NU Online News Service, Sept. 14, 2:30 p.m. EDT
A new government system monitoring motor-carrier safety will achieve a long-term goal of reducing crashes, experts agree, but it may have a short-term impact of driving up loss severity for inattentive insurance carriers, some warn.
Transportation insurers are going to have more items to check as the Federal Motor Carrier Safety Administration (FMCSA), a division of the U.S. Department of Transportation, rolls out its Comprehensive Safety Analysis initiative–a new process for monitoring and enforcing compliance with more than 900 existing government safety regulations, according to Tommy Ruke, president of Insurance Business Consultants in Fort Myer, Fla.
Mr. Ruke, an instructor of introductory and advanced courses on trucking insurance for specialty agents and insurance carriers, referred specifically to the need to check for "warning letters" and evidence of other types of interventions that the FMCSA will use to respond to deficient safety practices as part of CSA (more commonly known as CSA 2010, because of its initially proposed 2010 full-launch date).
What if an insured trucking firm gets such a warning and does nothing about correcting problems identified by the FMCSA, Mr. Ruke asked–going on to envision what might happen if that trucker winds up in court a few months down the road because of an accident caused by the same conditions.
"How are you going to defend those suits?" he asked. "That's punitive damages. It's big dollars," he said, highlighting a potential negative consequence for insurers.
Referring to a new set of safety measures known as safety fitness determinations, or SFDs, which will be assigned under CSA, Joe Hutelmyer, president of AmWINS Transportation Underwriters in Burlington, N.C., expressed a similar concern.
"How would you like to defend an insured that the federal government says is 'unfit,'" he asked, referring to the lowest of the three SFDs, which are "continue to operate," "marginal" or "unfit."
"Almost in our upfront underwriting, we're going to have to stipulate that our trucking clients maintain a rating of 'continue to operate' or 'marginal'–and if the rating is 'unfit,' then we're going to have to be able to get off," Mr. Hutelmyer said.
"Probably every time they pass a weigh station, they'll be inspected," Mr. Hutelmyer said, raising concerns from shippers that their goods may be sitting out in inspection stations rather than being delivered. "We're seeing shippers already taking a proactive approach and requiring that anybody hauling for them maintain 'continue to operate' or 'marginal' ratings," he noted.
The two men and other experts spoke to NU for a series of articles about the transportation insurance market and the implications of CSA, which will be published in the Sept. 20 edition of National Underwriter magazine.
All of the commercial auto insurance experts interviewed were quick to point out that in spite of concerns, on balance they believe the implications of CSA are overwhelmingly positive for insurers, motor carriers and the general public.
"We won't know until we actually get our hands on the data," [but] there's a general feeling [among] insurance carriers that things are going to get better as a result of CSA," according to Deane Sager, trucking industry specialist for Northland Insurance in St. Paul, Minn. "Even the American Trucking Association backs CSA. I have yet to talk to anybody who sees the information CSA provides as a bad thing."
One of the FMCSA's stated goals is to achieve a greater reduction in large truck and bus crashes, noted Mr. Sager. "I think everybody agrees the overall effect is going to be positive for the trucking industry."
Next week's edition of NU magazine describes the specifics of CSA in detail, and includes a ranking of top commercial auto insurers based on Highline Data figures for 2009 direct written premiums. (Highline Data is a data affiliate of National Underwriter.)
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.