Insurance

Traffic May Have Lessened With the Pandemic, But Insurance Rates Continue to Rise

January 18, 2021 by Levinson and Stefani Leave a Comment

At the top of the pandemic and the beginning of its effects in the United States, overall numbers of miles traveled dropped significantly. The trucking industry experienced a similarly dramatic drop, meaning, at least during that time, that more trucks gathered dust and fewer needed insurance.

As highway traffic congestion declined, truckers that were not furloughed could reach their destinations much more quickly, and, with lower crash risks, trucking companies struggling against consistently-growing insurance costs saw a brief period of relief.

Still, though, trucking insurance professionals knew that the reality of fewer accident risks and lower insurance rates would not last long.

“We saw…a definite decrease in April and May in reportable frequency of accidents due to [less] traffic on the road and not nearly as much congestion,” said Lockton Cos. senior vice president and transportation team leader, Matt Payne. “But that has normalized into the fall.”

However, hot spots with higher rates of traffic accidents have seen lower congestion levels, making deliveries easier for fleets.

“In densely-populated urban areas…you could make an argument that COVID-19 has created a better delivery environment because it’s easier to get in and out [of those areas],” said Scopelitis president and managing partner, Greg Feary. “Everything from serious accidents [to] fender benders has been reduced.”

Still, Feary agrees that that the insurance market will not have any lasting changes as a result of the pandemic, and in regards to non-COVID-related issues, insurance prices have still continued to rise.

“It’s kind of a blip in time,” said Feary in relation to truck fleet risk exposure in the era of COVID-19. In commercial trucking, carriers have not provided rebates, as has been the case for other kinds of carriers.

“We did see fewer cars on the roadways, which was helpful to truck drivers, who had to deal with less traffic and congestion–and fewer accidents,” agreed CFI president Greg Orr in regards to his carrier’s experience during the pandemic.

This ease in congestion and crashes was short-lived, as insurance rates can be driven up by other more permanent factors. One growing trend is that of “nuclear verdicts,” which bring awards of at least $10 million in truck crash-related cases.

To support claims of poor company practices, dangerous driver behavior, or institutional negligence that could cause serious and fatal accidents, attorneys dive deep into company history, practices, documentation, and operation–often finding more than enough evidence to secure a high payout.

It has also been a difficult time for insurance companies themselves, with fewer providers now wanting to create trucking company policies–leading to higher premiums by those who do provide these plans.

“The trucking insurance market has not seen a profit in quite some time,” according to Hudson Insurance Group senior vice president and head of commercial auto, Chris Homewood. Even though insurance prices are climbing, the industry has still been paying out between $1.03 and $1.12 for each dollar of revenue over the last decade, Homewood estimates.

“We will continue to see less [insurance] capacity, less coverage available,” Homewood explained, while what is currently available will continue to cost more as total claim severity and costs rise. “It is more challenging for [trucking companies] to build out their liability limits…where they would want to purchase $100 million in limits, they can only get [quotes on] $40 million. So, capacity is declining.”

In an attempt to curb insurance premium increases, many fleets have been implementing more advanced safety technology to help drivers avoid accidents–such as in-cab camera systems, which comes with driver training and behavior management tools and other supporting software that can keep a trucker safe.

Cameras, in particular, can help carriers “educate [their] drivers to change habits,” and address any dangerous behaviors ahead of time, Homewood explained.

Additionally, some of these systems can also provide recorded video evidence of an event that can prove a driver’s innocence in an accident liability case–another method of reducing claims expenses for trucking companies and their insurance carriers.

Fortunately, underwriters will develop the best and cheapest policies possible for “those motor carriers who demonstrate a strong culture of safety and accountability, particularly those who have skin in the game with self-insurance retention,” Homewood noted.

When Fleets Need to Buy, Lease, and Sell in an Ever-Changing Market

November 26, 2019 by Levinson and Stefani Leave a Comment

The modern trucking industry has made it vitally important for fleets to know the best times to buy and sell their assets.

Right now, experts are saying asset management being aligned with the ever-changing industry is of the utmost importance, and this includes everything from proper maintenance to extend the life of equipment, to when and where professionals should dispose of used assets, to the way they plan for capital acquisition of new equipment.

Still, those in the industry have a never-ending list of questions regarding how they can stay on top of the game. When should they buy or lease? How do they know when a truck is too old to be useful? How should a fleet stay up-to-date on the newest technologies?

The biggest issue at hand, still, is the need to keep costs low, which becomes increasingly difficult as new technology is introduced.

