Insurance: If You're Average, You're Lucky
DOUG CONDRA
EDITORIAL DIRECTOR/PUBLISHER
An American Trucking Assns. survey indicates trucking company insurance premiums have jumped sharply — an average 32% — over a year ago. Since 9-11, it says, premiums went up an average 37%.
That's bad. But it's worse — a lot worse — for many carriers who have been hit with much higher rates than that. They are worried that ATA's lower numbers, which are being highly publicized, will weaken freight rate negotiations with shippers.
ATA Chief Economist Bob Costello acknowledges that many fleets are over the survey's average. "We saw increases of well over 1,000% on an individual basis, and several in the 300% to 800% range," he said.
In our own conversations with fleets, we're told that even some companies with solid safety records have seen insurance rate increases up to 300%. One told me his premiums went up 150% last July — and that's after he quadrupled his deductible to keep the cost down.
Primary insurance, whose coverage limit is the first $1million in losses, has gone up, but it isn't the biggest problem. It's secondary insurance, which generally covers losses over the first $1 million, where premiums have skyrocketed.
For a fleet striving to hold costs down it means reducing coverage, or even dropping secondary insurance and settling for a higher deductible — and hoping it can avoid accidents.
In some cases the insurance carrier refuses to insure the fleet unless it accepts the increased liability of a higher deductible. And some carriers must provide insurers with letters of credit before they can get coverage. A fleet without sufficient assets to show economic depth can be in a heap of trouble.
Critics of the ATA survey want ammunition to negotiate freight rates with customers, and they think the survey's average numbers are low.
ATA's Costello admits: "Certainly our averages are understating what's going on out there. The average increase is tempered by changing deductibles. We'd love to have captured that information, but it's impossible."
The carriers who are complaining have a good point: Once their customers have that lower average in their heads, they're not going to want hear pleas from a fleet whose premiums went up even more. And apparently there are a lot of them.
The solution? Costello points out that ATA's report contains clear statements that the survey is not all-encompassing. Page 4 of the report says the survey results may not reflect true total cost increases for carriers' higher deductible or lowered coverage. "Without a known base year cost," it says, "survey results may reflect a lesser percentage of premium increases than actually were experienced."
Apparently, if your premium increase was anywhere near the stated "average" in ATA's report, you should consider yourself lucky.
Costello suggests that carriers show the full report their customers to help them understand.
It's free and can be downloaded from truckline.com. Printed copies are available by calling Mike Russell, ATA vice president of public affairs at (703) 838-7935.
