This line will continue to have a negative loss ratio until the driver has some personal skin in the game. And I don’t mean safe driving awards or other such window dressing. The problem with those incentives is simple. When one small infraction kills the chance of a reward, no more incentive. So, what to do? Many agents are not aware that a deductible can be placed on the property damage liability cover. Put a $500 to $1,000 deductible on that cover and notify the drivers that if it is determined that the accident was their fault, 50% of the deductible will be deducted from their next paycheck. But what about the bodily injury cover? Leave it alone. If there is property damage, there is probably going to be a BI claim. But if there is no PD claim, it is unlikely there will be a BI claim. The first driver hit with a 50% penalty will be more cautious from then on. The word will spread. If there is a union CBA, the union will be hard pressed to object. AND, if the insured has a debit mod due to PD claims, the carrier is required to recalculate the mod with the deductible in mind. Had one client where the mod went from a +2.00 to a minus .75. The debit was due to numerous small claims. All were wiped out with the deductible factored in. Basic risk management.
I don’t know, most places where driving is a main aspect of the business have pretty strict policies in play regarding drivers with multiple accidents. Usually if the accident is that bad or you have more than one max two small accidents you’re out. Putting the cost on the worker instead of the industry is going to pull more people away from what is already a dying industry. Most drive-for-hire job positions will be gone in the next ten-fifteen years as it is.
If you’re talking about autos in general as opposed to strictly commercial, the world isn’t ready for the rebellion we would feel if drivers were put on the hook for their accidents like that. We’d end up with a ton of litigation as a result, and limits would end up destroyed that way anyway.
The entire auto insurance market is on the rise, and with good reason. We all use our phones, everyone. Until we start having to lock our phones in a box to turn on the car, increases are on the horizon for a good long while I’d suspect.
This forum is not the place for your off-topic and personal bickering, diatribes, labeling and character attacks that have been increasing in number and difficult to keep up with. Please take those elsewhere. As we have said numerous times, one person going off-topic or being inappropriate does not justify following them. Driver: “But officer, that driver was also going too fast but you didn’t pull them over. That’s unfair.” Officer: “Here’s your ticket.”
I don’t mean to poke the bear but that is pretty funny guys.
August 29, 2019 at 10:40 am
Mike the Underwriter says:
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Commercial physical damage should have a $5,000 deductible minimum. The value of vehicles has grown at a much faster rate over the past 20 years than most insured’s deductibles. That said, I see little value in a small deductible like $500 or $1,000. Certainly, the auto liability line has not been running 100%+ combines for the past decade because insurers have just not figured out they need to put a small deductible on the policy. I would argue that the real problem is the frequency of accidents costing $250,000 or more that are tough to solve for in underwriting. Seeing an account with a frequency of severity is an easy pass. But what do you do when the account has never had a loss that large, how do you guess that they are due? What’s the right price for that risk? Is it $10 more per unit, is it $100 more per unit, is it $1,000 more per unit. All of those figures ultimately become inadequate on losses of that severity. That said, the temperature in commercial auto liability has been a combination of multiple items, that all need addressing. The driver shortage will never be solved so long as their continue to be a “cheap ass for the seat” mentality in commercial freight. The Owner Operator trucking model is a farce. So long as the cost of entry to trucking is simply how much down (little) and how much a month at the Penske/Ryder counters of the world, and getting out of the business is as easy as turning in the rented unit at the end of the week the shortage will continue. When transportation companies wise up and take back drivers as employees, hold them to the same standards as the rest of the workforce; to show up on time and be engaged in your own safety and that of others. The results will improve. This however will cause many companies to shrink temporarily as the industry evolves, and demands higher freight prices from shippers, which can in turn be used to pay better wages for truly better drivers. Simply not having an accident in the past 3 years does not make you a good driver. The AVERAGE American is in a car accident once every 18 YEARS. Not getting in accident once every 3-5 years does not make you a good driver. Even if you argue that a professional driver is on the road 5 times more than the average commuter, then the baseline should be 1 accident every 3-5 years. A “good driver”, should have far fewer accidents than the average. Consumers need to wise up too. The price of free next day delivery is congestion on our roads, inexperienced drivers behind the wheel, and increased accident frequency.
