.
Mr. Pohle specializes in finding coverage for fleets up to 50 trucks–with the great majority of his insureds owning one-to-10 trucks. He noted that trucking–usually the last line to join a market trend–is seeing a definite southward slope in premium pricing.
Prices are falling despite the fact that competition for the market has eased up, with fewer insurers in the market, according to Mr. Pohle.
"Ten years ago, we had 100-plus carriers writing truck insurance," he noted. "There seemed to be a great purge about five years ago, and that number dropped considerably."
This "purge," he said, was "basically a function of carriers getting into a line of business that they could not write profitably."
Has price softening put intermediaries such as Mr. Pohle in the driver's seat, increasing the bargaining power of agents and brokers in negotiating price, terms and conditions?
"What we try to do is maintain our underwriting integrity and get a fair premium for what we are trying to write," he said–emphasizing, however, that the carrier still holds the cards.
Still, independent agents shopping around in this softening market have been a source of pressure for carriers.
"Unfortunately, a lot of it is going to come down to pricing," he said. "What we try to sell is experience and service. It is not an easy class of business to write."
Thus, Jimcor prefers retailers familiar with the business. The carriers he deals with are working to hold the line in terms of pricing integrity, he noted.
Mr. Pohle–while not controlling the underwriting "pen"–sees himself as a filter. "Eighty percent of what I see, I decline, just because it does not fit, whether it is because it is a new venture or a poor driver," he said.
Because there are few places in the excess and surplus lines market to write auto-truck liability, "this is where a risk retention group comes in," which does not have the same restraints and can be more flexible, according to Mr. Pohle.
As for loss costs, those numbers are in the hands of insurers. "But what I am seeing is a lot of carriers being more proactive in loss prevention and mitigation," he said. "They are taking more proactive steps to help the trucker become more safety conscious."
Carriers will now send inspectors out–especially when the account is more than 10 units–on assessments that complement those of the U.S. Department of Transportation inspections.
"I don't get the impression loss costs are rising," Mr. Pohle said. "In my mind it has been a pretty stagnant situation."
He also noted he is not seeing any compromise in driver standards, even though there remains a driver shortage.
A 14-year veteran of the trucking insurance field, Mr. Pohle said the main change has been the availability of more evaluation tools for underwriters.
"The computerization of the industry has allowed for quicker access to loss runs and MVRs," he explained.
Greg Golden, chief operating officer of Aon Truck Group, characterized the motor carrier line as a "buyers market."
"Smaller fleets that transfer all their risk to insurance carriers are realizing the most overall benefit from market conditions," he said.
"However, larger fleets that retain sizable portions of their risk are winning also, because excess liability rates have decreased significantly during the past 18 months," he added.
Neal Leibowitz, assistant vice president for commercial auto actuarial at The Hartford, sees prices softening a bit, although "not as fast as in other commercial lines."
More importantly, he added, "we are seeing the increased use of predictive modeling in the small-commercial auto segment."
Carriers are using knowledge gained from personal auto pricing for their commercial auto products, he explained.
"The result is much more granular pricing, allowing companies to more aggressively price better risks," he said.
The Hartford model uses traditional factors such as motor-vehicle records, prior loss history and the company's financial standing.
"Although many of these characteristics were used in underwriting in the past, multivariate analysis allows us to apply pricing in a more systematic and consistent way," he said.
Loss costs for commercial auto have trended favorably for the past few years, he noted. "We continue to see physical damage claim frequency down 4 percent to 6 percent, while frequency for liability has flattened," Mr. Liebowitz observed.
Auto-severity trends have been steadily increasing at a rate of up to 4 percent for physical damage and 5 percent to 6 percent for liability, he added.
A representative for the Hartford-based Northland Insurance Companies, now a division of Travelers, said he did not detect much price movement recently.
"We continue to see pockets of softening as regional carriers enter the market on a limited basis," he said.
Loss costs continue to trend upward, but at a moderate pace. "From a liability perspective, rising health costs continue to be the biggest contributor," he noted.
From a physical damage perspective, new designs in trucks to reduce their weight and streamline them for fuel efficiency have led to more damage to the vehicle in lower-speed collisions.
"Where a steel bumper used to protect the tractor with minimal front-end damage, now an entire fiberglass engine hood must be replaced along with engine parts, which are not protected," he said.
Stephen Christiansen, director of research and consulting for Hartford-based Conning and Company–and author of a recent study on property-casualty reserves–surmised that a strong reserve position will most likely portend strong pricing competition in the near future.
The estimated reserve redundancy for commercial auto-truck liability-medical is 6 percent of carrier loss reserves as of 2006–a significant improvement from the negative-19.8 percent figure of 2001, he noted.
"Strong evidence now exists to indicate insurers have strengthened reserves and apparently eliminated prior deficiencies," according to Mr. Christiansen. "But dramatic premium-growth slowing could eventually weaken the overall reserve position."
Some indication of a slowdown in paid losses and claims closures suggests that the underlying distribution of the business may be shifting, he said, with higher deductibles and some of the business moved to alternative markets.
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