The high cost of insurance is largely the responsibility of the insured — that means looking at...

The high cost of insurance is largely the responsibility of the insured — that means looking at the impact of everything from proper truck maintenance to how safely drivers operate on the road. 

Photos: Jim Park

Figuring out how to lower fleet insurance costs is not rocket science. What it take is Business Administration 101: putting to work critical and analytical thinking to identify what’s driving up insurance costs and what actions will help bring them under control.

Even the Federal Motor Carrier Safety Administration preaches that “safety is good for your business.” According to the agency, the average cost of a “large truck” crash involving a fatality is $3.6 million. A crash with injuries costs almost $200,000 per crash, and the average cost of all large truck crashes is about $91,000 per crash.

According to Mitchell Keiper, business analyst at HNI Risk Advisors, a study by HNI of more than 24,000 accidents that occurred between 2010 and 2016 makes it clear the cost of a truck accident is on the rise.

“In 2010, 1.5% of all accidents incurred more than $100,000,” he advises in a blog post. “In 2016, that number nearly doubled to 2.9%.” More significant is that despite being a small fraction of accident frequency, these large accidents account for approximately 75% of all incurred losses. 

He also points out that “big accidents are becoming increasingly penalizing.” That trend is being driven by so-called nuclear verdicts, in which juries award tens of millions to hundreds of millions of dollars to the families of crash victims.

“Plaintiff attorneys have mastered the art of demonstrating how trucking companies are negligent and careless when it comes to safety, and how this negligence is a danger to the jurors and their families,” Keiper says. “These nuclear verdicts have been extremely detrimental to insurance companies as well,” leading many to exit the trucking space all together. The upshot is there are fewer insurance companies to absorb those large losses – so premiums rise for all. 

Even though there are fewer insurance providers to pick from, Dave Lubeck, business development consultant for Progressive Insurance, recommends seeking out an agent and/or insurance carrier with “experience with your type of business. Your business may require a combination of commercial auto and business insurance coverages, and an experienced agent or carrier can help assess your business and tailor a policy specific to your needs.

“The amount and type of coverage needed is based on preference and the type of business you’re in,” he adds. “Not all insurance packages will fit your needs, and value doesn’t always mean savings. Consider all the factors, like coverage customization, customer service, and discounts.”

Keep the enemy in sight

But you can’t rely only on your insurance provider to solve your problems. Nor can you shrug off the high cost of insurance on litigious ambulance-chasers. Walt Kelly’s cartoon character Pogo said it best: “We have met the enemy, and he is us.”

Let’s face it, when it comes to the high cost of insurance, it’s largely the insured who are responsible. That covers everything from proper truck maintenance to how safely drivers operate on the road. What matters most is how fleet managers help ensure their trucks are as safely spec’ed and maintained as possible and that the safest drivers possible are behind the wheel.

Conducting an internal safety audit or risk-management analysis is a critical first step to doing your part to rein in insurance costs. You’ve got to know what’s costing you what before you can start focusing your efforts on cost control.

One way to do that is by properly wielding data on your fleet operation’s safety profile. “Insurance companies make decisions on premium costs based on claim histories — the record of events that indicates whether a commercial vehicle operator is a good risk,” according to Teletrac Navman, a provider of  GPS-based truck tracking software.

The company says driver scorecards, based on telematics data collected by fleets, can provide the information needed to reward good performance, discover areas for improvement, and develop training that supports safety. This process ultimately can help reduce insurance premiums as well as other operating costs. In addition to creating a safer working environment for drivers, taking these steps can bring not only reduced insurance premiums, but also benefits such as lower fuel spend and extended vehicle life.

Dashboard cameras provide video documentation of what happens when a motor vehicle is in use, Teletrac Navman notes. “Truck and fleet cameras can record driver performance, traffic conditions, aggressive driving or moving violations, or the cause behind a collision or other incident. That video data is objective, and following an accident it can serve as reliable evidence in a dispute regarding which party was at fault. This makes it valuable in protecting fleets against expensive legal action – both in proving that negligence was not involved, and in expediting a rapid settlement instead of prolonged, costly litigation.”

“Usage Based Insurance” is the new buzzword in the insurance business. UBI is a method by which...

“Usage Based Insurance” is the new buzzword in the insurance business. UBI is a method by which mileage and driving behaviors are tracked using odometer readings or in-vehicle telematics devices. National Association of Insurance Commissioners says this enables monitoring a driver’s behavior directly while the person drives.

A new insurance buzzword

According to Mark Walton, co-founder and CEO of Gorilla Safety, a fleet and safety management software provider, Usage Based Insurance is the new buzzword in the insurance business. UBI is a method by which mileage and driving behaviors are tracked using odometer readings or in-vehicle telematics devices, says the National Association of Insurance Commissioners.

“The basic idea is that a driver’s behavior is monitored directly while the person drives,” explains NAIC. “These telematics devices measure a number of elements of interest to underwriters: miles driven; time of day; where the vehicle is driven (GPS); rapid acceleration; hard braking; hard cornering; and air bag deployment. The level of data collected generally reflects the telematics technology employed and the policyholders’ willingness to share data. The insurance company then assesses the data and charges insurance premiums accordingly.” 

Walton points out that, “throughout the underwriting process, there are chances for fleets to sell themselves to the insurance carrier. With the advent of fleet technology solutions, clarity and intelligence are perhaps among the most important differentiators used to distinguish any company from its peers and secure better pricing. Modern [telematics] technology now makes it easier than ever to track, manage, and leverage fleet capabilities, ensuring stability and continuity of best practices.”

He says telematics allows fleets to more easily manage and measure for better loss control and risk management. “With GPS and tracking, we now know which driver took which load where. There is also the ability to see exactly how many hours the driver operated the vehicles, and that information can be used to segment the risk profiles of any given fleet” by insurance carriers. And, Walton adds, fleets can “leverage the intelligence gleaned from using technology into both greater credits and lower overall claims that hopefully result in lower premiums over the long term.”

“Progressive is very excited about the use of telematics data,” says Dave Lubeck. “By leveraging our learnings about driving behavior from our Personal Lines organization and Smart Haul [Progressive’s new ELD-based UBI program for truck drivers], we see a lot of opportunity to understand more about commercial vehicle usage for underwriting applications and for fleet management.”

About the author
David Cullen

David Cullen

[Former] Business/Washington Contributing Editor

David Cullen comments on the positive and negative factors impacting trucking – from the latest government regulations and policy initiatives coming out of Washington DC to the array of business and societal pressures that also determine what truck-fleet managers must do to ensure their operations keep on driving ahead.

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