Best Trucking Insurance Tips – Livery Insurance: Insurance Loss Runs & How To Calculate Loss Ratio.
Trucking Insurance – Livery Insurance: Loss History.
What’s Loss Ratio?
Loss Ratio (LR) of an Insured is the total actual paid insurance claims (including Claims expenses) on an insurance policy; compared to the actual total premium collected by the insurance carrier, for the same period. Normally LR is measured over a period of not less than 12 months. The longer the period used for calculation, the more accurate the ratio will be, Loss Ratio reflects the Loss
History of an insured. If an insured pays $5,000 in premium for a Business Insurance policy for the first year, and the insured may incur a loss of $1,000 for example, during the same policy term, then the insured Loss Ratio is 20% for that policy term ($1,000/$5,000).
Let’s assume the insurance premium -for the same insured- will increase by 10% during the second year or first renewal- due to the claim incurred in the first year- so the first renewal premium will be $5,500, if the business will have another claim of $1,000 during the second year, then the total loss ratio –over two years period- will actually drop to 19%! ($2,000 in losses/10,500 in premium), short periods used for calculation would be unfair for the insured, especially if the insured is a new startup business or just having a tough first year, as happen with most new ventures, It’s better to use at least 3 years of insurance history to calculate the LR to obtain a fair judgment of the business history, but this not possible with new businesses, reported paid out Losses by the insurance carriers or their claim adjusters will include claims expenses in addition to actual claims amount, only premiums actually collected are used in calculation, not quoted premiums. Some insurance carriers will use 36 months or even 60 months to calculate the loss ratio, to have more accurate understanding of the insured loss history.
Loss Runs Report
Loss Runs or Loss History (also known as Claim History or Letter of Experience from an insurance carrier) is a detailed report listing claims on an insurance policy, including actual loss date, loss reported date, parties involved in the loss, type of loss, amount paid to each party and status of the claim, either closed or still open, Loss Runs will cover the actual policy or policies period an insured has with the same carrier, almost all insurance carriers will require a copy of the Loss Runs from a new customer before releasing a firm quote or issue a policy.
The report can be obtained only by the insured –or his authorized reprehensive- directly from the insurance carrier(s) or from the appointed agent/broker(s) during the policy(s) period.
Information contained in the Loss Runs reports, along with information about premiums paid already on previous insurance terms will be used by insurance carriers’ underwriters to calculate the client Loss Ratio and incorporate that in the new premium calculation for the upcoming insurance terms.
Some Loss Reports will include details about recovery, if the amount of claims paid out was recovered by the insurance carrier from a third party or not, Insurance carriers can recover claims paid from another party proved to be at fault and the original cause of the loss, as long as there is no waiver of subrogation included in the insured policy, which would mean the insurance carrier waive their rights to go after a third party after they pay the claim to the injured party.
We can help new clients get their Los Runs reports from previous carriers, if the other carrier or agent are taking too long to respond to the insured.
Trucking companies tend to have higher Loss Ratios, it may well exceed 65%, or even 100% in severe cases, an example, in the case of a startup trucking company with new, young or inexperienced drivers, a total truck loss is not uncommon, accident happens as they say, claims could be caused by theft, fire or accidents, newer trucks can cost up to $200,000 for truck-tractors only, a newer truck loss can bring the loss ratio sky rocketing, which will make very difficult for the affected trucking company to renew or find other insurance coverage in the regular market, what we’ve learned over the years, since we been working with similar types of trucking companies for a long time, an alternative insurance market is always needed.
Alternative Insurance markets could be with non-admitted or surplus, risk retention groups or state assigned risk plans, premiums will be higher with these markets, because they insure higher risk clients.
New drivers, new trucking companies or new DOT motor carriers, with no experience in the trucking industry will need an alternative insurance market, but they must be careful while searching for insurance, there are many choices offered specially online, and sometimes it’s so misleading, some new motor carriers are desperate to get started, but its better always to talk to an experienced truck insurance broker, before making their insurance purchase.
For existing motor carriers, with high losses or higher number of claims, our experienced insurance brokers at Saberlines Trucking Insurance could lead them in the right direction, normally the market is available for any kind of risk, but at a higher cost based on the amount of losses they already have, High Loss ratio could be an indication -for the insurance company- either of a lack of proper management, lack of experience, old equipment or other issues with the motor carrier safety procedures.
Bad Loss History, or No History at all!
Saberlines Trucking Insurance can do much to help clients in the trucking industry, and other transportation and construction clients, when clients are having a hard time finding trucking insurance coverage due to heavy claims or bad loss history, either one big loss or many small losses, or new companies with no history or experience to back them up! Which makes it hard to secure insurance coverage in the regular or standard market, we are here to help!