Manufacturers show us new models every year, each with their own improvements in comfort, safety, driver assistance, emissions control, and more. As of now, a Class 8 tractor typically exceeds $125,000. As trucks’ technologies increase in sophistication, businesses need more highly-skilled technicians, which are also more costly than ever before.

On top of this, insurance rates for trucking companies tend to follow the trends in the industry. “Rate increases have ranged from single digits to, in some cases, double or worse depending on these factors,” vice president of Lockton Cos.’ transportation practice, Todd Reiser, said.

Shippers are now working to stay as environmentally conscious as possible, while fleets are taking advantage of every tool they can to increase their fuel economy.

In terms of fleet acquisition, Hub Group Trucking has five principles it follows. Those include: safety and reliability, driver appeal, deploying the latest technology, fuel efficiency, and overall ownership cost.

Hub Group’s executive vice president, John Vesco, weighed in. “Safety is first and foremost,” he explained, saying that having the newest equipment and technology supports that value.

Also of high priority–a solid capital expenditure plan and a disposal strategy that take into account all aspects of a fleet’s operating considerations.

“The best strategy is to establish a ‘continuous build’ [plan],” said Mike Britt, principal of MG Britt Engineering. “This will help the vehicle manufacturer remain consistent with quality, materials, and skill sets.”

He also added that fleets should schedule the disbursement of new equipment evenly throughout the year at the same times they retire their old assets. “This process will reduce maintenance cost on vehicles ready to retire, keep quality on new builds, and prevent ‘full fleet’ out-of-service situations,” Brit said. He also believes this process will prevent a company “from being bombarded with loads of new equipment to learn all at one time.”

Balancing fleet composition for projected business plans and maintenance costs will also aid in seeing a maximum return on investment, according to Taki Darakos, vice president of vehicle maintenance at Pitt Ohio, which has a fleet of 2,000 tractors and 5,200 trailers.

He also said the acquisition and disposal schedule should always take into account technology improvements. “Drivers want the newest trucks with the newest features and equipment,” Darakos noted. However, he says there is an important balance between getting the most value of an asset’s life and holding onto equipment for too long, which can cause new technology to become obsolete and maintenance costs to exceed boundaries.

On the other hand, new tech does tend to help increase driver retention and recruitment, he said.

Pitt Ohio also doesn’t ever lease equipment. According to Darakos, it’s important for trucking companies to have a substantial mix of new, middle-aged and older assets, so that as trucks come to the end of their life cycles, there are already newer ones to take their places, thus keeping costs consistent.

“When you have a good mix, your [capital expenditure] becomes more predictable and you benefit from an even approach to maintenance expense,” Darkos explained.

For disposal, Pitt Ohio uses auctions, as it doesn’t operate as a wholesale truck sales company.

No matter what a company chooses to do in regards to buying and selling, though, consistency is always key.

“Don’t overreact to market swings,” executive vice president of Melton Truck Lines, Robert Ragan, said. Ragan follows many practices he believes to be fundamental: understanding the operating environment, keeping a close eye on business needs and growth plans, and continuing to spec equipment to meet those criteria. He’s also careful to invest in preventative maintenance and to trade or sell his units before warranties expire.

“Know what you paid for it, what you spent [on it] while you owned it, and what you sell it for,” Ragan said. Taking good care of assets while you have them, he says, will give you “a good reputation in the market that will maximize the residual value of your rolling stock when you sell.”

Insurers Just Starting to “Eye” Safety Technologies

October 17, 2019 by Levinson and Stefani Leave a Comment

New safety technologies–like collision mitigation systems, onboard cameras, and telematics, to name a few–are capturing the attention of the insurance industry as motor carrier companies work to handle increasing insurance premiums.

These technologies can help reduce or completely eliminate costly losses for fleets and keep all drivers on the road much safer, and have been used by trucking companies in Europe for years.

Both primary and excess liability underwriters are saying safety tech will play a huge role in reducing catastrophic losses, but Todd Reiser, vice president of the transportation practice at Lockton Cos., says underwriters are still “under a ton of pressure” to remain profitable.

So, does this play a part in why safety technologies haven’t yet been widely utilized across the U.S.?

Reiser says many large motor carriers who use collision mitigation systems can point to their own safety data in order to show “a significant drop” in rear-end collisions.

Additionally, with driver-facing cameras, driver behavior can easily be monitored.

