Riding Out the Rising Rates How trucking companies cope with increasing insurance premiums
By Renee Miller Contributing Writer
The American Transportation
Research Institute conducts a yearly report on the operational costs in the industry. ATRI’s most recent research revealed that the cost of insurance premiums have risen from 7.1 cents per mile (2014) to 9.2 cents per mile (2015). Those costs are driving compa- nies not just out of state, but out of the country, for better rates. One Arkansas carrier, USA Truck,
based in Van Buren, Ark., found it necessary to go to London in order to try to find competitive rates for excess coverage insurance, said Joe Kaiser, vice president and chief accounting officer of USA Truck. What would necessitate such an
action? A major player in the commer- cial auto liability market, Lexington Insurance Company (an AIG company)
ARKANSAS TRUCKING REPORT | Issue 6 2016
pulled out of the market in the first quarter of this year. In addition, Zurich Insurance Company, a player in the primary market, who offered up to $5 million in limits to their trucking cli- ents, also left the market earlier this year. Both companies cited an “increase in severity of catastrophic losses, and unfavorable verdicts and settlements as the primary reasons for withdraw- ing from the sector,” noted Mark Brockinton, chief executive of transpor- tation and logistics practice at Aon Risk Solutions.
FEWER CRASHES, BUT MORE COSTLY The exit of these two underwriting
companies triggered a reaction in the marketplace and created a spike in pric- ing in the excess market. Brockinton remarked that AIG continues to provide commercial auto cover and some excess insurance through subsidiaries other
than Lexington. All carriers, of course, must have the federally mandated amount of $750,000 excess coverage, but as Brockinton observed, the cur- rent federal mandates are three decades old. “They simply aren’t appropriate given the escalating costs of healthcare (which drives claims costs), and the current legal environment that is rife with attorneys targeting the trucking industry,” Brockinton said. A 2014 FMCSA study found that
catastrophic crashes resulting in dam- ages that exceed the current federal mandates are very rare — less than one percent of the 330,000 crashes ana- lyzed, but when catastrophic crashes do happen, the costs don’t just exceed, they tremendously exceed the insurance limits. Consequently, it has become a lot
more expensive to be protected from blockbuster verdicts and settlements.
23
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52