One of our companies sent a provocative link that should help agents explain the economic of loss ( or the lack thereof). What is very interesting is the following:
* over 500,000 truck accidents occur every year
* 75% of these accidents are due to the driver of the passenger vehicle
* 80,000 accidents a year are due to the driver's fault
* 5,000 people are killed in these accidents that involve large commercial vehicles and 98% of the time the driver of the other vehicle perishes.
So what does it all mean? The answer is TIME and MONEY
To take a masters of business administration approach, you need to look at the Direct costs versus Indirect ( Hidden Costs):
Direct Costs: Cargo Damage, Vehicle Damage, Injury and Medical Cost, Lost Revenue, Adminitractive Costs, Police Report, Towing and Storage Costs- and yes higher insurance costs ( both from a property/casualty perspective)
Indirect Costs: Irritated or lost customers, lost sales, meetings missed, salaries paid to supervisors and employees, lost productive time doing work, loss of personal property, downtime and replacement vehcile rental, accident reportin, medical costs, poor PR and publicity, government agency costs, increased PR costs, cost to hire and train employees
So how does this pencil out? Let's say the direct and indirect costs for an accident are $25,000. If the insured is a closely held operation and just trying to eek out a profit of say 2%, the motor carrier will have to generate $1,250,000 of additional revenue! That's a whole lot of miles for a trucker.
Then there is the time fooling with it. After reading this a trucker has every incentive to incentivize his drivers by compensating them for loss free mileage. It is surprising that all truck operations do not do this.
Tuesday, April 26, 2011
Tuesday, March 8, 2011
How Big Is The Trucking Insurance Pie?
How many Trucking Accounts are there in the US to be Insured?
Well the information is not exactly completely up to date but as of midyear 2010 we know the following:
There were:
Common Carriers- Over 76,000
Contract Carriers- Over 70,000
Common Carriers with Contract Authority- Over 16,500
Exempt Carriers- Over 84,000
Household Goods Movers- Over 3,400
Freight Forwarders- Over 1,600
That is over 250,000 accounts!!!
Can you imagine the amount of truck liability, physical damage, motor truck cargo, general liability, property, non-trucking, contingent, workers compensation, and umbrella premium being paid?
Food for thought....
Well the information is not exactly completely up to date but as of midyear 2010 we know the following:
There were:
Common Carriers- Over 76,000
Contract Carriers- Over 70,000
Common Carriers with Contract Authority- Over 16,500
Exempt Carriers- Over 84,000
Household Goods Movers- Over 3,400
Freight Forwarders- Over 1,600
That is over 250,000 accounts!!!
Can you imagine the amount of truck liability, physical damage, motor truck cargo, general liability, property, non-trucking, contingent, workers compensation, and umbrella premium being paid?
Food for thought....
Thursday, February 10, 2011
Cargo Filings- The End is Near
A good deal of you are probably aware that cargo filings will no longer required soon- but many parties involved with trucking insurance are not. The D-Day is on March 21st, 2011.
There has been very poor or no communication from the insurance companies on what the procedure is, how it will be communicated, and what it all means. I thought I might take a minute and tell you what it means:
The history is pretty interesting with respect to cargo filings. US Code 49 USC13906 required that motor carriers of cargo operating within federal jurisdiction must show evidence of cargo liability insurance with minimum limits of a whopping $5,000 for loss or damage to the contents of any one vehicle and $10,000 for aggregate losses or damage at any one time or place,
With that came the famous or infamous Form BMC32. What did that do? It required insurers to endorse motor truck liability policies with the BMC32- which actually is a certificate of insurance. The endorsement is entitled "Endorsement for Motor Carrier Polcies of Insurance For Cargo Liability" -pretty darn official.
So what effect does or did the BMC32 have? It required the insurer to pay the shipper or consignee for all loss or damage for which the motor carrier is legally liable. It is important to know that the insurer's responsibility was not limited to the terms, conditions, or exclusions of the motor truck cargo policy. Moreover, a deductible on the policy made no difference. If the insured was legally liable for a $100 loss, if the insured did not reimburse for the loss, the insurer would have to- which is one of the reasons that most carriers financially underwrote every potential cargo insured- and smartly looked at their O S & D reports. With the BMC32, the insurance company is required to investigate every claim to determine the motor carrier's liability- a big deal.