“When drivers know a camera is in the cab, they know whatever they do could potentially be reviewed.” These cameras could also possibly excuse a fleet from liability, Reiser explains.

Craig Dancer, transportation industry practice leader at insurance broker Marsh USA Inc. says key issues are reducing costs while at the same time keeping drivers safe, and that this comes down to having a safer operation.

“If you don’t have claims, your insurance costs come down and you avoid driver injuries,” he says.

Practice leader at insurance broker TrueNorth Cos., Bill Zenk, says safety technologies are allowing motor carriers to collect data straight from their cabs, “to coach better driver behavior as well as point-of-contact data to mitigate the cost of an accident.”

Peggy Killeen, director at Napa River Insurance services, weighs in on the benefits as well. “We have seen a high correlation between implementing safety technology and reducing the number and severity of accidents,” she says. “Specifically, vehicles equipped with crash avoidance systems have shown to be a valuable resource as it relates to lane change and merging accidents.”

With all of these positive aspects, why would it be taking so long to get this tech regularly implemented in our fleets?

“’Nuclear’ verdicts, defined as jury awards in excess of $10 million, are becoming more prevalent, especially in the trucking world where higher liability limits are often purchased,” explains director of underwriting for transportation at Sentry Insurance, Randy Ramczyk. “Plaintiff attorneys are now engaging in litigation financing where an unrelated third party provides financing to the plaintiff in litigation in return for a portion of any financial recovery from the lawsuit.”

American Trucking Associations second vice chairman, Garner Brumbaugh, agreed with this explanation, claiming that trucking companies are beginning to go out of business “because of very aggressive trial lawyers.”

However, the reason trial lawyers are winning cases against companies in the trucking industry is because the industry’s safety standards are nowhere near where they should be, and juries are agreeing.

Because of this, it appears there should be zero hesitation in utilizing these new safety technologies to their full capacities in as many vehicles as necessary.

“Common sense would dictate that technology can and will help minimize the number of commercial trucking accidents,” says Sentry’s Ramczyk. “Rear-end collisions along with lane-change accidents are the most frequent and severe causes of loss in the trucking industry. This technology can help eliminate, reduce or alleviate these types of losses that can result in significant bodily injury or death.”

Luckily, Ramczyk says in-cab camera systems and advanced collision mitigation systems are becoming standard on many new trucks. However, many insurers are subsidizing the hardware to install in vehicles rather than providing discounts to those using a specific technology.

“The insurer is betting that their investment in safety technology will be paid back over time based on their insured’s improved loss experience,” explains Dancer of Marsh USA Inc.

Additionally, Ramczyk says, premiums are increasing across the industry “and will continue to do so until loss costs stabilize,” so it appears trucking companies will not begin to widely implement safety tech until insurance costs decrease, but costs won’t decrease until safety tech is much more common and largely effective.

For now, we’re at a slow-moving catch-22.

Modern Safety Technology has Huge Effects on Trucking and Insurance

October 17, 2019 by Levinson and Stefani Leave a Comment

As new safety technologies become more and more prevalent in the trucking industry and regulations continue to change, insurance costs for motor carriers increases steadily.

Some of this new tech, like avoidance systems, collision mitigation, and onboard cameras, aim to help motor carriers cut out common expensive losses and monitor the behavior of their drivers while on the road.

But how are these technologies affecting insurance companies’ underwriting processes?

Pricing is typically based around individual trucking company losses and general trends in the industry. “Rate increases have ranged from single digits to, in some cases, double or worse depending on these factors,” says Todd Reiser, vice president of the transportation practice at Lockton Cos.

If companies aren’t able to choose from multiple insurers within commercial auto liability, they end up having much higher costs that affect premiums. Additionally, trucking litigation has become much worse over the last few years.

“Jury awards in excess of $10 million are becoming more prevalent, especially in the trucking world where higher liability limits are often purchased,” explains director of underwriting for transportation at Sentry Insurance, Randy Ramczyk.

The maximum amount of coverage a primary liability policy usually covers before excess coverage is $5 million, which varies below that number. Some fleets buy a policy with minimum limits around $750,000 or $1 million, while large fleets generally go for a policy that offers a higher limit, typically up to $5 million, Reiser says.

However, Garner Brumbaugh, second vice chairman of American Trucking Associations, says she hasn’t been in the “open” insurance market for the past 18 years, because she uses her own insurance company through a “captive”–a system where members focus on a culture of safety.

