BY SUSAN ROSEEditor’s note: Frustrated about your insurance rates? Having trouble getting insurance? Operators each year have to shop their insurance, which is often a time-consuming and “blind” process. You’re likely faced with fewer insurance carriers who are writing insurance in your state, and rates continue to rise. Bob Crescenzo, VP for Safety and Loss Control at Lancer Insurance, and Steve Friedberg, president of Research Underwriters, recently spoke at the Chauffeur Driven Show in Orlando about how you can optimally position your company so that you are getting the best and fairest rates come renewal time. Jason Sharenow, COO of Broadway Elite Worldwide and co-chair of CD’s Education Committee, moderated the session.
Find the Right Broker/Agent: “What you get when buying insurance is claims management and settlement skills,” says Crescenzo. “The reason it’s important to think that way is because each time a broker presents an application to an insurance company, they are presenting all of your information, a story to be told. How well that story is presented is how the underwriter decides to write insurance for you and at what rate.”
Ask Questions: An insurance company is going to turn over every rock and find what slithers out about your company, so you should do the same before accepting a policy. There’s nothing wrong with interviewing the company. “I would incorporate into the decision-making process—besides just the price of the policy—who handles the claims and what experience they have,” says Friedberg. Have your agent set up a phone interview with the claims manager. One of the most important questions you can ask is what the insurance company does with handling claims, because if they do a bad job, you can have something that may have been a $50,000 claim mishandled into a $1 million claim. That’s on your loss run, so when you renew, you might not get coverage.”
Introduce Yourself and Your Company: “Most of you probably don’t see the package that the agent sends on behalf of your company. We think it’s a really good idea that you take a look at it so that it’s bragging about all the right things that your company is doing. Include a nice cover letter, background on the owner, who your key management is, and a brief company history,” says Friedberg. “Tell us who you are and what you do; don’t make us guess. It’s also not a bad idea to have your broker introduce you to their underwriters so that they get a feel for who you are when making those decisions. By being a conduit between you and the insurance company, it always ends up with much better results.”
Some Key Areas That Underwriters Look At:
• Historical vehicle types, counts, and mileage
• Historical driver information
• Vehicle usage: charter, limousine, van, tour, corporate, fixed route, party/event, etc.
• Vehicle list
• Driver list
• International Fuel Tax Agreement (IFTA), if applicable
• Financial statements/information
• Website information
• SMS scores and proof of compliance with both state and federal regulations
• Electronic devices (cameras, ELDs, GPS) and monitoring programs
• Industry involvement and association membership
• Five or more years of claims data (such as loss runs and claims settlements)
• Safety and loss-control assessments
• Business plan (including anticipated changes to business model, size, and/or ownership)
• Marketing plan and review of current and anticipated contracts/commitments
Courtesy of Lancer Insurance
Website and Advertising Consistency: Does your application match your website? It’s a digital world where access to information is readily available for most anyone, including your insurance company. So if you’re claiming that you only do church group trips and executive transportation on your application, but advertise that you specialize in party bus and nights on the town, it raises questions that your underwriter wants answered. The underwriter needs to know what the facts are, and safety and loss control serve as the eyes and ears to make sure that the policy is priced to represent the appropriate risk. Honesty goes a long way.
Business and/or Marketing Plan: Crescenzo suggests that operators should share their business or marketing plans during the review process because it indicates where you are going with your company in the next 12+ months. This also applies any time when your company’s business model changes, such as adding a larger vehicle. “Underwriters often work with existing policy holders as they change their business model or update their fleet because we have that relationship and know what they can manage. Having that type of plan in place reassures the insurance company and helps to communicate risk. It’s part of your story. That is how you are going to get your best rate—it may not be the rate you want, but it will be the fairest rate in the marketplace at the time and based on your circumstances.”
Driver Standards: You should maintain certain criteria for hiring chauffeurs, including any special contracts that utilize your driving workforce in a way that’s different from the traditional chauffeur and especially during periods of desperation when you need to hire in a pinch. This is also vital to include in your annual application to show consistency across the board when hiring and vetting your drivers. Highlight your safety and training program, because if you don’t have either, then you are letting your drivers spend your company’s money through potential claims down the road.
Loss Runs and Outstanding Claims: Just like you wouldn’t buy a vehicle without checking your finances, you shouldn’t come up for insurance renewal without checking your loss runs and reserves, which is an estimated placeholder amount that your insurance company hasn’t paid out yet for open claims. If you have an accident that involved bodily injury, then the reserve may be listed very high. A reserve is considered money spent until that claim is closed, so it will affect your insurance renewal. It’s important to have your broker explain that number to you and work on your behalf. Friedberg suggests that all companies look at their loss runs as far back as five years because 90 percent of your premium is based on what is in there. “If you haven’t checked your loss cost per unit and claims ratio per vehicle, you need to do it. Pricing of policies is impacted by frequency, severity, and claims average.”
“I request my loss runs every quarter,” says Sharenow. “Like my P&L statement, I also need to know what’s sitting on my loss runs. I want to know what the reserves are and if claims have been closed, because when it comes time for renewal, all that information is going to affect it. I want to get those claims closed as quickly as possible, and we’re going to do everything we can to do so. If the insurance company isn’t handling claims internally, then they are using a TPA, or a third-party administrator. Some TPAs have been very good, but some haven’t. That’s why it’s so critical that I’m highly involved in the process of monitoring my claims.”
“Every operator should be working with their broker or agency to manage those claims because you have a vested interest,” says Crescenzo. “If your current company isn’t settling claims quickly and fairly or doesn’t have that skill, then you’re spending a lot of money in premiums for resources that you’re not getting. It’s important that you work with a specialty agency that understands your business. If you’ve added buses, make sure that they are skilled in bus insurance. It’s a huge change in the industry.”
Buses/Vehicles Operating With USDOT Authority: The Safety Measurement System (SMS) is a summary of all of the violations against your company and drivers incurred during a driver incident, a location visit, or a roadside inspection. Those incidents remain on the company’s record for two years and the driver’s record for three years.
“It’s sort of like an MVR by the Feds,” says Crescenzo. “Every month this system is updated, so if you are not monitoring your scoring, then that’s a piece of information that you don’t know. In certain circumstances, these records are available to law enforcement—which is why your company may be targeted for roadside inspections—and the general public. You or someone in your company should be monitoring your score.”
Rate Frustration: Are you still confused by why you aren’t getting what you consider to be fair rates? It’s likely your history. “The insurance companies know that at the end of the policy period that whatever your loss runs show by then are probably going to be doubled five years from now. If your loss ratio for the current year is 30 percent, your carrier is going to double that number and look at the original 30-percent ratio as a break-even point,” says Friedberg. Seriously sit down with your broker and figure out a path to better operations in the eyes of your insurance company. Is it your hiring practices? Do you need a better training program? With any luck, Friedberg says you’ll be on your way to lower rates. [CD1117]