So what is happening again? Common, contract carriers along with freight forwarders will no longer have to have cargo filings ( the exception is household goods carriers will still have to make a filing). Also note that the filings will all merely expire on March 21st, 2011 so that there is not the need to cancel them or have them removed by endorsement. The FMCSA will keep for 2 more years (due to the statute of limitations on filing a cargo claim) until March 18,2013.
So what are some of the ramifications of all this:
* more and more shippers will require being named as a loss payee ( and even an additional insured(which is a whole other subject) under the cargo policy in an effort to be provided notice of cancellation
* more E & S companies will get into underwriting MTC as no longer will a filing be required ( which had to be done by an admitted company in most cases with the exception having been Lloyds)
*there will be less financial underwriting of MTC
*it will be harder to understand who the MTC carrier was due to the lack of information available from the FMCSA .
* Canal estimates this affects approximately $93,800 insureds!
Expect there to be more ramifications....
There has been very poor or no communication from the insurance companies on what the procedure is, how it will be communicated, and what it all means. I thought I might take a minute and tell you what it means:
The history is pretty interesting with respect to cargo filings. US Code 49 USC13906 required that motor carriers of cargo operating within federal jurisdiction must show evidence of cargo liability insurance with minimum limits of a whopping $5,000 for loss or damage to the contents of any one vehicle and $10,000 for aggregate losses or damage at any one time or place,
With that came the famous or infamous Form BMC32. What did that do? It required insurers to endorse motor truck liability policies with the BMC32- which actually is a certificate of insurance. The endorsement is entitled "Endorsement for Motor Carrier Polcies of Insurance For Cargo Liability" -pretty darn official.
So what effect does or did the BMC32 have? It required the insurer to pay the shipper or consignee for all loss or damage for which the motor carrier is legally liable. It is important to know that the insurer's responsibility was not limited to the terms, conditions, or exclusions of the motor truck cargo policy. Moreover, a deductible on the policy made no difference. If the insured was legally liable for a $100 loss, if the insured did not reimburse for the loss, the insurer would have to- which is one of the reasons that most carriers financially underwrote every potential cargo insured- and smartly looked at their O S & D reports. With the BMC32, the insurance company is required to investigate every claim to determine the motor carrier's liability- a big deal.
So what is happening again? Common, contract carriers along with freight forwarders will no longer have to have cargo filings ( the exception is household goods carriers will still have to make a filing). Also note that the filings will all merely expire on March 21st, 2011 so that there is not the need to cancel them or have them removed by endorsement. The FMCSA will keep for 2 more years (due to the statute of limitations on filing a cargo claim) until March 18,2013.
So what are some of the ramifications of all this:
* more and more shippers will require being named as a loss payee ( and even an additional insured(which is a whole other subject) under the cargo policy in an effort to be provided notice of cancellation
* more E & S companies will get into underwriting MTC as no longer will a filing be required ( which had to be done by an admitted company in most cases with the exception having been Lloyds)
*there will be less financial underwriting of MTC
*it will be harder to understand who the MTC carrier was due to the lack of information available from the FMCSA .
* Canal estimates this affects approximately $93,800 insureds!
Expect there to be more ramifications....
Friday, January 21, 2011
Congestion- Good for Trucking Insurance Companies?
I hope everybody is doing well. While CSA continues to be the pervasive topic along what to do with it, I was struck by an article in TT Express below:
"The cost of U.S. traffic congestion has jumped to $115 billion in 2009 from $24 billion in 1982, and trucks are shouldering a disproportionate share of the cost, according to a report released this week.
Congestion in the nation’s largest urban areas cost the trucking industry $33 billion in delay time and wasted fuel last year, said the annual Urban Mobility Report by the Texas Transportation Institute of Texas A&M University, released Thursday.
While trucks account for just 7% of the total vehicle miles traveled, the $33 billion represents 29% of the total congestion costs, the report said.
Unlike the cost of congestion for cars, the cost of truck congestion “was passed on to consumers in the form of higher prices” and the fallout from the congestion extends “far beyond the region where the congestion occurs,” the report said.
Because trucks carry goods to suppliers, markets, and manufacturers, delays in arrival can cause whole production lines to close down, it said.
“The report confirms that congestion has a significant impact on the cost of moving freight, which is ultimately borne by Americans in the form of higher shelf prices, lower incomes and lost jobs,” said Darrin Roth, director of highway operations for American Trucking Associations..."
