Change to the commercial liability insurance minimum of $750,000 still appears to be months, if not years, away. Some insurance industry representatives believe an increase to perhaps $1 million or $1.5 million is inevitable when the ongoing debate is resolved.
For many owner-operators and small fleets, the lower figure would be relatively easy to swallow, says Gabe Hotop with C.M. Brown & Associates, based in Perryville, Mo. “Most already have $1 million in coverage because the shippers require it,” he says.
The policyholder’s experience, location and other factors affect the cost of liability insurance. An independent’s yearly premium can vary from $3,000 to $15,000. Hotop says the average cost for liability rises 2 to 3 percent annually, but that rising cost is often offset by depreciation and other factors.
“Here in the Midwest, if you’ve been in business for a while and have a clean driving record and your violations look good, you’ll pay around $3,000 to $4,000 per unit” as a small fleet, he says. If you’re up in the Northeast or running congested lanes up and down the West Coast, expect to pay more. “It all averages out nationally to about $6,000.”
The House of Representatives’ version of a six-year transportation reauthorization bill included some directives meant in part to slow the Federal Motor Carrier Safety Administration’s work to increase the liability minimum.
The bill’s draft would require the agency, in developing any rule change, to study in-depth an insurance minimum hike’s potential impact on owner-operators and small fleets.
Ways to save
Anything owner-operators can do now to improve their perceived risk will pay dividends now and when the minimum hike occurs. Here are some tips:
•Use agents with direct contracts with insurers.Hotop says this can result in a better rate because you’re working directly with the insurance companies. Going through a broker, who represents multiple companies, adds another person to the transaction, which can increase prices.
Agents can be captive agents, dedicated to one insurance company, or not. Distinguishing between agents and brokers can be difficult. If you’re in doubt, ask.
Agents as a general rule hold less liability for making certain you’re getting the right coverage than brokers. Hotop offers this tip for sussing out a capable agent: “If the person you talk with asks more questions about your business and how you operate, it’s likely they’re a good agent,” Hotop says. “If all they’re doing is reading off a sheet, I’d suggest not going with them because they won’t help you out later down the road.”
•Get some time behind the wheel. For new independent operators, it can be difficult to find a company that will write a policy, not to mention an affordable one.
That’s not the case at Progressive Insurance, according to Brett Stalnaker, a product manager for the company, who says Progressive’s average fleet size is less than two trucks per policy.
Getting insurance is particularly tough for independents with safety issues, says Stalnaker, who suggests new truck owners lease with a company for a couple of years, build a good driving record and then try to get operating authority.
“Driving record is huge,” he says. “It plays not only into rates, but acceptability as well. The amount of time someone has been in business also plays into it. A lot of companies won’t take a chance with a new trucker.”
•Keep insurance needs bundled with one company. Bundling other useful insurance, such as a physical damage policy for the truck, can yield savings, particularly over the long term.
It’s usually a good idea to stick with an insurance carrier as long as possible instead of shopping around for the cheapest rate each year. Insurance companies will be more likely to help owner-operators during a rough patch if they’ve been loyal, Hotop says.
Also, it’s important to be insured through an A-rated carrier because many shippers and brokers won’t honor anything less, Hotop says. Ratings are issued by A.M. Best, Fitch, Moody’s, Standard & Poor’s and TheStreet.com. An insurance company with a good rating should not be shy about letting you know about it; if you’re in doubt, ask.
It also helps if the client exemplifies stability. “If an owner-operator is paying bills on time and managing their money well, that will factor into getting a lower rate,” Stalnaker says.
•Shop around, but not too much. It doesn’t hurt to keep your eyes open for better deals, but the owner-operator insurance market is more limited than you might imagine. “The worst thing [owner-operators] can do is call five or six people,” Hotop says. “There are only 10 to 15 companies that write coverage for commercial vehicles, so agents a lot of times are working together. I recommend finding two good agents in your area.”
Independent Howard Salmon encourages any new independent to include the Owner-Operator Independent Drivers Association when shopping around. Salmon, who pulls a reefer and hauls beer, food and other items from the Rocky Mountains to the East Coast, has used OOIDA’s insurance for three years.
“They will tell you what you need, and they’ll walk you through what you need to do,” he says.
•Try usage-based insurance if it’s available. Pay-as-you-drive policies base rates upon miles actually run.
“Most insurance companies don’t offer usage-based insurance unless the company has 10 or more units, but it can really help,” Hotop says. If a company runs more miles in the summer than the winter, they’ll pay less when it’s colder, he says.
Discounts for dashcams?
Whether road-facing or dual road- and driver-facing, dashcams are becoming more common. Camera evidence can aid greatly in settling an insurance claim, given that most truck-related accidents are not the truck driver’s fault.
Camera use is relatively new and less likely to reduce today’s insurance payments, but some insurers already have partnered with dashcam companies and can offer a 30 to 40 percent discount when purchasing a device.
“It’s a very preventive tool and can save you from having to make a claim,” Hotop says.