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

Risk Management

The Profession

Wawa’s Director of Risk Management knows that harnessing data and analytics will be key to surviving the rapid pace of change that heralds new risk exposures.
By: | July 27, 2017 • 5 min read

R&I: What was your first job?

My first job was at the age of 15 as a cashier at a bakery. My first professional job was at Amtrak in the finance department. I worked there while I was in college.

R&I: How did you come to work in risk management?

A position opened up in risk management at Wawa and I saw it as an opportunity to broaden my skills and have the ability to work across many departments at Wawa to better learn about the business.

R&I: What is the risk management community doing right?

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The advancements in analytics are a success for the industry and offer opportunities for the future. I also find value in the industry focus on emerging and specialty risks. There is more alignment with experts in different industries related to emerging and specialty risks to provide support and services to the insurance industry. As a result, the insurance industry can now look at risk mitigation more holistically and not just related to traditional risk transfer.

R&I: What could the risk management community be doing a better job of?

Developing the talent to grow with the industry in specialization and analytics, but to also carry on the personal connections and relationship building that is a large part of this industry.

Nancy Wilson, director, quality assurance, risk management and safety, Wawa Inc.

R&I: What was the best location and year for the RIMS conference and why?

I have had successes at all of the RIMS events I have attended. It is a great opportunity to spend time with our broker, carriers and other colleagues.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I think the biggest challenge facing most companies today is related to brand or reputational risk. With the ever-changing landscape of technology, globalization and social media, the risk exposure to an organization’s brand or reputation continues to grow.

R&I: What emerging commercial risk most concerns you?

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The changing consumer demands and new entrants into an industry are concerning. This is not necessarily something new but the frequency and speed to which it happens today does seem to be different. I think that is only going to continue. Companies need to be prepared to evolve with the times, and for me that means new risk exposures that we need to be prepared to mitigate.

R&I: Are you optimistic about the U.S. economy or pessimistic and why?

I try to be optimistic about most things. I think the economy ebbs and flows for many reasons and it is important to always keep an eye out for signs of change.

R&I: What have you accomplished that you are proudest of?

I am fortunate to have opportunities professionally that make me proud, but I have to answer this one personally. I have two children ages 12 and 9 and I am so proud of the people that they are today. They both are hardworking, fun and kind. Nothing gives me a better feeling than seeing them be successful. I look forward to more of that.

R&I: What is your favorite book or movie?

This is really hard as there are too many favorites. I do prefer books to movies, especially if there is a movie based on a book. I find the movie is never as good. I have multiple books going at once and usually bounce back and forth between fiction and non-fiction.

R&I: What’s the best restaurant you’ve ever eaten at?

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I have eaten at a lot of different restaurants in many major cities but I would have to pick Horn O’ Plenty in Bedford, PA. It is a farm to table restaurant in the middle of the state. The food is always fresh and tastes amazing and they make me feel like I am at home when I am there. My family and I eat there often during our trips out that way.

R&I: What is your favorite drink?

I do love a good cup of coffee (working at Wawa helps that). I also enjoy a good glass of wine (red preferably) on occasion.

R&I: What is the most unusual/interesting place you have ever visited?

Vacations aside, I do get an opportunity to travel for work and visit our food suppliers. The opportunities I have had to visit back to the farm level have been a very interesting learning experience. If it wasn’t for my role, I would have never been able to experience that.

R&I: What is the riskiest activity you ever engaged in?

My husband, kids and I recently did a boot-camp-type obstacle course up in the trees 24 feet in the air. Although I had a harness and helmet on, I really put my fear of heights to the test. At the end of the two hours, I did get the hang of it but am not sure I would do it again.

R&I: If the world has a modern hero, who is it and why?

The first people that come to mind are those who are serving our country and willing to sacrifice their own lives for our freedom.

R&I: What about this work do you find the most fulfilling or rewarding?

Every day is different and I have the opportunity to be involved in a lot of different work across the company.

R&I: What do your friends and family think you do?

My husband and children have a pretty good sense of what I do, but the rest of my family has no idea. They just know I work for Wawa and sometimes travel.




Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]