Well, is that bad for trucking insurance companies? My answer would be no. Congestion works out to less miles traveled by each truck ( if the trucker is complying with hours of service and CSA is seeing to that). Less miles = less exposure. Less exposure= less losses.
That has certainly borne out in the lower frequency and severity statistics that have occurred year-after-year. So in spite of medical inflation that is out-of-control, look for better claims results.
That does not mean better loss ratios though as premiums continue to be in a free-fall. If the insurance companies can hold their pricing ( which they show no discipline for doing ever), then congestion would translate to better results.
Trucking's misery ( congestion) creates some unlikely beneficiaries ( trucking insurance companies). Food for thought....
"The cost of U.S. traffic congestion has jumped to $115 billion in 2009 from $24 billion in 1982, and trucks are shouldering a disproportionate share of the cost, according to a report released this week.
Congestion in the nation’s largest urban areas cost the trucking industry $33 billion in delay time and wasted fuel last year, said the annual Urban Mobility Report by the Texas Transportation Institute of Texas A&M University, released Thursday.
While trucks account for just 7% of the total vehicle miles traveled, the $33 billion represents 29% of the total congestion costs, the report said.
Unlike the cost of congestion for cars, the cost of truck congestion “was passed on to consumers in the form of higher prices” and the fallout from the congestion extends “far beyond the region where the congestion occurs,” the report said.
Because trucks carry goods to suppliers, markets, and manufacturers, delays in arrival can cause whole production lines to close down, it said.
“The report confirms that congestion has a significant impact on the cost of moving freight, which is ultimately borne by Americans in the form of higher shelf prices, lower incomes and lost jobs,” said Darrin Roth, director of highway operations for American Trucking Associations..."
Well, is that bad for trucking insurance companies? My answer would be no. Congestion works out to less miles traveled by each truck ( if the trucker is complying with hours of service and CSA is seeing to that). Less miles = less exposure. Less exposure= less losses.
That has certainly borne out in the lower frequency and severity statistics that have occurred year-after-year. So in spite of medical inflation that is out-of-control, look for better claims results.
That does not mean better loss ratios though as premiums continue to be in a free-fall. If the insurance companies can hold their pricing ( which they show no discipline for doing ever), then congestion would translate to better results.
Trucking's misery ( congestion) creates some unlikely beneficiaries ( trucking insurance companies). Food for thought....
Thursday, December 30, 2010
Changes in Hours of Service For Truck Drivers/ CSA 2010 ramifications
The FMCSA has been busy this month. The new proposed hours of service rules have now been released. There is not much that was changed. While the hours have been reduced to 13 hours, a driver can now take a one hour rest and then continue to complete 14 hours of service. The 34 hour restart rule also applies, provided that there are 2 rest periods – from midnight to 6 a.m. A restart will only be allowed once in a seven day period. The proposed regulations will not be open for public comment curiously.
It will be interesting to see how CSA 2010 grades hours of service non-compliance and what insurance carriers do about it.
It is early days with CSA where in the first days the system had 22,000(!) hits in one hour. Nobody knows what percentage of truckers are getting alerts for failing BASIC scores.
Happy New Year to all!
It will be interesting to see how CSA 2010 grades hours of service non-compliance and what insurance carriers do about it.
It is early days with CSA where in the first days the system had 22,000(!) hits in one hour. Nobody knows what percentage of truckers are getting alerts for failing BASIC scores.
Happy New Year to all!
Tuesday, November 30, 2010
What Shippers and Brokers Need to Know to Manage Their Liability Exposure and The Effects of CSA 2010
I watched a fantastic webinar put on by American Shipper in November that pointed to ( although they did not specifically mention) two presently underinsured or uninsured exposures- broker liability and contingent auto liability and why coverage is needed today. ( As in right now!)
Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace. With the current economy, many truck sales professionals are setting up brokerage authority or expanding brokerage sales-as trucking capacity is still tight in many areas. Even today's truckers, who are at an all-time high with respect to operating efficiencies, have found they do not either have the equipment or drivers to keep up with their shippers' needs or demands- and that is poor business. So they are setting up and expanding their brokerage operations both within and autonomous to their existing operating authority.
CSA 2010 will make capacity even tighter as crappy trucking operations and crappy drivers will not have long to fix it. And that spells bad news to the brokerage community- who even with best practices will find their operations exposed.
