ITI spoke with Ryan Erickson of insurance brokerage McGriff, Seibel & Williams by phone. As an ITI partner, they frequently refer fleets to use PRO-TREAD driver training to reduce risk.
How do insurers calculate your premium?
When insurers calculate your premium, they’re looking at what’s called the loss run. There’s the hard part of it, the straight numbers: Here are the losses and here’s how we extrapolate it for the future.
Training is the soft piece. They typically want to look at the driver training manual, the safety training manual. The more you can elaborate on what the fleet is doing for safety, the more aggressive the underwriter can be pricing the premium. But again, that’s a soft part of figuring the cost.
If you had to generalize, what kind of discount could training have in terms of premium?
There’s no hard number, but it could be between 3-5 percent. Where it really matters is if you have a history of backing accidents, you can show you’re doing something about it right now. If you monitor what types of incidents happen, and you train specifically on those things, an insurance company can look at it and say, “well, we project you’d have this kind of claims in the future, but you’re training on it, so maybe there will be better experience.”
And that can vary greatly. If you’ve started to do some training, and you have some measurable results, the impact can go up dramatically. You want to be able to show them that over the past, say, two years, you’ve made measurable gains.
Does the type of training matter?
The insurance company wants to know that everything is in the right place from a training perspective, and that it covers a lot of topics like PRO-TREAD. If you’ve got a history of rear-end collisions, they want to know you’ve trained to avoid them. That helps the insurance company in lawsuits.
Are small incidents reported? Like crashes with costs lower than the deductible?
Yes, most things are reported. The only time things aren’t reported is if it’s pure property damage and under the deductible, so there is no potential for bodily damage with another person. But the insurance company or third-party administrator are handling the claims, working through the process, and then sending a bill to pay.
Is there a good time to shop for insurance? Or is there a bad time to shop for insurance?
No. Not really. Insurers look at 5 years of history for smaller fleets, and as much as 10 years for bigger fleets.
Will insurers mandate certain safety programs? Or provide discounts on training or safety programs?
Yes, there will sometimes be loss-control programs. You see that. It depends on the insurance company. They typically aren’t offering discounts, but rather saying you need to follow our risk control recommendations or we’re not willing to provide the insurance.
What kind of incidents tend to create the biggest increases in premiums?
It’s all driven by loss ratios. There are some losses in particular that will make insurers more nervous, like those that involve drugs and alcohol violations. But it’s all tied to loss ratios. Insurance companies usually have overhead in the 35% to 40% range on a premium dollar. So when you start to have loss ratios approaching that 55% to 60% mark, that’s when you start talking about not being profitable for that insurer. When that number starts to erupt, or the projection of losses or future reserves starts to eat into that, that’s when they tell you “we’ve got problems.”
What are your most frequent types of incidents?
Hitting stationary objects. They’re the most frequent types of incidents, though they’re obviously not the most costly. They are a large cost component. Frequency breeds severity. The more often you have the little incidents, it tends to lead to the bigger incidents. And companies that are carrying their own risk with $50,000 deductibles, you’re paying all of those out of pocket. If you can cut those in half, you’re certainly improving your profits.
What do fleets choose when it comes to deductibles?
It has to do with fleet size, financials, losses. You have to be able to pay those losses without going out of business. Yet the more risk the fleet takes on, the lower their insurance costs.
When an insurer is calculating your premium, are they looking also at CSA scores?
CSA scores have become huge. To the point where it’s become almost a pass-fail test. If you have really poor CSA score, like maybe an alert or two, some insurers have drawn a line in the sand to say “it doesn’t work for us.” Most insurers are looking at CSA scores. One alert is generally OK, two typically is not. All the different B.A.S.I.C.’s matter. It’s not just drugs and alcohol. Brakes failing will look really bad in the eyes of the jury.
About Ryan Erickson
Ryan Erickson specializes in design and implementation of complex risk management programs for large and mid-sized transportation companies. Specific expertise includes traditional risk placement, insurance captives and self-insurance analysis. Ryan is actively involved in various American Trucking Association programs including speaking engagements at the ATA Management Conference as well as a current board member of the National Accounting and Finance Council.
About McGriff, Seibels & Williams
McGriff, Seibels & Williams is nationally recognized as a specialist in transportation, working with LTL, Truckload, Flatbed, Specialized, Moving & Storage, Distribution and Passenger businesses. They provide traditional insurance coverage for smaller fleets, as well as custom risk management programs for larger clients.