According to Reiser, both primary liability and excess liability underwriters keep in mind that safety tech has major effects in reducing large losses, and are “under a ton of pressure” to remain profitable.

“It is difficult to measure the exact impact of accidents that have either not happened at all or have been substantially mitigated by these technologies, especially for fleets that are largely self-insured,” he says. He also explains that motor carriers such as these are able to use their own safety data to show a significant drop in rear-end collisions for trucks with collision mitigation systems.

“Only the most financially stable carriers will see value in continuing to buy high levels of excess insurance,” says Reiser.

Additionally, new safety tech is now allowing motor carriers to gain data straight from the cab–not only to improve driver behavior, but to mitigate the cost of an accident. For example, driver-facing cameras have been extremely helpful in avoiding accidents and correcting unsafe behaviors.

“When drivers know a camera is in the cab, they know whatever they do could potentially be reviewed,” says Reiser. Cameras can also help a fleet be exempt from liability, because they can be used to determine who is at fault in a collision.

Other tech, like crash avoidance systems, equip vehicles with a resource to reduce accident severity–especially in lane change and merging incidents.

Because of circumstances like these, some insurers are now establishing prerequisites, meaning they are only considering risks that use particular technology, including camera systems and collision avoidance.

Another widely-used new tech changing the insurance game? ELDs.

Since 2017, electronic logging devices have been mandated in commercial trucks. If a carrier goes without ELDs, insurers will typically not agree to write that particular risk.

Brumbaugh says ELDs are doing well at making the industry safer overall. “The challenges will be the learning curve, which takes time after full implementation,” which will go into effect this December.

Sentry’s Ramczyk says camera systems and collision mitigation systems are becoming the most effective in regards to safety, though. “Common sense would dictate that this technology can and will help minimize the number of commercial trucking accidents,” he says.

Insurers are now paying for hardware installation like these in certain vehicles, especially with systems like cameras, instead of providing discounts to companies for using them.

Craig Dancer, transportation industry practice leader at Marsh USA Inc. says this is to be expected. “The insurer is betting that their investment in safety technology will be paid back over time based on their insured’s improved loss experience.”

Is There Insurance Coverage if a Divvy Bike is Involved in a Crash?

June 26, 2019 by Levinson and Stefani Leave a Comment

One of the first things an attorney does when investigating a case involving injuries is determining who is responsible for what happened. This week a 32-year-old man was struck by a hit-and-run driver that was traveling westbound along the 400 block of Grand Avenue after 1:00 a.m. on Tuesday. Police are still searching for the motorist that was seen on surveillance footage traveling quickly past the cyclist before striking him off camera. From the video, it appears that the car was speeding. The man is critically injured.

Supposing this irresponsible motorist is not caught, what recourse does the injured bicyclist or his family have in paying for medical bills, lost wages, and other damages? Isn’t that what insurance is for? Illinois law does require motorists to carry uninsured motorist coverage in case they are injured in a crash by an uninsured driver. This type of insurance is meant to cover you and your whole household even if you, your spouse, or a child are walking or riding a bike. If an injury is caused by an uninsured driver or by a hit-and-run driver, you should file a claim with your car insurance company.

What if I don’t own a car?

Suppose you are living green in Chicago. You don’t have any drivers in your household. You take ride share services, taxis, bicycles, scooters, roller-skates, or just your walking shoes to get from point A to point B. I imagine the savings would be astronomical when you take a car, gas, and maintenance out of your monthly budget. But then what happens if a negligent driver causes you to get hurt when you are riding a Divvy bike, for instance?

Does Divvy have its own insurance policy?

No. Divvy doesn’t operate like a rental car company that gives its customers the option of purchasing insurance with their rental. In fact, the Divvy website has a pretty extensive limited liability and indemnification agreement in their terms of use. Whether or not those provisions will hold up in court is another issue. But what about insurance coverage? There may be other sources of coverage that apply. If you find yourself in the unfortunate position of having been injured by an uninsured driver, and you don’t have any auto coverage of your own, you should contact an experienced personal injury attorney to help you investigate your options.

Should Divvy offer insurance?

Yes. Perhaps Divvy doesn’t want to add the option of purchasing insurance coverage to its business model. It’s less expensive that way. However, it may be helpful to give customers the choice considering that bicycles in Chicago share the same roads that cars, trucks, and vans use. Especially when considering that people who rely on public transportation to get around the City who aren’t covered by an auto policy could be left to pay their own medical bills if they were ever injured by a negligent driver and not due to any fault of their own.

