Insurers Applaud EOBRs, Demur on Premium Cuts

This story appears in the June 6 print edition of Transport Topics.

Insurance executives said they strongly support electronic logging but that use of the devices by truckers will not automatically lower fleets’ coverage expenses because carriers’ overall safety records dictate rates.

Four insurers made that assessment as the Federal Motor Carrier Safety Administration weighs comments about its proposed electronic onboard recorder (EOBR) mandate. The agency said it expects to publish a final rule in May 2012.

“A strong safety culture reflected in a good safety record and positive claim experience is the strongest positive factor for achieving the best rates,” said Thomas Dickmeyer, CEO of the Cline Wood Agency, an insurance firm based in Leawood, Kan.

Cline Wood supports the views of American Trucking Associations and the Truckload Carriers Association, which have endorsed the technology.

“Installing EOBRs will not, in and of itself, gain a motor carrier a better insurance rate,” Dickmeyer said.

“To the extent that EOBRs indicate a commitment to safety to a particular underwriter and the actual experience of the motor carrier is reflective of this, rates can be impacted positively,” he said. “Only after that technology improves safety and that improvement shows up in claim experience will there be significant rate improvement.”

“We’ll take [EOBRs] into consideration in underwriting,” Paul Fazekas, senior vice president of Venbrook Insurance Services, Woodland Hills, Calif., told Transport Topics. “We have no uniform way of addressing EOBRs. It is not something where there would be an automatic discount. It impacts the underwriting, but we can’t put a specific number on it.”

“There are still a number of insurance carriers that loss-rate,” Fazekas said, referring to the insurance company practice of measuring the insurer’s cost of accidents against premiums paid by the trucker.

Mark Langer, transportation practice leader at insurance broker Marsh Inc., New York, agreed, saying that use of EOBRs is a factor, but coverage cost still is largely based on past loss experience.

Roger Murphy, assistant vice president at insurer ACE Westchester Environmental, Philadelphia, also stressed the broader view while speaking at a May 24 trucking meeting.

“There are many factors that are used to insure and underwrite policies,” Murphy said, also citing loss severity and frequency.

A handful of major fleets such as Werner Enterprises have had EOBRs for years, while others — including Schneider National — installed them more recently, and still others haven’t done anything yet.

That gradual adoption is creating uncertainty, experts said.

“It’s kind of a mixed picture right now,” Murphy said. “Some [fleets] have them and some don’t. For some, it’s a capital constraint.”

“We’d like to have information about whether carriers have them,” Murphy said, terming them “a favorable development. Logs are a tool to get out in front of problems before they occur.”

Fazekas said he believes a majority of insurers still don’t ask about the presence of EOBRs when they send questionnaires to carriers, though some have started to do so.

Insurers found multiple reasons to laud e-logs.

Langer described Marsh’s experience with the devices as “very positive,” saying “if [fleets] have EOBRs there are going to be less over-hours, less fatigue and less accidents.”

He also stressed a less-noticed benefit: The presence of an EOBR means that lawsuit plaintiffs’ attorneys can’t be as aggressive in pursuing litigation, reducing the likelihood of costly punitive damages.

That occurs, Langer said, because plaintiffs’ attorneys can’t pick apart a driver’s paper logbook during a court case to use against a fleet in court.

Don Osterberg, senior vice president of safety and security for truckload carrier Schneider National, agreed.

“Removing the irregularities that are in paper logs will position us more favorably in litigation,” Osterberg said. “The reality of regulatory noncompliance is that it increases the cost of settlements.”

Murphy identified additional benefits, citing the growing adoption of EOBRs as the federal Compliance, Safety, Accountability program takes hold.

Both force drivers to improve their behavior and drive legally because there is more statistical information available to ensure improvement, Osterberg said.

Murphy also noted that the devices’ benefits are maximized when management at fleets that have electronic devices use the information generated to reduce the frequency and severity of accidents by working with drivers.

Like Murphy, Langer stressed the importance of using EOBR information as a very effective performance measurement tool for drivers and managers.

Langer also said that EOBRs often add safety technology that measures critical events such as hard braking.

Still another advantage of electronic recorders, Langer said, is using the devices’ communications capabilities to reduce the incidence of accidents that occur when a driver gets lost or misses a highway exit.

Those factors contribute to 30% of severe crashes, Langer said.

Dickmeyer observed that immediate EOBR benefits for the vast majority of most motor carriers that comply with hours-of-service rules and log accurately will be limited to more accurate record-keeping.

However, Dickmeyer added, mandatory EOBRs could help law-abiding carriers by creating a competitive advantage against rivals who continue to ignore hours-of-service requirements.