Some information I learned from the webinar corroborates the need for coverage. The Transportation Intermediaries Association understands that brokers need and will be required to have broker liability ( primary coverage) or contingent auto coverage ( secondary coverage). Why?
Truckers who continue to hire or retain unfit drivers will face litigation for negligent hiring and retention. Note a now famous court decision against the nation's largest brokerage operation C. H. Robinson further necessitates the need for coverage ( the Schramm decision).
Attorney Clay Porter, a true pro in the truck broker/ insurance arena has described the truck liability "vortex" well where there is a constant duty to supervise and retain records amongst other things from a best practices context.
Broker/ Shipper Liability can today be summarized by 6 exposures
* Respondeat Superior- the employer ( the truck broker) is responsible for the employee( the carrier). Even though the broker in all cases acts as an independent contractor, the courts are becoming sensitive to this bringing vicarious liability whereby one party is responsible for the actions of others
* Negligent Entrustment- causing injury due to instrumentality( a poor driver operating a extra heavy tractor)
* Claims under the Motor Carrier Act
* Claims that a Broker acted as a Motor Carrier
* Aiding and Abetting
* Negligent Hiring
While I want to emphasize I am no lawyer, it is pretty clear to me the biggest exposure to a broker is negligent hiring- and that a best practices approach needs to be delivered to the truck brokerage community- along with appropriate insurance ( yes we provide same so this may seem a tad self-serving which is not my intention).
Federal laws also necessitate coverage. Which ones?
+49 USC 14704- Rights and Remedies of Persons injured by carriers or brokers- Both the carrier or broker is liable for damages sustained by a person as an act or omission of that carrier or broker in violation of this part
+49 CFR 387.307- Broker surety bond or trust fund- the broker is liable to payments to shippers or motor carriers if the broker fails to carry out its contracts or agreements for supplying of transportation by authorized motor carriers.
Shippers are going to make their brokers have insurance. Attorney Porter says that the indemnity agreements that brokers and truckers are being forced to sign do not hold up in 23 states, meaning shippers will require insurance, waivers of subrogation, and additional insured requirements across the board.
One of the failures of the industry is that there is a fine line between liability exposure either on a primary or contingent basis versus a professional liability exposure ( yes we insure that too). Clearly its early days from a professional liability perspective and few shippers are requiring same of their brokers and virtually none of their truckers. You will see those products as well.
While I have not commented much about CSA 2010, suffice it to say that these factors in a large loss or claim will have impact on the broker that hired them:
^Unsafe Driving
^Fatigued Driving
^Poor Driver Fitness
^Drug and Alcohol Use
^Poor Vehicle Maintenance
^Cargo Securement
^Higher than Average Crash Indicator
These are primarilly no brainers for a plaintiff's attorney to go to war against a trucker or broker but the crash indicator of a trucker is not something available to the broker or general public as I understand it at this stage in time.
You can bet the truck insurance agents will be hit with insurance requests, waiver of subrogation requests, hold harmless contracts, and additional insured requests. And today, no one knows what to do with the exposure when there is more than one broker involved in the transaction.
Keep in touch on this and Happy Holidays.
Ben
Both coverages are not understood and frankly not part of the mainstream trucking insurance marketplace. With the current economy, many truck sales professionals are setting up brokerage authority or expanding brokerage sales-as trucking capacity is still tight in many areas. Even today's truckers, who are at an all-time high with respect to operating efficiencies, have found they do not either have the equipment or drivers to keep up with their shippers' needs or demands- and that is poor business. So they are setting up and expanding their brokerage operations both within and autonomous to their existing operating authority.
CSA 2010 will make capacity even tighter as crappy trucking operations and crappy drivers will not have long to fix it. And that spells bad news to the brokerage community- who even with best practices will find their operations exposed.
Some information I learned from the webinar corroborates the need for coverage. The Transportation Intermediaries Association understands that brokers need and will be required to have broker liability ( primary coverage) or contingent auto coverage ( secondary coverage). Why?
Truckers who continue to hire or retain unfit drivers will face litigation for negligent hiring and retention. Note a now famous court decision against the nation's largest brokerage operation C. H. Robinson further necessitates the need for coverage ( the Schramm decision).
