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Ask the Expert Q&A: Transportation Insurance

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A shortage of qualified, experienced drivers is contributing to increased risks in the transportation industry. To learn more about the state of the industry and its implications for Transportation Insurance, we spoke with John Woods, Vice President, National Practice Group Leader, Transportation, Burns & Wilcox, Scottsdale, Arizona.

How does the shortage of drivers impact transportation risks?

The continuing shortage of qualified, experienced drivers is a challenge that has been ongoing for a number of years. Put simply, less experienced drivers tend to make more mistakes. More experienced drivers have been exposed to driving in bad weather and heavy traffic, navigating new routes, and generally face fewer unforeseen circumstances.

What should companies be aware of relative to this risk?

Among other things, driver inexperience leads to more accidents, losses and insurance claims. There is a growing trend for so-called “nuclear” verdicts—jury awards of $10 million or more—among lawsuits against companies in the transportation industry. The more accidents a company has, the greater that company’s risk of facing a lawsuit and a nuclear verdict becomes. Nuclear verdicts have been a major factor in the hardened transportation insurance market, and many trucking companies have been forced out of business due to their inability to afford increased premiums.

What insurance policies do transportation companies need?

All trucking firms are required to have Truckers Auto Liability Insurance and the limits are based on the types of commodities that they haul. General commodities haulers are usually required to carry a minimum of $750,000 in liability limits but the vast majority of the industry carries $1 million at a minimum. Unfortunately, due to the proliferation of $1 million-plus settlement verdicts in recent years, $1 million can no longer be assumed to sufficiently or entirely offset the full cost associated with a claim. Escalating insurance premiums mean many trucking firms struggle to afford basic limits, let alone adequately protect their company with an Excess Liability Insurance policy with higher coverage limits. Most firms also need a Cargo Insurance policy, which covers expenses from losses related to goods being hauled. Pollution Liability Insurance may be needed as well, depending on what is being hauled, as Truckers Auto Liability Insurance does not include coverage for an environmental loss related to the cargo being hauled.

What risk management and loss control actions should companies take to complement their Transportation Insurance?

It is essential for companies to implement excellent safety and maintenance procedures and follow them to the letter. Additionally, they should invest in and fully utilize as many safety and technology advancements as they can possibly afford. These advancements could take the form of collision avoidance or braking systems, or accident event recorders, which can help mitigate any challenges about what happened in the event of a claim.

How has COVID-19 affected the Transportation Insurance market?

The sudden halt in operations of companies hauling products or providing services deemed “non-essential” at the beginning of the pandemic put many of them out of business. Charter tours, limousines, Uber, Lyft—all of those businesses shut down almost instantaneously. Some of those businesses are beginning to come back and there is more need for truckers to get on the road. Conversely, the companies hauling “essential” products face increased demand when COVID-19 hit, along with added risks related to meeting that demand, including operating safely during a pandemic. We still have a long way to go to get back to where we were before the pandemic.

What advice do you have for brokers new to Transportation Insurance?

Align yourself with an organization that has an established transportation specialty practice so you can be properly mentored and have access to insurance carrier partners that write that business. Seek out opportunities to work for someone with expertise, experience and a solid track record producing profitable business with specialty insurance carrier partners. 

What is most important for brokers to discuss with clients relative to their insurance needs?

One distinguishing characteristic of the best brokers is their willingness to invest the time to ask their client detailed questions about their business. Explore with each client in depth how their business has changed over time and what they envision for their company’s future. Ask whether there are activities they are not engaging in currently that they would like to incorporate in the future. Find out whether a client’s business has been forced to make changes due to economic conditions. This kind of inquiry will allow a broker to fully understand a client’s full range of potential risks and present it to the underwriter. Insurance carriers dislike surprises, so to build mutually respectful broker-carrier relationships it is critical for brokers to understand and share all of their clients’ operational exposures.

 

Transportation Insurance

WHY YOUR CLIENTS MIGHT NEED IT: Increasingly extreme and unpredictable weather has become the new norm, making road conditions more perilous. Accidents are common – 450,000 police-reported crashes involving large trucks occurred in 2017 alone and 78 percent of large truck rollover accidents were attributed to driver error that year.

PROTECTS AGAINST: Costs stemming from third-party property damage and bodily injury, environmental pollution, driver error or negligence and damaged cargo and vehicles.

EXPERT OPINION: “General commodities haulers are usually required to carry a minimum of $750,000 in liability limits but the vast majority of the industry carries $1 million at a minimum. Unfortunately, due to the proliferation of $1 million-plus settlement verdicts, $1 million can no longer be assumed to sufficiently or entirely offset the full cost associated with a claim,” said John Woods, John Woods, Vice President, National Practice Group Leader, Transportation, Burns & Wilcox, Scottsdale, Arizona.

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