Transportation

Coverage Challenges for Transportation

Facing deteriorating results, some large commercial fleet carriers are leaving the market.
By: | November 7, 2016 • 4 min read

A spike in blockbuster payouts over the last five years has prompted some of the largest commercial fleet auto insurers to exit the market.

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With cell phone use and sleep deprivation on the increase, it’s no surprise that the number of fatalities involving large trucks has climbed by 7.5 percent between 2010 and 2015, according to the U.S. Transportation Department.

In some cases, this has resulted in juries awarding tens or even hundreds of millions of dollars to the families of victims.

Among the most high profile incidents was the Wal-Mart truck that plowed into comedian Tracy Morgan’s limo in New Jersey in 2014, causing a six-vehicle pile-up, killing one person and injuring several others.

Aon has cited at least six cases topping $20 million this year, the most in four years.

Added to that, the industry’s adverse loss reserve development increased by almost $1 billion, from $647 million in 2013 to $1.6 billion in 2015.

David Perez, executive vice president, national insurance specialty, Liberty Mutual

David Perez, executive vice president, national insurance specialty, Liberty Mutual

Rates, meanwhile, have risen by as much as 30 percent and are expected to climb further next year.

David Perez, executive vice president, national insurance at Liberty Mutual, said that while insurers increased premiums over the last three to four years, their results had continued to deteriorate.

“It’s at a point where insurers can’t get the rate they need to be competitive, so there’s little other option than to cut back,” he said.

As a result, many of the biggest underwriters, including AIG and Zurich, have pulled some of their for-hire fleets coverage.

However, they will still cover trucks directly operated by retailers and manufacturers.

AIG subsidiary Lexington Insurance Co. stopped covering trucking fleets as part of its wider strategy to improve its commercial insurance division profitability; however, other units will continue to provide cover, according to a company statement.

“With all of these big insurers pulling out, it’s going to create a big problem,” said Daniel Bancroft, transportation practice leader, North America, at Willis Towers Watson.

“Whereas three years ago fuel was their major expense, now insurance is their third largest expense behind drivers’ salaries and equipment costs.”

Mark Brockinton, CEO of Aon’s transportation and logistics practice, said that the main reason behind the increase in accidents was the sheer volume of vehicles on the road.

Brockinton said that verdicts and settlements have been trending upwards over the last five years as plaintiffs’ lawyers have targeted employer negligence and hiring, training and safety practices in the trucking industry.

“They have become adept at finding issues such as logging, added to which have been the highly publicized claims such as Tracy Morgan’s, creating new fodder for plaintiff lawyers,” he said.

The cost of coverage, meanwhile, is putting extra pressure on trucking companies, with rates up 15 percent to 20 percent on average, and in some cases by 30 percent, squeezing out the smaller operators.

Joseph Peiser, executive vice president, Willis Towers Watson

Joseph Peiser, executive vice president, Willis Towers Watson

Federal law requires firms to cover drivers up to $750,000 per accident. Many self-insure up to around $1 million and buy further tiers of insurance to cover additional costs.

Joseph Peiser, executive vice president and head of casualty broking at Willis Towers Watson, said that attachment points for umbrella insurance also increased over the last year, sometimes as high as $15 million.

“Increasingly we are seeing situations where family-owned companies are having to pay claims in excess of the umbrella limits purchased, which is hard to swallow if your margins are only 2 to 5 percent,” he said.

This has resulted in some companies cutting corners on safety in order to save costs.

Steven Gursten, a Michigan attorney specializing in severe trucking accidents, went as far as to say that there had been a “systemic, company-wide disregard of mandatory safety rules” by some firms.

“Too many companies are in a dangerous race to the bottom,” he said.

“Today, we have many unsafe trucking companies that deliberately ignore mandatory safety rules and that, as a result, can undercut good, safe trucking companies on price.”

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From December next year, however, most trucks will be required by federal law to carry electronic monitoring devices to ensure truckers don’t exceed limits on time spent behind the wheel.

Jenn Guerrini, vice president and executive commercial auto specialist, North America risk engineering services at Chubb, said that collaborative effort is needed between truck manufacturers, regulators and the trucking industry to reduce the number of accidents.

“Road trucking companies need to implement stringent fleet safety programs, reinforce driver training, monitor driving behaviors, educate employees and enforce company policies uniformly throughout the organization,” she said.