Normally, the at-fault driver’s insurance policy is supposed to cover damages caused in a car crash. By law, Illinois has a minimum liability insurance policy requirement of $25,000. Anyone who’s been to the emergency room in the last decade will know that medical bills add up quickly. If a person has broken bones, needs a CT scan, or is hospitalized for even a short period of time, $25,000 may not be enough to even cover the initial treatment after a car crash.

This is why it’s incredibly important to spend as much as you can afford on auto coverage. The price of insurance is relatively cheap compared to the amount of coverage available, and compared to medical bills and lost wages, it’s better to have more coverage than to be in a position where the damages caused by a crash exceed the available insurance coverage limits.

For example, imagine if a man in his thirties who is married with 3 kids is walking across the street and gets tragically struck down by a car that runs a red light because the driver is either drunk, on his phone, or just not paying attention. If both the victim and the negligent driver have only $25,000 in auto insurance coverage, the family who lost their husband and father may not be able to recover more than that minimum policy amount from the at-fault driver. Only $25,000 for such an immense loss.

Similarly, if the crash was a hit-and-run, the pedestrian’s uninsured motorist coverage should apply. If the pedestrian only has $25,000 in coverage we have the same horrible circumstance. Not to say that any amount of money could replace a person, but not having enough coverage to pay medical or even funeral expenses just adds insult to injury.

The goal, of course, for any policy maker or member of the community should be to work towards a transportation system that eliminates crashes and the injuries that result from them. Until we get there, we should not leave people with no recourse just because they don’t own a car and subsequently have no reason to buy auto insurance. If Divvy doesn’t start offering insurance coverage for injuries that result from crashes, lawmakers should require it so that no one is left without options after a tragedy.

Do I need rental car insurance?

June 21, 2017 by Levinson and Stefani Leave a Comment

Protection comes in many forms

The conundrum for many consumers renting cars is whether to buy supplemental insurance. Upon pickup, an attendant will likely ask whether you’d like to purchase some form of liability coverage for an extra cost per day. The price effectively goes from $150 to $300 in a matter of seconds. In the back of your mind you know it’s the right thing to do. But you could be spending double for one simple reason: You don’t know that you’re already covered.

We always advocate for the best and most comprehensive form of insurance money can buy. That said protection comes in many different forms. It doesn’t always depend on what companies like Avis or Enterprise try to offer (or more accurately, sell). Below we include three different forms of protection (including rental protection) and how they work. This isn’t to suggest you should save as much money as possible. Instead, we hope to educate readers about what types of coverage exist and why you should take time to understand them.

Your auto insurance policy

Many insurance companies factor rental coverage into their contracts, which can be a nice incentive for those who travel on a regular basis. But it depends on the type of package you choose to buy. The caveat: knowing what and whom your policy covers under different circumstances.

Three primary forms of coverage provided by your insurance company: liability coverage, comprehensive coverage, and collision coverage. Each protects you in different ways, but favoring one more than another puts you at greater risk. That’s because the extent of your coverage depends on the nature of the crash. For example, liability coverage covers another person’s medical bills and property damage if you happen to be responsible for the accident. By contrast, collision coverage is designed to take care of your own bills and damage.

What to do: Discuss your insurance coverage with a representative over the phone or in-person. Have your rep outline what your contract stipulates and how you’re covered under the guidelines of the agreement.

Your credit card policy

Most credit card companies offer some form of consumer protection, including minimum liability coverage for rental agreements. We’re not suggesting that simply owning a credit card guarantees you complete coverage. In fact, coverage often depends on the credit card company and the policies they choose to enforce. An American Express Gold Member may have better coverage than a standard Discover Card as it pertains to annual fees, etc. The big thing to know in this case is that credit card liability coverage is minimal compared to your personal auto insurance policy and what rental companies offer.

What to do: Contact your credit card company by calling the number listed on the back. A representative can provide a written document outlining terms and conditions in greater detail.

Rental insurance

Rental companies typically offer at least four forms of insurance coverage: Liability, Collision, Personal Effects, and Personal Accident. As we lay out above, liability and collision take care of different aspects of a crash if you happen to be responsible. But rental insurance differs from standard coverage in the sense that rental coverage is designed to protect their property, less so the driver.

What to do: Do a little advance research online and understand the definitions of what the rental provider offers. Rental carriers are less concerned with explaining the nuances of their protection packages as they are with selling them. Ultimately, the idea is to get you to buy; you shouldn’t expect them to cover everything in concise detail.