Tank truck carriers struggling with insurance industry crisis

Feb. 1, 2002
AN INSURANCE crisis continues to hammer tank truck carriers across the United States as they struggle to renew coverage. At least one container drayage

AN INSURANCE crisis continues to hammer tank truck carriers across the United States as they struggle to renew coverage. At least one container drayage operator had to take vehicles out of service for almost a month while its Department of Transportation safety profile was scrutinized by underwriters.

All trucking companies are facing extraordinary increases in premium costs, some as much as $8,700 per truck, compared to a cost of $880 per truck a few years ago. For carriers seeking umbrella coverage, they can expect as much as a 200% to 300% increase in premiums.

Added to the complications is the shrinking pool of insurance underwriters that continues to extend coverage to trucking companies. Cliff Harvison, president of the National Tank Truck Carriers (NTTC), estimated that in the past three years the insurer pool has been drained from 123 underwriters to 22. “And very few of those companies are interested in covering tank trucks,” Harvison noted. “We have got to convey this message to our customers and shippers.”

Harvison made the comments as guest speaker at the January 8 luncheon of the Transportation Club of Houston (Texas). Leading the discussions on the insurance crisis were Barbara Stiles, president, Excess House Inc; Joe Ware, corporate account sales director, American Freightways; and Roy Acton, vice-president safety and compliance, Mission Petroleum Carriers Inc. They presented the insurance difficulties carriers are encountering and the methods that can be used to ease the situation.

The September 11, 2001, terrorist attacks on New York City and Washington DC have increased the risks for the trucking industry, particularly for those transporting hazardous materials. In the tank truck industry, at least 80% of the shipments involve hazardous materials, according to NTTC estimates.

Stiles said Congress is considering legislation that would exempt insurance companies from providing insurance policies for incidents stemming from terrorist attacks. “Carriers will be sitting out there without that coverage,” she added.

Also on the rise are premiums for health insurance and worker compensation, the latter projected to increase by 50% nationwide. In addition, some worker compensation insurers want to exclude coverage for operations with more than 100 employees in a single location.

Stiles noted that when carriers apply for insurance, their DOT safety profile can become a major obstacle, if it fails to meet the insurance company's requirements. The information is easily accessed on the DOT Web site. Insurers review the profile rating as a primary consideration for extending coverage. If the rating is below standard, some insurance company representatives may go no further in their review and deny coverage, she said.

“That's why you need an agent who understands the trucking industry,” she added.

Because the rating carries such importance, truck fleet managers should review their profile every month and contest any entries that are inaccurate, said Acton. He noted that one carrier's information may be entered in another's profile with a similar name. Those inaccuracies, and others, can be misleading and should be addressed immediately in order to correct the profile. Acton recommended the Commercial Vehicle Safety Alliance (CVSA) as one source for helpful information. Carriers also can get a detailed profile via a monthly e-mail from DOT.

The insurance hikes have been spawned by several events that staggered the industry, including the current sluggish economy and the terrorist attacks, said Stiles. Insurance companies typically invested premium income in the stock market, which has been on a downtrend. At the same time, the suffering economy impacts companies seeking insurance, which causes them to reduce their coverage. Natural disasters also have stunned insurance providers.

Insurance company mergers haven't necessarily helped the situation either. “There is a significant cost of mergers,” she said. “They may not be run as efficiently. If they make a bad decision from the management side, that is going to impact them; and it's going to impact you.”

Finally, the September 2001 terrorist attacks cost the insurance industry $40 billion to $50 billion, and the repercussions from the Enron failure have yet to be totaled. Insurance investors, seeing the poor market conditions, are backing out.

“There's just less money around to invest in insurance,” Stiles said. Furthermore, a government bailout isn't likely.

To ameliorate the carrier situation, Ware recommends that carriers provide a detailed list of insurance premium increases to their customers when seeking compensation, whether through a surcharge or rate increase. The information places the carrier in a better position to negotiate compensation to offset the insurance costs it faces, he said.

Acton emphasized the importance of presenting a prospective insurer with information that details the company's dedication to safety and a description of its safety program.

However, despite the best efforts, industry spokesmen aren't offering a bright forecast for the next year. Transportation associations continue to headline insurance issues at their meetings and seminars, and companies continue to wrestle with insurance costs. Unless the economy takes a sudden turn upward, it appears the insurance issue will task the industry throughout 2002.

About the Author

Mary Davis