Attorney Clay Porter, a true pro in the truck broker/ insurance arena has described the truck liability "vortex" well where there is a constant duty to supervise and retain records amongst other things from a best practices context.
Broker/ Shipper Liability can today be summarized by 6 exposures
* Respondeat Superior- the employer ( the truck broker) is responsible for the employee( the carrier). Even though the broker in all cases acts as an independent contractor, the courts are becoming sensitive to this bringing vicarious liability whereby one party is responsible for the actions of others
* Negligent Entrustment- causing injury due to instrumentality( a poor driver operating a extra heavy tractor)
* Claims under the Motor Carrier Act
* Claims that a Broker acted as a Motor Carrier
* Aiding and Abetting
* Negligent Hiring
While I want to emphasize I am no lawyer, it is pretty clear to me the biggest exposure to a broker is negligent hiring- and that a best practices approach needs to be delivered to the truck brokerage community- along with appropriate insurance ( yes we provide same so this may seem a tad self-serving which is not my intention).
Federal laws also necessitate coverage. Which ones?
+49 USC 14704- Rights and Remedies of Persons injured by carriers or brokers- Both the carrier or broker is liable for damages sustained by a person as an act or omission of that carrier or broker in violation of this part
+49 CFR 387.307- Broker surety bond or trust fund- the broker is liable to payments to shippers or motor carriers if the broker fails to carry out its contracts or agreements for supplying of transportation by authorized motor carriers.
Shippers are going to make their brokers have insurance. Attorney Porter says that the indemnity agreements that brokers and truckers are being forced to sign do not hold up in 23 states, meaning shippers will require insurance, waivers of subrogation, and additional insured requirements across the board.
One of the failures of the industry is that there is a fine line between liability exposure either on a primary or contingent basis versus a professional liability exposure ( yes we insure that too). Clearly its early days from a professional liability perspective and few shippers are requiring same of their brokers and virtually none of their truckers. You will see those products as well.
While I have not commented much about CSA 2010, suffice it to say that these factors in a large loss or claim will have impact on the broker that hired them:
^Unsafe Driving
^Fatigued Driving
^Poor Driver Fitness
^Drug and Alcohol Use
^Poor Vehicle Maintenance
^Cargo Securement
^Higher than Average Crash Indicator
These are primarilly no brainers for a plaintiff's attorney to go to war against a trucker or broker but the crash indicator of a trucker is not something available to the broker or general public as I understand it at this stage in time.
You can bet the truck insurance agents will be hit with insurance requests, waiver of subrogation requests, hold harmless contracts, and additional insured requests. And today, no one knows what to do with the exposure when there is more than one broker involved in the transaction.
Keep in touch on this and Happy Holidays.
Ben
Tuesday, November 2, 2010
Latest Trends in Trucking Loss Control Recommendations
The one consistency in trucking insurance is that change is an integral part of the game. If you cannot change or do not want to change, you will find that the status quo is the same as a trucker putting on the brakes. You have to be moving - and stay current to what is going on in the industry. Otherwise you become irrelevant and most importantly fail to add the value that differentiates you from the masses.
I thought it made sense to address very briefly what we are seeing from insurance companies writing trucking insurance from a loss control perspective. Here is what we see:
• Acknowledgement by trucking management that CSA 2010 has been reviewed and understood
• Within CSA 2010, insurance companies want to make sure CSA 2010 has been presented to drivers and that everyone understands the implications of a drivers safety record within the driver safety measurement system
• No texting policy and the acknowledgement that it is a disqualifying expense. They will want to see this put in the drivers manual
• Defensive driver training and programs must be implemented
While there are other trends in loss control, these are what we see in most loss control reports.
If you are not familiar with what these issues are about, it makes sense to get familiar with them.
I thought it made sense to address very briefly what we are seeing from insurance companies writing trucking insurance from a loss control perspective. Here is what we see:
• Acknowledgement by trucking management that CSA 2010 has been reviewed and understood
• Within CSA 2010, insurance companies want to make sure CSA 2010 has been presented to drivers and that everyone understands the implications of a drivers safety record within the driver safety measurement system
• No texting policy and the acknowledgement that it is a disqualifying expense. They will want to see this put in the drivers manual
• Defensive driver training and programs must be implemented
While there are other trends in loss control, these are what we see in most loss control reports.
If you are not familiar with what these issues are about, it makes sense to get familiar with them.
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