Many insurance underwriters, happy to have a new tool to give them data on customers, are putting too much emphasis on CSA scores when it comes time to writing policies. This could mean higher premiums, higher deductibles, and even a case where some underwriters won't even consider insuring your company, said John Simms, vice president with HNI, in a session at last month's Fleet Safety Conference, put on by Bobit Business Media in Schaumburg, Ill.
HNI is an insurance broker and safety consulting firm that helps companies improve their safety programs in order to help them get the best rates from the underwriting community.
"Premiums are on the rise and a lot of that is being attributed to CSA," he said, noting that the American Transportation Research Institute's annual cost per mile study found truck insurance premiums in 2011 were up by 8 cents per mile from the previous year. He predicts you'll see a radical increase in 2012 as well.
"We've seen deductibles jump from $10,000 to $200,000."
If you have no more than one CSA alert and a good loss ratio, underwriters will be happy to work with you, Simms said. However, "carriers with two or more CSA alerts are considered ineligible risks for a number of underwriters, regardless of loss ratio or the number of years they have been with the insurance company."
Insurance underwriters are determined to use all available information, public or private, to decide whether to insure a risk and what the pricing should be, Simms said. CSA brings a new source of that information.
"As a result, CSA data is receiving intense scrutiny by underwriters and now plays a disproportionately large role in the consideration and pricing of your risk," he explained. "Underwriters believe that the data from CSA can significantly impact the financial outcome of liability claims. Bad CSA data means higher claim settlements, which means [the insurance company is] going to pay out more in claims, which means you're going to pay a higher premium."
There are several ways your CSA information can be misinterpreted by insurance writers, Simms said. Many underwriters simply don't understand the methodology of CSA and the SMS system. That's why it's important to work with your underwriter to help make sure they're using it correctly.
"Make sure your underwriter understands your numbers," he said. If a deeper look at your scores shows they are trending downward (and in CSA scores, like golf, lower is better), make sure the underwriter's aware of that trend.
If the trend is downward, you'd better get busy on a plan to improve it.
"If you have active alerts, what is your improvement plan?" Simms said. "Be specific and show you mean business."