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Ask the Expert Q&A: Transportation Insurance

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Transportation companies face a multitude of risks, from driver shortages to high-severity claims. To learn more about how Transportation Insurance can help companies address these risks, Crain’s Content Studio spoke with Tyler Myers, Director, Transportation, Burns & Wilcox, Dallas/Ft. Worth, Texas.

What are some of the greatest risks the transportation industry faces today?

T.M.: Some of the greatest risks in the transportation sector include: operational integrity; the ever-growing driver shortage coupled with pent up demand and bounce back from previous supply chain shortages; congestion and parking issues; and failure to implement or execute a risk control plan of action.

What should transportation companies be aware of relative to these risks?

T.M.: In order to mitigate as much risk as possible, transportation companies should strive to execute strong risk management and mitigation strategies.

For example, companies should focus on vehicle maintenance, implementing safety protocols with remedial reviews with drivers, and compliance. Driver retention efforts and written-implemented driver hiring policies and procedures are also important.

Transportation companies should adopt and utilize loss-control measures, such as cameras and telematics, and consider hiring a loss-control professional or utilizing a consulting firm, which can also help with Compliance, Safety, and Accountability scores. They can also utilize pre-operational inspection unit logs, quarterly or biannual driver training, and use telematics data for driver counseling and training opportunities.

Trip planning can also help mitigate the increased risk of loss due to weather, construction zones or poor infrastructure, as well as familiarize the driver with the planned route.

What insurance policies can help companies respond to these threats, and what are the limits and examples of covered expenses?

T.M.: The core issues highlighted are motor carrier operational issues. While additional insurance coverages or increased limits might help in the case of a large severity claim, adopting core operational practices with loss control ingrained in your company culture greatly reduces the probability of loss severity.

Loss severity can increase insurance costs, thereby increasing operational costs, and can likely keep a company from being considered by preferred insurance carriers—which typically provide enhanced coverages, lower-than-average market premiums, and loss-control advisement. It can also impact company longevity and increased profit margins.

How has COVID-19 affected the Transportation Insurance market?

T.M.: In the trucking industry, supply chain issues affected the efficiency of transport, increasing unit downtime, resulting in a loss of generated income for most companies. It also caused an economic shift. Prior to COVID, we saw a healthy frequency of trucking startup and non-fleet operations. As the economy trended down due to COVID, demand and logistical failures increased. The larger established operations had a higher probability of survival, while smaller non-fleet operations—particularly new ventures with under three years of operational experience—suffered or closed down. In the public auto industry, there was a complete shutdown in operations in most cases. The lapse in operations/coverage for a year or longer made the risk more difficult to accurately rate due to driver turnover, reduction in units, and change in operation exposure, etc.

Can you provide an example of a scenario you have dealt with that would be illustrative of the types of risks that we have been discussing?

T.M.: I too often see distressed operations—whether it be basic scores, loss ratio, driver quality, or etc.—kick the proverbial can down the road in regard to attacking the core issues attributing to their operational deficiencies. Instead of reducing profitability in the short term to fix their issues, which would protect the longevity of their business, they choose to double down on profitability, oftentimes cutting corners for short-term gain. The solution should be partnering with the appropriate insurance carrier with a good financial rating and with good support systems in place, such as loss control advisors, driver training, and incentives for performance. While this option generally comes at a higher cost, it can improve the overall tier of risk going forward, making them more favorable to preferred markets, which, in turn, increases the longevity of the company as well as profitability.

An insurance wholesaler like Burns & Wilcox can provide retail brokers and agents access to these insurance carriers—ensuring adequate coverage for their clients during a difficult time and market.

What advice would you give brokers to increase their success rates with these products?

T.M.: Understand the industry and its challenges as well as the challenges associated with the territory you generally source trucking-related opportunities.

To assist in properly advising insureds, retail brokers and agents should partner with an experienced insurance wholesaler with long-standing relationships—all of whom have the insured’s success and sustainability in mind. While it seems counterintuitive, it reinforces trust, which in turn increases opportunities.

TRANSPORTATION INSURANCE

WHY YOUR CLIENTS MIGHT NEED IT:  From driver shortages to fraudulent insurance claims, the transportation industry is facing great challenges.

PROTECTS AGAINST: A range of legal and financial costs related to delivery delays, theft, damaged goods, accidents, and more.

EXPERT OPINION: “Adopting core operational practices with loss control ingrained in your company culture greatly reduces the probability of loss severity. Loss severity can increase insurance costs.”

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