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SOM-Trucking-Sept2016.5

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SOM-Trucking-Sept2016.5

  1. 1. State of the Market Excess Trucking September 2016 CRC Group | CRC | CRC Swett | SCU
  2. 2. 2 Takeaway The market for excess trucking liability insurance is facing some of the most challenging conditions it has experienced in decades. The decision by the market’s leading insurance company to no longer underwrite transportation-for-hire risks due to profitability concerns has made finding replacement coverage at lower layers more difficult for retail agents and brokerage firms. CRC, CRC Swett and SCU have centuries of combined experience in solving insurance problems for trucking risks. We are focused on delivering solutions regardless of market conditions and have a long track record of success in helping meet the needs of retailers’ customers. The current market is challenging but not in crisis, and we are able and committed to help clients find the best solutions. Excess Trucking The Most Challenging Conditions in Decades
  3. 3. 3 Placement Considerations Business owners deal everyday with the dynamics of supply and demand and its effect on pricing. Insurance works in much the same way. When multiple insurers compete to write a given set of risks, premiums tend to come down. The reverse is also true—fewer insurers competing means rates will tend to increase, sometimes sharply. This is the situation that the excess trucking liability marketplace is seeing. In the current environment, insurers’ resources—both in terms of available underwriters and their time to evaluate trucking risks—are limited, but demand remains high. This is making it harder for trucking firms to keep their insurance costs in line with their past expectations. One positive is that capacity for excess trucking risks remains available, but limits are coming at a price, particularly for lower excess layers. Even with the withdrawal of a leading insurer, there is still capital available from highly rated companies to underwrite these risks. However, because of limited time and resources underwriters are: Becoming much more selective about the risks they entertain Evaluating each risk on its own merits Pushing for higher rates on both new business and renewals with unfavorable loss histories Raising attachment points and cutting back limits for excess layers, in certain situations Besieged with submissions seeking quotes Naturally, the most challenging segment at the moment are the lead layers above primary. This means an account placing $19 million excess of a $1 million primary could likely require four excess insurers to complete the placement, while only requiring two, possibly three, insurers in the past. As has been the case in the market, the premium on the first excess layers may increase substantially. With that said, however, CRC, CRC Swett and SCU have successfully placed new and renewal business at or around expiring rates, and on some occasions, reductions where warranted. Above the first $20 million excess layers aren’t facing quite the same challenges in the current marketplace. Profitability in excess trucking liability has been problematic for insurers over the past several years. Even though claim frequency is up, the main factor in reduced profitability is a spike in claim severity. Litigation arising from trucking accidents has led to costlier settlements, particularly in certain states that are considered more favorable to plaintiffs. It is not uncommon for a single excess liability claim today to equal several years of collected premium for a given risk.
  4. 4. 4 HOW TO GET TO THE TOP OF THE PILE With relatively few underwriters seeing a greater number of submissions for excess trucking liability insurance, the ability to get insurers’ time and attention is critical to success. Insurers are not issuing quotes on every submission, which means that obtaining quotes is more difficult now. Here are some ways to ensure your risk gets to the top of the pile: Clean, complete submissions. In this marketplace, underwriters will automatically move sloppy or incomplete coverage applications to the bottom of the pile or reject those applications outright. Information on risk improvement. Accounts should emphasize what they are doing to improve their risk profiles, such as using technology in fleet operations. If possible, demonstrate improvements in safety scores in the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability (CSA) program. Engage with us early on. It may take time to gather all the necessary information to prepare a submission. Working with CRC, CRC Swett and SCU two to three months before renewal will help smooth the path to the best solutions for insureds. Communication with underwriters and clients. Clear, frequent communication with excess trucking underwriters and the customers is imperative to manage expectations and obtain the best results in the current marketplace. CRC, CRC Swett and SCU have strong relationships and significant premium flow with every leading insurance market in excess trucking. Our business volume, longstanding relationships with underwriters, and deep expertise in trucking risks mean we can obtain coverage indications quickly, even in the current marketplace. How Much to Buy: Limits Benchmarking Reports CRC and CRC Swett can provide retailers with access to limits benchmarking reports based on proprietary trucking account data. When facing tough decisions in light of increased rates, higher attachment points or reduced layer limits, these reports offer insights on total recommended limits ensuring well informed decisions. Contact your CRC or CRC Swett broker for access to these reports.