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Chubb’s 5 Step Guide to Improve Driver Safety

  1. Reinforce driver training and increase the use of telematics to monitor driving behaviors.
  2. Buy new vehicles with advanced driver assistance systems fitted as standard.
  3. Implement a fatigue driving policy and establish a wellness program for drivers.
  4. Install dash-mounted technologies that can help identify fatigued drivers.
  5. Install electronic logging devices to monitor drivers’ hours of service.
Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Emerging Risks

Stadium Safety

Soft targets, such as sports stadiums, must increase measures to protect lives and their business.
By: | January 10, 2018 • 8 min read

Acts of violence and terror can break out in even the unlikeliest of places.

Look at the 2013 Boston Marathon, where two bombs went off, killing three and injuring dozens of others in a terrorist attack. Or consider the Orlando Pulse nightclub, where 49 people were killed and 58 wounded. Most recently in Las Vegas, a gunman killed 58 and injured hundreds of others.

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The world is not inherently evil, but these evil acts still find a way into places like churches, schools, concerts and stadiums.

“We didn’t see these kinds of attacks 20 years ago,” said Glenn Chavious, managing director, global sports & recreation practice leader, Industria Risk & Insurance Services.

As a society, we have advanced through technology, he said. Technology’s platform has enabled the message of terror to spread further faster.

“But it’s not just with technology. Our cultures, our personal grievances, have brought people out of their comfort zones.”

Chavious said that people still had these grievances 20 years ago but were less likely to act out. Tech has linked people around the globe to other like-minded individuals, allowing for others to join in on messages of terror.

“The progression of terrorist acts over the last 10 years has very much been central to the emergence of ‘lone wolf’ actors. As was the case in both Manchester and Las Vegas, the ‘lone wolf’ dynamic presents an altogether unique set of challenges for law enforcement and event service professionals,” said John

Glenn Chavious, managing director, global sports & recreation practice leader, Industria Risk & Insurance Services

Tomlinson, senior vice president, head of entertainment, Lockton.

As more violent outbreaks take place in public spaces, risk managers learn from and better understand what attackers want. Each new event enables risk managers to see what works and what can be improved upon to better protect people and places.

But the fact remains that the nature and pattern of attacks are changing.

“Many of these actions are devised in complete obscurity and on impulse, and are carried out by individuals with little to no prior visibility, in terms of behavioral patterns or threat recognition, thus making it virtually impossible to maintain any elements of anticipation by security officials,” said Tomlinson.

With vehicles driving into crowds, active shooters and the random nature of attacks, it’s hard to gauge what might come next, said Warren Harper, global sports & events practice leader, Marsh.

Public spaces like sporting arenas are particularly vulnerable because they are considered ‘soft targets.’ They are areas where people gather in large numbers for recreation. They are welcoming to their patrons and visitors, much like a hospital, and the crowds that attend come in droves.

NFL football stadiums, for example, can hold anywhere from 25,000 to 93,000 people at maximum capacity — and that number doesn’t include workers, players or other behind-the-scenes personnel.

“Attacks are a big risk management issue,” said Chavious. “Insurance is the last resort we want to rely upon. We’d rather be preventing it to avoid such events.”

Preparing for Danger

The second half of 2017 proved a trying few months for the insurance industry, facing hurricanes, earthquakes, wildfires and — unfortunately — multiple mass shootings.

The industry was estimated to take a more than $1 billion hit from the Las Vegas massacre in October 2017. A few years back, the Boston Marathon bombings cost businesses around $333 million each day the city was shut down following the attack. Officials were on a manhunt for the suspects in question, and Boston was on lockdown.

“Many of these actions are devised in complete obscurity and on impulse, and are carried out by individuals with little to no prior visibility.” — John Tomlinson, senior vice president, head of entertainment, Lockton

“Fortunately, we have not had a complete stadium go down,” said Harper. But a mass casualty event at a stadium can lead to the death or injury of athletes, spectators and guests; psychological trauma; potential workers’ comp claims from injured employees; lawsuits; significant reputational damage; property damage and prolonged business interruption losses.

The physical damage, said Harper, might be something risk managers can gauge beforehand, but loss of life is immeasurable.

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The best practice then, said Chavious, is awareness and education.

“A lot of preparedness comes from education. [Stadiums] need a risk management plan.”

First and foremost, Chavious said, stadiums need to perform a security risk assessment. Find out where vulnerable spots are, decide where education can be improved upon and develop other safety measures over time.

Areas outside the stadium are soft targets, said Harper. The parking lot, the ticketing and access areas and even the metro transit areas where guests mingle before and after a game are targeted more often than inside.

