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Underwriting Information

15 Apr


The Secret to Insurance

April 15, 2009 | By |

I am frequently asked what the secret to insurance is.  In other words, how can a client get his best insurance rate?  In my years of insurance experience I have seen many prospective clients head down the paths they think will lead them to their best rate, only to have it turn out just the opposite.  This month I thought I’d offer up some tips on what may make your trucking company a more appealing risk to the insurance company and to dispel some myths about what will increase your rates:


Experience:  Insurance companies like the comfort of knowing that the trucking company owner has previous experience in the industry before starting his own company.  Most insurance companies prefer prospective clients who have been in business, and profitable, for at least 2 years.  For new ventures, preferred companies will have owners with multiple years of experience as Owner Operators first.


Drivers:  Drivers are near the top of criteria that an Underwriter will review.  Preferred clients will have drivers with multiple years (five or more) of experience driving the same type of equipment the trucking company operates.  In addition it is desirable for a company to have very low driver turn over, not to utilize “finishing programs” for new hires, and for their drivers to have few, if any, moving violations, within the last 3 years. 


Safety:  Also high up on an Underwriter’s review is management’s attitude toward safety.  Less easy to define, management’s attitude toward safety is often demonstrated through the existence of a complete safety program that is not only reviewed with the drivers, but is the standard to which driver’s are held.  Regular safety meetings on relevant topics and safety incentive and award programs for drivers also demonstrate how committed to safety a company may be.


Routes:  While the nature of the trucking industry makes this one difficult to obtain, Underwriters have a preference for company’s who have regular, known routes hauling commodities that they have had extensive experience with.  In addition, long term profitable contracts with the same core group of shippers also appeal to most insurance companies.


Losses: Of course this is the one I am asked most frequently of all.  “How will this claim affect my premium?”  The answer is complex.  Insurance companies expect losses; that is why they are in business. However, they prefer clients who have losses that are infrequent, unpreventable and non-routine in nature.  Some examples of loss experience that might impact a company’s premium are if the Underwriter is able to see a pattern to a company’s losses, the losses are minor but frequent in nature, there is a specific driver responsible for the majority of the losses, but no disciplinary action taken or there are a number of high dollar and preventable claims. 


Controlled Growth:  Insurance companies prefer clients who have demonstrated stable and controlled growth.  Newer ventures that have grown from one truck to ten in a three month period can throw a red flag up for an Underwriter, as he or she will begin to wonder if management has enough safety policies and procedures in place to manage the growth well.  Often times trucking companies think that the more equipment they have the more “buying power” they yield.  This may be true for a company that has been in business and profitable for 5 or 10 years, but is not the case for a company that has been in business for 1 year and has already had multiple claims.


It is important to note that the items above are not all that an Underwriter will take into consideration while reviewing your account, but they are some of the big items I am frequently asked about.  If we can help you to understand your company’s snapshot, give us a call at (800) 596-TRUCK (8782).  We’d be happy to help you out any way we can.  All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result oriented. 


Until next month,


Jeffery A. Moss, ARM



14 Nov


Total Loss? Ouch!

November 14, 2008 | By |

A while back we had a client who experienced something that we in the industry call a “Constructive Total Loss.”  For him, it was a very painful experience, one that I think we can all learn from. 


What is a “Constructive Total Loss?”  A CTL is a loss where the item insured is not totally destroyed, but is so severely damaged that the insurance company considers it uneconomical to repair.  A CTL in and of itself is not particularly painful, but if you happen to have undervalued your equipment, purchased a stated amount physical damage policy (which the majority of policies are) and been involved in an accident that damages your equipment at 50% or more of the amount stated on the policy, you may feel you got burned.


Here’s what happened to our client:


Tom purchased a “lead” and a “pup” flatbed trailer to be pulled as doubles.  The “lead” was purchased for $40,000 and the “pup” for $45,000.  Tom figured he could repair almost anything that could happen to these trailers if they were involved in an accident, so he decided to insure them on a stated amount policy for $15,000 each.  His assumption was that this would reduce his physical damage premium and that in the event of a claim, if the insurance company paid him $15,000 for each of them, he would be able to use that money to repair any damage that might occur. 


On a snowy, icy day Tom lost control and rolled his rig.  The result was $12,000 in damage to the “lead” trailer (80% of the value he insured for) and $9,500 to the “pup” (63% of the value insured for.)  Tom thought everything was going to be ok, until the Claims Adjuster called him and told him that he was going to “total-out” the two trailers and would be sending Tom a check for $30,000 and, per the policy conditions, the insurance company would be taking possession of the totaled vehicles.  Tom quickly realized that while he had $30,000 in his pocket, he had nothing to repair and an additional $55,000 in outstanding loans for the equipment!


There are two important lessons that Tom learned.  The first is that there is no savings in underinsuring your equipment.  To have insured these trailers up to their full value would have likely cost less than and additional $1,500 a year (much less than the ultimate hit of $55,000.)  Additionally, Gap Coverage (which I discussed in last month’s posting) is a coverage that can be vital to protecting yourself financially from unforeseen catastrophic losses.


What would happen in the event of a loss that did a significant amount of damage to your equipment?  Would you be content with your settlement in the event of a CTL or is it time to make some revisions?  Give us a call today and we can discuss with you the best methods to insure yourself so you don’t get burned by a Constructive Total Loss.


Until next month,


Jeffery A. Moss