from Transport Topics
Logistics Expenses Drop 3.5%
WASHINGTON — The cost of moving and storing goods nationwide fell 3.5% last year, the first decline in logistics-related ex-penses in six years, despite 2% higher transportation expenses. Manufacturers and retailers slashed inventories and excess capacity limited the ability of freight carriers to raise prices, according to a new report
What does this mean for truckers? With shipping capacity tight, they will continue to look at ways of cutting expenses and insurance is one of the larger expenses
from CAB
Trucking is getting more safe which means less non-standard risks- 80.4% of truckers have their vehicles compliant with FMCSA requirements. There are less bad operations on the road. Drivers are 95.7% compliant which is the highest ever
Shipments are up 3.2% and this is a bell weather for the economy improving
While that is going on there has been a lack of capital extended to the industry and less entrepreneurs wanting to venture into trucking and less trucks on the road with registrations down 40% for 2009- so there are less trucks to insure
Thursday, June 25, 2009
Wednesday, June 24, 2009
Trucking Named Insureds Grow in June
source: Don Harvey and Bruce Butler
According to the DOT 9,350 new companies have been set up and 5,600 have departed for a net increase of 3,750. While this says nothing with respect to the number of vehicles on the road, the assumption would be that those that departed had a greater number of power units than those new companies that set up. It also shows that there is a consistant need for new venture insurance capacity.
According to the DOT 9,350 new companies have been set up and 5,600 have departed for a net increase of 3,750. While this says nothing with respect to the number of vehicles on the road, the assumption would be that those that departed had a greater number of power units than those new companies that set up. It also shows that there is a consistant need for new venture insurance capacity.
Virginia UM
In a case decided in June 2009 that is sure to send reverberations down to the trucking insurance company sector, the Virginia Supreme Court decided to stack UM limits for 3 vehicles on a policy and award a plaintiff $850,000. They cited ambiguity in the UM policy form language. Look for most insurance carriers to refile their UM forms in VA
Monday, June 22, 2009
The Importance of Trucking Financials For Insurance Underwriting Purposes in the 2009 Economy
Why is it so important for our companies to require us to get financials on well-established, experienced truckers? I think the industry does a very poor job explaining why. Everyone knows truckers have been struggling from a financial viability standpoint and that they are struggling this year as well. Last summer’s diesel price increase put a number of owner-operators out of business. These truckers simply could not afford to fill up their gas tank to run. Either they leased onto other truckers or they went out of business. Some of our insurance companies told us that it was the first time they were losing renewals when it did not involve the competition; the truckers simply choose not to renew.
So if we all know truckers are struggling financially, why do we force our agents to get financial information? Also everyone understands it puts you as a retail agent/ broker in a terrible position to ask for confidential financial information when all you really want to do is get a quote and see if you can win the business. If you have not built a level of trust with your trucking insured, chances are you are not going to get financial information. To add insult to injury, financials are usually required on 10 power unit accounts and higher in this marketplace, and for most agents, not having the financials is a barrier to getting any quote- and most of our companies and most of the companies in the marketplace will not quote without updated financials.
So what can the insurance company hope to glean once they receive the financials? With trucking insurance capacity pervasive in the marketplace, all insurance carriers are trying to out select each other. They look to use financials as a benchmark for risk acceptability and in certain cases use them as a schedule rating tool and apply debits and credits based on quality of the financial situation with the trucker.
It’s not a perfect situation however. Most trucking companies are small businesses and closely held. As such, most trucking owners and principals are not leaving much money in the operation annually and likewise trying to avert taxes. This means less capital available to run operations and less profit. Most trucking financials are unaudited so an underwriter is not able to establish verifiable financial information necessary in underwriting.
So what do they look for in financials? Generally it is 3 things:
1) The Quick Ratio- Current Assets to Current liabilities need to be 1:1. Less than 1:1 indicates cash flow problems, payment of driver issues, maintenance issues, etc..
