Sam Tucker is the founder and CEO of Carrier Risk Solutions, Inc., an Atlanta, Georgia based transportation risk management startup. Prior to this venture, Sam spent 13 years underwriting trucking and logistics accounts at some of the most well known insurance companies. He holds degrees in Business Economics and Finance/Risk Management as well as multiple professional insurance designations. Carrier Risk Solutions' innovative safety management platform can be found online at www.MySafetyManager.com. Reach Sam by email at STucker@CarrierRiskSolutions.com.
With razor thin profit margins and your burning need to stay competitive in today's logistics environment, you owe it to yourself to maximize your spending on insurance and risk management.
Let's face it, paying for insurance is right up there with paying your taxes. Necessary evil? Perhaps. Inevitable? Yep. Many folks look at insurance companies as adversaries rather than partners due to our prior experiences and the personal life scripts that we read off of (how we're influenced by our parents, friends, relatives and their thoughts, etc.) Having worked for 4 separate insurance companies and been an insurance consumer for many years, I have my own thoughts and feelings too, but we're not here to discuss that. We're here to save you some money.
Let's get started!
No two trucking/logistics companies are the same. You know this better than I do! As humans, we try to simplify and generalize as quickly as possible to help our brains process what we are trying to understand. Just like you may place all insurance companies in the same bucket, some insurance underwriters place all trucking risks in the same bucket.
The intersection of these two issues makes trucking insurance especially difficult to underwrite, price, understand and/or explain.
My point is simple: Just as you have operations that you are better at than your competitors, insurance companies are no different.
Do business with insurance producers and insurance companies that specialize in transportation related business.
You can sniff out those who can walk the talk by asking some basic questions:
How many transportation companies do they insure?
How do they help you manage your exposure to risk and your total cost of risk?
Which companies/agencies do they partner with?
Partnering with producers and insurance companies that focus on transportation accounts will save you money because those who are specialists have the experience and knowledge to ensure you better.
Potential coverage gaps can be reduced or eliminated, claims are handled on a more efficient basis and the right insurance partners can reduce the exposures that you face that you can't easily insure (like indirect costs due to missed delivery deadlines, etc.)
All insurance premiums are a function of exposure and rate.
Exposure is how much revenue your company produces, how many miles your trucks run during each period or how many power units are covered during the policy period.
Rate is what the insurance company charges you per unit of exposure (usually gross receipts, mileage or power units).
You would think that you control the exposure base while the insurance company controls the rate. I feel that you really control both.
You should always be as truthful as possible when estimating your exposure base for the upcoming years. Seasoned Underwriters can sniff this out pretty quickly and may end up declining to quote your business simply because of not being able to understand the exposure that they face.
These next two tips will be about how to control the rate that you are charged.
There is a scene that I love in the popular 90's movie, Liar Liar. It unfolds like this:
Greta: He knocked over another ATM. This time at knife point. He needs your legal advice.
Fletcher (Jim Carey): [picking up phone and shouting] Stop breaking the law, a$$%^&*!
You can save a great deal of money on your trucking insurance premiums by investing in reducing the amount of losses that you have.
Right!?! Sounds simple on paper, but the reality is always much more fun than that. According to an ATRI study, an estimated 67% of all losses involving trucks are caused by a private passenger vehicle.
As you well know, it sometimes doesn't matter who was "at fault". You have a ton of daytime TV personal injury attorneys who feel that Joe Public, who cut in front of a truck and caused an accident shouldn't be held responsible for that action. The truck driver (who works for a company with a relatively higher HOS CSA BASIC score) and who wasn't leaving enough clearance in front of him was obviously fatigued and liable for the accident.
Well, you can't control things like media bias and the personal scripts that some attorneys or some members of the general motoring public are reading from.
You can control (to some extent, at least) driver recruitment, hiring, training and retention practices, accident scene procedures, claim reporting timeliness, vehicle maintenance, route scheduling, contractual liability, owner-operator risk management, not allowing vehicles to be parked in unsecured parking areas, etc.
My point is that an investment in safety is just that: an investment. That investment pays dividends in many ways (reputation, safe delivery of cargo, less time away from work due to injury, etc.). But, it really has a significant impact on how much you pay for insurance coverage.
Put some more skin in the game.
Perhaps one of the quickest and most effective ways of reducing your insurance premiums are to assume more risk yourself through the use of increased deductibles or self-insured retentions (SIR).
I won't bore you with the specifics, but you can call me (678) 643-8939 and I'll explain how both of these work if you would like.
The deal is simply, if you are assuming more of your potential loss exposure then your rate (see paragraph 6) will be less.
Thankfully, losses should be pretty infrequent events. Insurance companies are in business to make money, just like you are. There's nothing wrong with that. But, are you managing your insurance spending well?
If you've had, on average, 10 physical damage losses over the last 5 years with total paid claims amounting to $60,000 then your averaging about $6,000 per APD loss. Does a $1,000 comprehensive and collision deductible make sense in this example? How much would you have saved over that 5 year period if you had a $5,000 deductible instead?
I don't know the answer to that question because it's impossible to know at this point.
What you can do is ask your insurance agent or broker to provide some deductible options for your coverages. (Hint) You don't have to wait until your policy comes up for renewal to do this. Most insurance companies will endorse your policy mid-term in order to do this.
You'll only know your options if you ask. But, don't immediately run to the phone and call them now. Take some time to understand how many losses that you have had and what the paid amounts were for those losses first. Doing so will save time and money and it will give you a better understanding of how your company is doing at managing risk.
There are lots of ways to get creative with how you can reduce the amount that you pay for your insurance coverage. Most importantly, don't risk more than you are afraid to lose. Use insurance wisely, as part of your overall risk management program and be sure to work with reputable insurance agents, brokers and companies.