Last year, for example, a stadium in Manchester was the target of a bomb, which detonated outside the venue as concert-goers left. In 2015, the Stade de France in Paris was the target of suicide bombers and active shooters, who struck the outside of the stadium while a soccer match was held inside.

Security, therefore, needs to be ready to react both inside and outside the vicinity. Reviewing past events and seeing what works has helped risk mangers improve safety strategies.

“A lot of places are getting into table-top exercises” to make sure their people are really trained, added Harper.

In these exercises, employees from various departments come together to brainstorm and work through a hypothetical terrorist situation.

A facilitator will propose the scenario — an active shooter has been spotted right before the game begins, someone has called in a bomb threat, a driver has fled on foot after driving into a crowd — and the stadium’s staff is asked how they should respond.

“People tend to act on assumptions, which may be wrong, but this is a great setting for them to brainstorm and learn,” said Harper.

Technology and Safety

In addition to education, stadiums are ahead of the game, implementing high-tech security cameras and closed-circuit TV monitoring, requiring game-day audiences to use clear/see-through bags when entering the arena, upping employee training on safety protocols and utilizing vapor wake dogs.

Drones are also adding a protective layer.

John Tomlinson, senior vice president, head of entertainment, Lockton

“Drones are helpful in surveying an area and can alert security to any potential threat,” said Chavious.

“Many stadiums have an area between a city’s metro and the stadium itself. If there’s a disturbance there, and you don’t have a camera in that area, you could use the drone instead of moving physical assets.”

Chavious added that “the overhead view will pick up potential crowd concentration, see if there are too many people in one crowd, or drones can fly overhead and be used to assess situations like a vehicle that’s in a place it shouldn’t be.”

But like with all new technology, drones too have their downsides. There’s the expense of owning, maintaining and operating the drone. Weather conditions can affect how and when a drone is used, so it isn’t a reliable source. And what if that drone gets hacked?

“The evolution of venue security protocols most certainly includes the increased usage of unmanned aerial systems (UAS), including drones, as the scope and territorial vastness provided by UAS, from a monitoring perspective, is much more expansive than ground-based apparatus,” said Tomlinson.

“That said,” he continued, “there have been many documented instances in which the intrusion of unauthorized drones at live events have posed major security concerns and have actually heightened the risk of injury to participants and attendees.”

Still, many experts, including Tomlinson, see drones playing a significant role in safety at stadiums moving forward.

“I believe the utilization of drones will continue to be on the forefront of risk mitigation innovation in the live event space, albeit with some very tight operating controls,” he said.

The SAFETY Act

In response to the terrorist attacks on Sept. 11, 2001, U.S. Homeland Security enacted the Support Anti-Terrorism by Fostering Effective

Warren Harper, global sports & events practice leader, Marsh

Technologies Act (SAFETY Act).

The primary purpose of the SAFETY Act was to encourage potential manufacturers or sellers of anti-terrorism technologies to continue to develop and commercialize these technologies (like video monitoring or drones).

There was a worry that the threat of liability in such an event would deter and prevent sellers from pursing these technologies, which are aimed at saving lives. Instead, the SAFETY Act provides incentive by adding a system of risk and litigation management.

“[The SAFETY Act] is geared toward claims arising out of acts of terrorism,” said Harper.

Bottom line: It’s added financial protection. Businesses both large and small can apply for the SAFETY designation — in fact, many NFL teams push for the designation. So far, four have reached SAFETY certification: Lambeau Field, MetLife Stadium, University of Phoenix Stadium and Gillette Stadium.

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To become certified, reviewers with the SAFETY Act assess stadiums for their compliance with the most up-to-date terrorism products. They look at their built-in emergency response plans, cyber security measures, hiring and training of employees, among other criteria.

The process can take over a year, but once certified, stadiums benefit because liability for an event is lessened. One thing to remember, however, is that the added SAFETY Act protection only holds weight when a catastrophic event is classified as an act of terrorism.

“Generally speaking, I think the SAFETY Act has been instrumental in paving the way for an accelerated development of anti-terrorism products and services,” said Tomlinson.

“The benefit of gaining elements of impunity from third-party liability related matters has served as a catalyst for developers to continue to push the envelope, so to speak, in terms of ideas and innovation.”

So while attackers are changing their methods and trying to stay ahead of safety protocols at stadiums, the SAFETY Act, as well as risk managers and stadium owners, keep stadiums investing in newer, more secure safety measures. &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]