2) Profit- A company that is figuring out a way to make money and not have to utilize capital to run the com
3) Positive Net Worth- this notes a good capital structure to be able to endure economic bumps in the read
Other companies use a smart GTU partner CAB. CAB stands for the Central Analysis bureau and they have come up with a financial rating program that most truck liability writers and nearly all motor cargo writers utilize. The insurance company’s rationale is that due to the DOT financial responsibility filings that must be made by the insurance company with the DOT, the insurance companies are contractually liable for any vehicle operating on the insureds behalf, whether they get paid premium or not and due to notification issues upon cancellation, there is a 35 day window for cancellation. The motor truck cargo insurance writers know that they might have to reimburse unpaid deductibles ( O S & D’s) which happens on financially strapped truckers. I attach CAB’s information for your interest. An agent will submit an account with financials only to have it turned down for a CAB rating that is unacceptable to company standards. So when you are working on a fleet, if you can get financials early in the game it can save you a lot of time .
You can learn about CAB by going to www.cabfinancial.com. Jean Gardner is a principal in the firm and you will find her to be as knowledgeable about trucking financial matters and industry issues as anyone there is in truck insurance.
At the end of the day, trucking financials are an integral part of the underwriting process. Although unaudited in a great deal of cases, they are a barometer of a trucking companies health. While some companies are going into the politically delicate issue of credit rating based on getting actual receivables/ payment history on truckers, you will find that your better truck insurers are looking at trucking financials- especially on the larger risks. In this economy, a good trucking company can end up having financial problems quickly- and those problems spill over into problems for insurance companies, their general agents, our retail agents, and the trucking company itself
So if we all know truckers are struggling financially, why do we force our agents to get financial information? Also everyone understands it puts you as a retail agent/ broker in a terrible position to ask for confidential financial information when all you really want to do is get a quote and see if you can win the business. If you have not built a level of trust with your trucking insured, chances are you are not going to get financial information. To add insult to injury, financials are usually required on 10 power unit accounts and higher in this marketplace, and for most agents, not having the financials is a barrier to getting any quote- and most of our companies and most of the companies in the marketplace will not quote without updated financials.
So what can the insurance company hope to glean once they receive the financials? With trucking insurance capacity pervasive in the marketplace, all insurance carriers are trying to out select each other. They look to use financials as a benchmark for risk acceptability and in certain cases use them as a schedule rating tool and apply debits and credits based on quality of the financial situation with the trucker.
It’s not a perfect situation however. Most trucking companies are small businesses and closely held. As such, most trucking owners and principals are not leaving much money in the operation annually and likewise trying to avert taxes. This means less capital available to run operations and less profit. Most trucking financials are unaudited so an underwriter is not able to establish verifiable financial information necessary in underwriting.
So what do they look for in financials? Generally it is 3 things:
1) The Quick Ratio- Current Assets to Current liabilities need to be 1:1. Less than 1:1 indicates cash flow problems, payment of driver issues, maintenance issues, etc..
2) Profit- A company that is figuring out a way to make money and not have to utilize capital to run the com
3) Positive Net Worth- this notes a good capital structure to be able to endure economic bumps in the read
Other companies use a smart GTU partner CAB. CAB stands for the Central Analysis bureau and they have come up with a financial rating program that most truck liability writers and nearly all motor cargo writers utilize. The insurance company’s rationale is that due to the DOT financial responsibility filings that must be made by the insurance company with the DOT, the insurance companies are contractually liable for any vehicle operating on the insureds behalf, whether they get paid premium or not and due to notification issues upon cancellation, there is a 35 day window for cancellation. The motor truck cargo insurance writers know that they might have to reimburse unpaid deductibles ( O S & D’s) which happens on financially strapped truckers. I attach CAB’s information for your interest. An agent will submit an account with financials only to have it turned down for a CAB rating that is unacceptable to company standards. So when you are working on a fleet, if you can get financials early in the game it can save you a lot of time .
