OPINION: Insurance - No Bargains in Basement

With fleet insurance rates on the rise, conventional wisdom might be to aggressively shop your insurance program for the cheapest rate. Such a strategy at this time may well prove disastrous for unlucky trucking firms.

Property and casualty insurance rates historically have been volatile, with extreme rate increases last observed in the hard market of 1985-86. This is attributable to normal market swings and is influenced greatly by the returns insurance companies obtain from the investment markets as well as past underwriting profitability or the lack thereof. The P&C marketplace is currently in a firming phase. A number of significant players in the trucking insurance area are withdrawing from the marketplace or re-underwriting their books of business to increase premiums and reduce underwriting losses. This is exerting upward pressure on rates.

Over the years there have been numerous questionable entrants into the fray who offer seductively low rates unsupportable by prudent underwriting. Such programs serve to drive rates below sustainable levels. Such programs do not last. When they non-renew or become insolvent, fleets scramble for an alternative — often paying dearly.

ate increases predicted in Transport Topics in December 1999 have proved in many cases to have been conservative. Over the course of the past several months, most fleets’ policies have renewed with rate increases of 5% to 20%. Further increases of this magnitude are widely predicted. There are numerous unfortunate fleet operators who are suffering the “triple whammy” of movement to a new insurance carrier, along with poor accident history and prevailing rate increases. They often have no choice but to accept renewal rates representing a doubling or trebling of annual premiums.

For the full story, see the May 29 print edition of Transport Topics. Subscribe today.

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