Truck Insurance Rates...where are they going?
Due to the hardening of the truck insurance market, fleets are now paying close attention to how they can reduce their exposure to losses and protect their operating authorities. Since the fall, truck Insurance rates have been increasing and some fleets are seeing a significant increase or non-renewal.
So what’s causing the increase?
“The Ontario Automobile Insurance system is broken,” says John Oldfield, who has been a Senior Account Executive at Dalton Timmis Insurance for 19 years. He continued, “It’s not just broken, it’s fatally broken with 30 to 40% of claim cost being lost to leakage in the process. Ontario has some of the highest costs for insurance in Canada. If your fleet is not managed, it’s going to be a lot more difficult to get insurance, or if you can source insurance, you may not be able to afford it. So the key words this year are access to insurance and affordability of insurance.”
David Marshall, who was appointed by Order in Council as a Special Adviser to the Minister of Finance to review and make recommendations as to improvements in the system of auto insurance in the Province of Ontario had this to say in his final report published in early April. “Overall, Ontario has one of the lowest levels of auto accidents and fatalities in Canada and the most expensive auto insurance premiums.” He continued, “Historically, periods of cost reduction have inevitably been followed by cost increases. What is more disappointing is that while the number of automobile accidents in Ontario – especially very serious ones – have consistently come down, the cost of claims has consistently gone up. Ontario also has one of the least effective insurance systems in Canada. It is filled with disputes and inefficiencies, and a very high percentage of premiums are being used to pay experts and lawyers and not going directly to injured persons.”
One controllable area that has been hit hard over the last few years is the Statutory Accident Benefits (SAB's) of the carriers auto policy. As a result fleet managers are starting to pay closer attention to the WSIB Alternative programs that their OO's are purchasing.
Oldfield says, “If a fleet is not covering off the SAB’s exposure correctly, then their fleet insurance policy is in jeopardy and it will show up in their loss run. Premiums are directly affected by loss histories and loss histories are directly affected by improperly insured O/O’s.”
Times have changed. In the past, fleets would only require their O/O’s to purchase a private alternative and many would ask them to provide a certificate of insurance for their file. Although many of the WSIB Alternatives purchased offered excellent weekly or monthly benefit terms, the majority of programs offered to O/O’s are set up as “excess only” coverage for Accident Medical Benefits. This means that costly benefits such as rehab, physio, prescription drugs and other medical expense are 2nd payor to the carrier’s primary automobile policy.
“Last year we had one claim that exceeded $1 million under the accident medical benefits and travel medical portion of our policy. This amount would have been directed to fleets auto policy had we had similar wording in our policy”, said Katelyn Oke, Vice President, Risk Management & Compliance at NAL Insurance. She continued, “A claim like this could have crippled the fleet had our policy not been 1st payor.”
Just because there hasn’t been an issue, doesn’t mean there won’t be. Fleet Managers need to do their due diligence up front and not assume the O/O has made the correct choices when purchasing coverage.
In our experience many of the programs we look at are filled with gaps that leave the fleet and O/O fully exposed.
“When an insured carrier allows their Owner/Operators to opt out of workers compensation coverage, we look for best practice controls to be in place to help protect the insured as well as their transportation policy,” reports John Farquhar, Transportation Risk Specialist at The Guarantee Company of North America. He continued, “These best practice controls must include a good solid alternative workplace coverage that is mandated for all owner operators. This program must be administered by the insured carrier either with the Owner/Operator paying into the program and the provider monitoring compliance with reports back to the insured or the insured paying for the program on behalf of the owner operator. These are controls that must be in place to minimize the associated risks.”
If you have allowed your O/O’s to opt out of WSIB, we strongly recommend that you require your O/O’s to purchase a comprehensive (that is first payor in all areas) alternative to WSIB, to reduce your liability and help control future primary insurance costs. Offering a solution through settlement deduction will ensure your O/O’s have not only purchased coverage but because you are paying the premium on their behalf (and charging them back), you can ensure coverage has been maintained. And while you’re at it, select a provider that can instantly provide you status updates, claims history and payouts for MVA type claims.
“It used to be that insurance was sold on fear. Fear of a claim” says Lisa Arseneau, Commercial Producer with Staebler Insurance Brokers. “Nowadays, we fear premiums and lack of affordable coverage. Premiums can be the deciding factor for many O/O’s as to whether or not they can open their own business and be their own boss.”
If you haven’t reviewed your WSIB Alternative process lately, now is the time to do it as your insurance company may require this before a renewal has been offered. Meet with an expert that knows what to look for and have them review each of the policy wordings. They can then provide written recommendation on how to fill any gaps you may have. Doing so gives you a better chance of maintaining affordable primary insurance rates moving forward.