You can learn about CAB by going to www.cabfinancial.com. Jean Gardner is a principal in the firm and you will find her to be as knowledgeable about trucking financial matters and industry issues as anyone there is in truck insurance.
At the end of the day, trucking financials are an integral part of the underwriting process. Although unaudited in a great deal of cases, they are a barometer of a trucking companies health. While some companies are going into the politically delicate issue of credit rating based on getting actual receivables/ payment history on truckers, you will find that your better truck insurers are looking at trucking financials- especially on the larger risks. In this economy, a good trucking company can end up having financial problems quickly- and those problems spill over into problems for insurance companies, their general agents, our retail agents, and the trucking company itself
Tuesday, June 16, 2009
Transportation of Hazardous Materials
Excerpts from Holmes and Wisel, PC
There are certain driving and parking rules that those that haul hazardous materials and their insurance agents are not aware of.
If a driver is transporting explosives, the load must be attended at all times by the driver or a qualified representative of the motor carrier. The only exception is while the load is on the property of the motor carrier.
If a driver wants to park a load of hazardous materials, it cannot be parked within 5 feet of a highway or street or within 300 feet of a bridge, tunnel, dwelling or place of work or where people gather.
No smoking is allowed within 25 feet of the vehicle
The motor carrier must supply the driver with all the rules and what to do if an accident occurs
There are certain driving and parking rules that those that haul hazardous materials and their insurance agents are not aware of.
If a driver is transporting explosives, the load must be attended at all times by the driver or a qualified representative of the motor carrier. The only exception is while the load is on the property of the motor carrier.
If a driver wants to park a load of hazardous materials, it cannot be parked within 5 feet of a highway or street or within 300 feet of a bridge, tunnel, dwelling or place of work or where people gather.
No smoking is allowed within 25 feet of the vehicle
The motor carrier must supply the driver with all the rules and what to do if an accident occurs
Friday, June 5, 2009
Trucking Insurance Report- June 2009
Where are we today in trucking insurance and what is the current outlook?
Trucking insurance is a specialty line of insurance written with specialty insurance companies. The current outlook for specialty commercial insurance companies is mixed as general economic uncertainty, financial market turmoil and competitive market conditions are pressuring financial results and making the market turn more difficult to predict.
• Prices continue to decline, but have shown signs of stabilization; capital constraints are causing carriers to implement more disciplined underwriting to avoid business that does not meet profitability targets.
• The weak economic environment is reducing exposure bases and impacting demand for insurance, particularly in sectors that have been hit hardest by the downturn such as construction and transportation.
• Standard market carriers in search of premium growth continue to be a primary source of competition for business historically written in the E&S marketplace.
• Investment portfolio deterioration has reduced excess capital positions as credit spreads have yet to experience significant contraction.
Increasing reinsurance rates are expected to precede a turn in primary rates, creating margin erosion at primary carriers in the interim; capital-constrained insurers are turning to the reinsurance markets as one of the few available and viable sources of capital. We’ll see if that happens in trucking insurance soon.
Information on trucking insurance companies is both scant and hearsay. However, there has been specific company response made public. WR Berkley, one of GTU’s carriers through their Carolina Casualty subsidiary, sees declines in commercial transportation along with significant undercutting on prices for trucking insurance. National Interstate has mentioned that there are lower premiums due to fewer insured vehicles; moreover they also report low-single digit rate decreases for trucking insurance. There is a tendency for larger accounts to look for placement options outside of large struggling insurers. Baldwin & Lyons reports fleet transportation business as essentially flat from a pricing context.
What strategies have some of the carriers employed?
All companies are trying to grow in this tough marketplace while they say they want to maintain their underwriting discipline. Meadowbrook has chosen to expand it transportation footprint geographically. WR Berkley has formed new underwriting units- one of them being an Excess Transportation Facility through a new General Agent. Baldwin & Lyons acquired at the end of last year an insurance broker called Transportation Specialty Insurance Agency which provides service to owner-operators.