  5. 5. 5 60000 90000 120000 150000 People Injured Injury Crashes 2014201320122011201020092008 Non-fatal crashes involving large trucks and buses have risen since 2009. 79%No Injuries 20%At Least One Injury 1%At Least One Fatality Data gathered by FMCSA for 411,000 police reported crashes in 2014. 5%DECREASE IN FATAL CRASHES (2013-2014) 55%INCREASE IN INJURY CRASHES (2009 - 2014) INCREASE IN INJURY/PROPERTY CRASHES (2013-2014) 21% INCREASE IN PROPERTY DAMAGE CRASHES (2013-2014) 31% EXCESS TRUCKING BY THE NUMBERS $281.6M $165M $58.5M In 2013, a Texas jury awarded $281.6 million to the family of a man killed when a driveshaft broke off an oncoming tractor-trailer and struck his vehicle.4 In 2015, a New Mexico jury awarded $58.5 million to the family of a woman who was killed with her 4-year-old daughter in a 2011 accident involving a FedEx truck.5 In 2013, a New Mexico jury awarded $58.5 million to the family of a man killed in a 2010 trucking accident. The award consisted of $11.5 million in compensatory damages and $47 million in punitive damages.6 LARGE AWARDS FOR FATAL ACCIDENTS TRENDS IN INJURY CRASHES
  6. 6. 6 For more information, contact your CRC, CRC Swett or SCU broker. To find a conveniently located broker visit us on the web at: crcins.com, crcswett.com or scui.com. Conclusion Excess liability insurance for trucking companies is one of the most challenging lines in the current marketplace. Reduced profitability and increased exposure are forcing underwriters to adopt a much more selective approach to writing excess trucking risks. With loss frequency up and loss severity spiking, claims costs have become inflated. This has been exacerbated by the withdrawal of a leading insurance company from the trucking-for-hire sector. The number of participating insurers for excess trucking liability has shrunk, and they have a limited amount of time to consider the high volume of requests for coverage. The combination of fewer players, worse-than-expected underwriting results and greater selectivity means that, in general, accounts are likely to see significant increases at renewal. Every deal is different, however, and an account with good loss experience is likely to fare better than those with poor loss experience or recent large claims. Critical to smooth renewals are complete and accurate submissions, information on risk improvement, working with an experienced and expert wholesale broker, and clear communication with underwriters as well as insureds. Regardless of an account’s risk profile, CRC, CRC Swett and SCU are well-positioned as the leading wholesale insurance firm, with significant expertise, market relationships, and proprietary limits benchmarking reports, to help retailers navigate current market challenges and obtain the right solutions for insureds.
  7. 7. 7 Endnotes 1 The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) maintains a searchable database of interstate motor carriers with scores on seven Behavioral Analysis & Safety Improvement Categories, or BASICs: unsafe driving, crash indicator, vehicle maintenance, hours of service compliance, controlled substances/alcohol compliance, hazardous materials compliance and driver fitness. https://ai.fmcsa.dot.gov/SMS 2 As part of the FAST Act, FMCSA in February 2016 contracted with the National Academy of Sciences to conduct a thorough study of the CSA program, specifically the Safety Measurement System. NAS will examine the accuracy of safety metrics and their correlation to high-risk motor carriers. A report to Congress is scheduled for June 2017. Until the study is completed and published, FMCSA has removed the alerts and certain percentiles of SMS scores from public view. https://www.fmcsa.dot.gov/ fastact/csa 3 Among the requirements of the FAST Act, which authorizes FMCSA funding through fiscal year 2020, is the development of a Beyond Compliance program that will recognize and give credit under the CSA program for motor carriers that voluntarily adopt advanced safety and monitoring technologies or enhanced driver fitness measures. https://www.fmcsa.dot.gov/regulations/fixing-americas-surface-transportation-act-fast-act 4 A jury in Dimmitt County, Texas, awarded $281.6 million in damages in 2013 against a trucking company after one of its tractor- trailers broke a driveshaft, which struck and killed a passenger in another vehicle, according to news reports. http://www.mysanantonio.com/news/local/article/Shale-company-ordered-to-pay-281M-in-wrongful-5044466.php 5 A Santa Fe, New Mexico, jury awarded $165 million damages against FedEx following a 2011 accident that claimed the live of the FedEx driver as well as a woman and her 4-year-old daughter, according to news reports. http://krqe.com/2015/01/23/santa-fe-jury-awards-fedex-crash-victims-record-165m/ 6 Another Santa Fe, New Mexico, jury awarded $58.5 million in damages against a small trucking operator after a 2010 crash that killed a man, according to news reports. http://www.ttnews.com/articles/printopt.aspx?storyid=31688 7 The Truck Accident Attorneys Roundtable – Fried, Gursten, Leizerman P.L.L.C. was founded in 2015 to specialize in trucking accident litigation. The firm’s founders have litigated more than 600 cases collectively. http://www.truckaccidentattorneysroundtable.com/about-us/http://www.truckaccidentattorneysroundtable.com/about-us/

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