Trucking firms unable to find trucking insurance at an affordable rate, fall into two segments:
#1 New Drivers, Young Drivers, New Startup Trucking Companies, Motor carriers with new DOT numbers.
Over the years, at Saberlines Trucking Insurance, we gained experience with certain risks and with certain type of clients, by adding more programs to insure the hard to insure listed clients, we didn’t choose the hard to insure part of the trucking industry, but the business chose us as they say, we noticed from day one, we enjoy challenging accounts, including new trucking companies, motor carriers with new DOT#, new truck drivers, drivers who just got their CDL, young driver round the age or less than 25 years old, some insurance companies even consider drivers up to the age of 28 years old to be inexperienced drivers!
#2 Existing trucking companies with many claims or major single claim in the past 36 months.
When it comes to Loss or Claim History, insurance companies need to be able to retain at least 35% of total premium they collect per policy term, which is a standard 12 months policy, to explain, insurance companies willing to pay up to 65% of policy annual premium in claims, like $6,500 in claims for each $10,000 in premium, as long as they keep 35% to cover management, underwriting, reserve and/or investment expenses, this percentage paid out in claims, is called Loss Ratio as explained in the beginning of this blog.
Business owners having difficulty finding insurance in the regular markets are not limited to trucking industry, high number of clients in the transportation industry, including taxi companies, limousine service, towing business, Non-Emergency Medical Transportation tend to have high or higher loss ratio than other industries because of the exposure they have all the time.
Construction Industry & Contractors
Another industry we noticed in our insurance practice, tends toward having higher loss ratio or more infrequent claims, is the construction business, including general contractors and artesian specialty contractors. For a period of time, it was very difficult to find insurance coverage for General Contractors who are building new homes, tract homes, apartments, or condominiums, even to this day there is gap in coverage or lot of exclusions and restrictions built into the General Liability policy for residential contractors, unless the contractor is a major construction company that will create enough high insurance premium for the insurance carrier to consider the risk, the exclusions will still apply, we still see law suits going to this day, against companies who used asbestos or other chemicals in building materials.
Dealers & Auto Repair
Auto Dealerships selling used cars and auto repair shops tend to have higher losses also compare to other garage businesses, and we have experienced that, other industries or professions have higher malpractice claims in the legal or medical field, like lawyers or doctors.
We like Challenging Accounts
At Saberlines Trucking Insurance we have experience in dealing with and helping clients in both transportation and construction fields, our clients who suffered heavy claims, trusted us year after year to find coverage for their companies so they can continue to operate profitably.
We developed good term relationships with many trucking insurance carriers in both standard and alternative insurance markets, our markets can insure high risk, hard to insure and new business ventures.
Losses or claims incurred in an industry can affect and increase the premiums for all insureds in that industry, Insurance is based on numbers, for example; Workers Compensation premium keep rising for certain industries, due to more claims in that particular industry, certain industries -as we discussed above- have higher losses than others, premiums for those industries will be higher than others, future premiums for an industry will be affected by present and past losses for the industry, insurance premium will increase year after year, if more losses are paid out within the industry, simply, these losses or claims paid out to previous insureds will be built into calculating the new future premiums for that industry, it’s like dividing losses over future premiums, another example is the trucking insurance premiums that keep increasing year after year for the same reasons above, insurance carriers use past experience to calculate future premiums across an industry, among other factors.
Non-Emergency Medical Transportation – Trucking Insurance
One of the transportation industry segments that was hit by higher losses in recent years is the non-emergency medical transportation, losses in this segment increased under the General Liability for some time, including the Sexual Harassment or Abuse claims filed by passengers, mainly due to drivers new to the industry, and being properly educated about handling the public. The auto liability loss ratio tend to be higher than expected from an auto based business, due to many frequent pickups and drops during the day.
As for NEMT insurance, the General Liability covers the Loading/offloading of passengers, business related activities while auto is stationery, and sexual harassments or abuse while handling passengers by drivers or other company staff, a lot of claims took place while the vehicle stopped, during loading or offloading, that’s why it’s important to have –and verify in writing- such coverage like Sexual Harassment, Loading & Offloading coverage added or included already under the General Liability for NEMT operations, a lot of time this coverage is silent, meaning it’s not spelled out, which is ok as long it’s not excluded in writing, the limit for this specific coverage could be up to the policy limit, or it could have separate limits of its own, which could be much lower than the policy limits!
So if you just starting your new venture!
If already in business but with losses or claims!
If you having difficulty finding the insurance coverage you need!
Need insurance to continue operating or to start a new business!
We can help!
We can provide the insurance coverage you need, through many of standard and alternative markets we represent!
Call or Email our experienced agents today!
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