At GTU we see our companies and our agents the same way- everyone is trying to out select the competition without sacrificing underwriting integrity. In its present form, the marketplace constraints against growth and underwriting profit are not sustainable but when the marketplace will harden is anyone’s guess
Trucking insurance is a specialty line of insurance written with specialty insurance companies. The current outlook for specialty commercial insurance companies is mixed as general economic uncertainty, financial market turmoil and competitive market conditions are pressuring financial results and making the market turn more difficult to predict.
• Prices continue to decline, but have shown signs of stabilization; capital constraints are causing carriers to implement more disciplined underwriting to avoid business that does not meet profitability targets.
• The weak economic environment is reducing exposure bases and impacting demand for insurance, particularly in sectors that have been hit hardest by the downturn such as construction and transportation.
• Standard market carriers in search of premium growth continue to be a primary source of competition for business historically written in the E&S marketplace.
• Investment portfolio deterioration has reduced excess capital positions as credit spreads have yet to experience significant contraction.
Increasing reinsurance rates are expected to precede a turn in primary rates, creating margin erosion at primary carriers in the interim; capital-constrained insurers are turning to the reinsurance markets as one of the few available and viable sources of capital. We’ll see if that happens in trucking insurance soon.
Information on trucking insurance companies is both scant and hearsay. However, there has been specific company response made public. WR Berkley, one of GTU’s carriers through their Carolina Casualty subsidiary, sees declines in commercial transportation along with significant undercutting on prices for trucking insurance. National Interstate has mentioned that there are lower premiums due to fewer insured vehicles; moreover they also report low-single digit rate decreases for trucking insurance. There is a tendency for larger accounts to look for placement options outside of large struggling insurers. Baldwin & Lyons reports fleet transportation business as essentially flat from a pricing context.
What strategies have some of the carriers employed?
All companies are trying to grow in this tough marketplace while they say they want to maintain their underwriting discipline. Meadowbrook has chosen to expand it transportation footprint geographically. WR Berkley has formed new underwriting units- one of them being an Excess Transportation Facility through a new General Agent. Baldwin & Lyons acquired at the end of last year an insurance broker called Transportation Specialty Insurance Agency which provides service to owner-operators.
At GTU we see our companies and our agents the same way- everyone is trying to out select the competition without sacrificing underwriting integrity. In its present form, the marketplace constraints against growth and underwriting profit are not sustainable but when the marketplace will harden is anyone’s guess
Wednesday, June 3, 2009
Towing Coverage under a business auto policy
Question:
I got asked the question from an agent who said that they had several insurance companies not covering towing coverage for commercial vehicles under a business auto policy.
On page 7 of 13 of Business auto form CA 00 01 03 06 it says that under 2 Towing
" We will pay ip to the limit shown in the declarations for towing and labor costs incurred each time a covered auto of the private passenger type is disabled. However the lanor must be performed at the place of disablement"
The assumption from this is that towing is included for private passenger vehicles only if it referenced in the declarations. Therefore towing would not be covered
Answer
In checking with several insurance companies that is not the case. However it is only covered up to the limit. The issue here is that the insured/ insurance company would be "preserving and protecting the property" which is inherent to any physical damage policy.
I got asked the question from an agent who said that they had several insurance companies not covering towing coverage for commercial vehicles under a business auto policy.
On page 7 of 13 of Business auto form CA 00 01 03 06 it says that under 2 Towing
" We will pay ip to the limit shown in the declarations for towing and labor costs incurred each time a covered auto of the private passenger type is disabled. However the lanor must be performed at the place of disablement"
The assumption from this is that towing is included for private passenger vehicles only if it referenced in the declarations. Therefore towing would not be covered
Answer
In checking with several insurance companies that is not the case. However it is only covered up to the limit. The issue here is that the insured/ insurance company would be "preserving and protecting the property" which is inherent to any physical damage policy.
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