Insure This By Bill Velin
Tow Truck Insurance Market Problems T
ow truck drivers operate in a danger- ous world. Every day they face angry drivers while repossessing vehicles, dan- gerous driving and road conditions, and close calls on U.S. freeways while hitch- ing up wrecked vehicles. These are just a few of the reasons why the tow truck insurance marketplace is in a “state of emergency.”
Another key reason: a crumbling insurance marketplace that has fewer and fewer insurance companies willing to even consider writing this business. Most insurance agents have not seen anything like this market in their ca- reers. Those who write towing compa- nies are working three times as hard just to keep the tow truck customers they have insured. Yet, the insurance indus- try’s competitive environment, the usu- al culprit, is not the problem. The insurance market for towing companies is so difficult that some tow- ing companies are being forced to close their doors. Approximately one out of every four towing firms are shutting down due to the inability to find an in- surer willing to write their business, and the prohibitive cost once they do find a market. Carriers will write garage liabil- ity for towing companies that have tow trucks, but will not insure the tow trucks on the auto schedule.
The tow truck insurance market has been hit with a myriad of factors lead- ing up to the current state of disrepair, from the reinsurance drying up to the commercial auto insurance market- place unprofitability, combined with the ever-increasing costs of litigation and health care, towing firms are fac- ing heavy obstacles – and unfortunately it is only just begun. Most of the U.S. commercial auto insurance market has had a very rough time in recent years and tow truck operators are no excep- tion. The commercial auto market has
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posted large underwriting losses for 6 consecutive years and has evolved into the most chronically under-performing product segment for most U.S. Property and Casualty insurers. It is the “perfect storm” for garage and commercial auto, and most people connected to this seg- ment of the industry do not see it letting up anytime soon.
The biggest shock wave hit this mar- ket at the end of 2016 when Progressive Insurance pulled the plug on the tow- ing sector nationwide. However, that was only a sign of what was to come. In the last 18 months, 8 or 9 towing in- surers exited the industry in an already small field of insurers. The reasons for the exodus ranged from insurers that lost money to those who made money but decided they just did not want to write this class of business anymore. And, when Progressive left the market that pretty much shut down any new in- surers entering the market as well. Pro- gressive was a very savvy market, and the carriers out there felt that if Progressive could not write this business profitably nobody could write it profitably. Fortu- nately Progressive did not cancel exist- ing customers, but they are not writing new accounts. This has resulted in a 100 percent to 150 percent premium in- crease on accounts with no claims. Continuing challenges in commercial auto liability range from distracted driv- ing to increased miles driven to higher
vehicle repair costs to rising severity of liability claim. Tow trucks are no excep- tion. Commercial auto in general is not going to catch a break for the next sev- eral years. For tow trucks, it is rear-end collisions that are bringing insurance companies to their knees. Drivers are going too fast and are distracted. The few insurers left in this industry are swamped.
The only thing towing companies can do is manage their risk. They are put- ting cameras inside their tow trucks fac- ing both outward and inward. If they are caught eating or talking on the phone or texting, there is zero tolerance – they are terminated.
It is not expected that this market for towing will bounce back anytime soon. It will be a long time before insurers react to improved risk management in towing firms. For now, towing firms should fo- cus on increased driver training and at- tempt to settle more claims out of pock- et if they legally can. And if you currently have insurance and it is semi-affordable, protect it with your life.
Bill Velin is Vice President with Assured Insurance Group/Lee F. Murphy Insurance, one of the largest insurance agencies in the country, representing a variety of carriers. To benefit from ARA’s
national Insurance Program, contact Bill at (651) 294-0705 or
billv@leefmurphy.com. Visit
www.leefmurphy.com.
July-August 2018 • AUTOMOTIVE RECYCLING
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