By practicing good safety and being proactive with all insurance policies, four of my insurance customers all recently have been rewarded with lower insurance premiums. Not one of them had to increase their deductibles, lower the stated value of their trucks, remove coverage or anything else.
At renewal, their premiums simply went down!
These four customers represent a very diverse cross section of truck owners in our industry. That is why I wanted to share their stories. Each of them is an excellent example of how to operate a trucking company to be safe and compliant -- and, above all, to reduce insurance premiums!
Before we look at my customers and how each of them lowered their premiums, first we need to discuss the realities of the ever-increasing cost of insurance. We all know that insurance companies have been raising their premiums. Most have increased premiums anywhere from 20% to 40% within the last year or two. Let’s suppose a hypothetical insurance company has raised premiums 30% from the previous year. Let’s also suppose that one of the hypothetical insurance company’s insureds receives a lower premium -- say, last year’s premium was $15,000 and the renewal premium is $10,000.
That would represent a total premium reduction of around 60%.
How does that work? The hypothetical insurance company reduced the insured’s risk score by around 60%. (“Risk score” here is my own chosen verbiage to help explain how insurance carriers rate and consider each application before offering a quote with a premium.) If the risk score had remained the same, the insured’s premium would have increased by 30% to accommodate the insurer's premium increase. (Last year’s premium was $15,000, and the renewal premium would be close to $20,000 in that scenario.)
All four of my customers we’re going to look at employed some common strategies. What they all achieved:
- CSA scores did not increase.
- No driving/moving violations.
- No adverse roadside inspections or non-moving violations.
- No liability insurance claims payments.
- No physical damage insurance claims payments.
- No cargo coverage claims.
Now, let me introduce you to my customers and what each of them did in addition to the above -- all of which solidified and improved their premiums.
[Related: What do insurance companies use to calculate our insurance premium rates?]
Insurance Customer #1
A 36-year-old independent owner-operator. He entered trucking last year as an independent owner-operator. His chosen, virtually overnight path to being an owner-operator with motor carrier authority is one of the most difficult ways to enter this industry. But like me, he is a very determined individual and has survived his first year in business. Because of his efforts, on December 20, he was rewarded with a 30% gross premium reduction for his insurance renewal this year from last year’s policy. That means his insurance carrier reduced his risk score by approximately 60%. Talk about a Christmas gift!
First, he had two personal auto claims in his past that are no longer being considered by the insurance company. Second, he had a moving violation that is also no longer being considered.
When violations on a driver’s Motor Vehicle Record or insurance claims become a certain age, typically 3-5 years, they no longer count against our risk score.
Lastly, he’s now over the age of 35, which seems to be a sweet spot. Generally speaking, older than 35 and younger than 65. For drivers outside of that 30-year age period, I have noticed, insurance companies apply a higher risk score.
Insurance Customer #2
A small carrier with two trucks and two trailers (one van, one reefer). The owner is a driver of one of those trucks. The owner has been a driver for more than 20 years, and he began his trucking company in 2019. His path to having his own trucking company is far more traditional. This year, his gross premium for his renewal decreased 33% from last year’s policy. That means his insurance carrier reduced his risk score by approximately 63%.
This customer’s reduction in premium for his renewal was improved by taking advantage of a safety program offered by the insurance company. The customer enrolled in a program that measured all trucks’ driving performance via the insured’s electronic logging devices. This program alone accounted for 20% of this customer’s premium reduction for his renewal.
Insurance Customer #3
A 45-year-old Army veteran who has been driving trucks for the past 17 years. Last year, he started his own independent owner-operator flatbed company operating OTR. He has two teenage sons, which I am mentioning for a reason. His premium for his renewal this year decreased 30% from last year’s policy. As in other examples, that means his insurance carrier reduced his risk score by approximately 60%.
This customer’s improved his premium by a very proactive and responsible approach to managing his CLUE (Comprehensive Loss Underwriting Exchange) report, which insurers use to research an insured’s personal-auto and business-auto claims history. This customer’s management of his CLUE report served for an excellent teachable moment for one of his teenage sons. On our last call, when I shared the good news about his premium reduction for his insurance renewal, he shared this story with me.
One of his teenage sons parked a motorcycle next to his pickup truck (a personal auto) earlier this year. That motorcycle fell over and into the pickup truck, causing significant damage. His teenage son said, “Good thing we have insurance for that, dad.”
My customer replied: “Insurance isn’t paying for this. You are. Otherwise, it can cause both our personal auto policy and my commercial auto [trucking] insurance premiums to increase.”
My customer was right! He also did the very best thing for both the long run and short-term. It cost far less for his teenage son to pay for the repairs compared to the total cost of higher insurance premiums for years to come. In the short term, it taught both of his sons about responsibility, safety and insurance. That will pay dividends for them both for the rest of their lives.
[Related: Protect claims history: Be mindful of fine print in broker/customer agreements and contracts]
Insurance Customer #4
A 60-year-old who was looking for something to do before ready to fully retire. He operates a flatbed regionally, and even had a liability claim filed against his policy in the last year. Even with that claim, his gross premium for his renewal this year decreased 5% from last year’s policy. That means his insurance carrier reduced his risk score by approximately 35%.
Some readers may be asking, “Why is Joel including this customer?” Great question. The answer may surprise you! This customer had a third party (another trucking company in this case) file a liability claim against his policy. The third party accused him of being liable (responsible) for an accident and, as such, liable for the damages to the third party’s property (their truck). The customer cooperated fully with the insurance adjuster assigned to the claim and the investigation. The customer provided pictures, documents and the police report, and provided a statement.
Doing so enabled the adjuster to have enough evidence to deny the claim to the third party. Yes, a claim does impact our risk score, but nowhere near as significantly as a claim with a payment (financial settlement)! As a result, this customer’s risk score wasn’t impacted enough to cause a premium increase for his renewal.
Finally, if you want your next renewal to go the way of these four examples, be proactive to maintain a low CSA score, avoid moving and non-moving violations, and avoid claims, even on personal auto policies. In the event of a claim, be cooperative with the adjuster; be a defensive driver; and take advantage of any programs offered by an insurance company to verify your safe driving practices. Employing these practices and not being deceptive to the insurance company, as I have written about several times before, will result in insurance premiums that are more affordable than the premiums you’ll see if you don’t.
Need help with your own insurance? Call the author of this story, W. Joel Baker -- if you have questions about insurance you'd like to see addressed by Baker here in Overdrive, drop a comment under this story or get in touch with him directly via his websites.
Find more information on the ins and out of trucking insurance in the Overdrive/ATBS-coproduced "Partners in Business" manual for new and established owner-operators, a comprehensive guide to running a small trucking business. Click here to download the most recent edition of the Partners in Business manual free of charge.