Mike: Please reread my post. I was not talking about the collision cover, I was talking about the PD liability cover. Two very different things. In the case of the client, it was an ice company. The drivers had a “habit” of pulling under the awnings at the convenience stores and hitting the canopy. Couldn’t / wouldn’t read the height sign. The damage was usually not more than $2,000, but the frequency was crushing the loss ratio. It only took ONE charge back to a driver, and ALL of those claims stopped. And yes, the policy was legal. We even had the drivers sign a release giving approval to debit their next paycheck for the 50%. Saved BIG $$$$$ in premium. The agent looked a little silly, and was soon replaced. I do agree with your position regarding the collision deductible. But until drivers have a financial interest in preventing an accident, no amount of training will work.
Mike, I’ve been an advocate your methodology for years. But any recommendations on how to collect the DED. What I’ve found is that applying a PD DED, I wind up chasing the said DED. ultimately non-renewing and stuck with paying the PD Claim anyway. Yeah, we can secure a LOC but once exhausted it’s not easy going back to the well.
Commercial Auto will continue to tank CR’s until we somehow stop the frivolous lawsuits and/or take an aggressive stance in litigation. Anyone in the industry knows there are more and more law firms that do nothing but chase these claims. I could go on and on about these frivolous suits I have seen over a 20 year career!
Here is the problem I see in the commercial auto industry and trying to effectively UW a trucker. Back in 2009 the FMCSA decided to post truckers safety scores publicly in a few limited states. In 2010 this program went nationwide and was called CSA 2010. So I ask, when was the last time commercial autos CR was under 1.00 – answer 2010 (prior to the FMCSA releasing this data).
Common sense here will clearly show the commercial auto insurance industry has tanked since the publication of this data by FMCSA. FMCSA did this to try and clean up the industry and get rid of the bad apples, I am not sure how posting “poor data” publicly will clean up anything. In my opinion all it did was teach a large group of lawyers how easy it is to fleece this industry. All the “data” they need is publicly available and there is no defense to any federal regulation that has been violated.
I come from a law enforcement family and spent 10 years in law enforcement myself. I have the utmost respect for all law enforcement, but this system has to change. The number of violations these carriers are written up for are staggering to say the least.
Here are a couple classic day to day violation that happen everyday:
Example #1 – Trucker has a blowout on a new set of tires (different story if he was driving on bad tires) and safely pulls to the side of the road and calls for service. Now here comes a DOT officer and pulls in behind him to check on the situation. This everyday event just turned into an OOS violation for the driver/motor carrier and posted publicly, many times this will also turn into many other violations too depending on the drivers attitude and officers attitude. This is equivalent to you or I having a blowout in our car and getting a ticket for reckless driving!
Example #2 – Driver does his pre-trip inspection and everything is working properly. He hits the road and gets pulled over for an inspection. During the inspection the officer discovers his trailer lights that are not working. The driver tells him they were working when he did his pre-trip inspection and they wiggle the connector and they start working again. So you would think common sense would come in here and this would not be written up as a violation….wrong! What typically happens in this situation is the driver is issued multiple violations (running lights, tail lights and brake lights) all counting against him and the motor carrier. Even though the problem was fixed onsite and was clearly a short or bad connection DOT is still issuing “multiple” violations instead of one violation for the short/bad connection. All of these points are added to the carriers SMS Score and again NOT defensible in litigation, so to a jury this guy looks bad!
This is equivalent to you or I getting a 5 tickets for going 5 MPH over the speed limit, one for each MPH infraction.
Speaking from a law enforcement background there is way to much officer “opinion” interupations in all of these regulations. For this matter alone this data in my opinion is very “poor data”.
Here comes the BIG picture of the problem we face today. Insurance carriers love data, data alone is what they live on. They will try everything to make sense of the data so they are able to underwrite to profitability.
We need to wake up and realize this “data” is poor at best. Yet today almost 100% of carriers and underwriters are required to use this data. This data is being downloadeed daily into an underwriting report sold to them by Central Analysis Bureau (CAB). Might I also add CAB then charges more than $3000 per user for access to this poor data.
So here is my take on this:
1) Get the poor data removed or all this data removed from public view. It was originally designed for a law enforcement as a tool. Leave it as a law enforcement tool only.
2) Disallow any of the SMS data in civil litigation.
3) Allow underwriters to underwrite on “real” information from there own loss control reports and what the agent is telling them about the account.
This line will continue to have a negative loss ratio until the driver has some personal skin in the game. And I don’t mean safe driving awards or other such window dressing. The problem with those incentives is simple. When one small infraction kills the chance of a reward, no more incentive. So, what to do? Many agents are not aware that a deductible can be placed on the property damage liability cover. Put a $500 to $1,000 deductible on that cover and notify the drivers that if it is determined that the accident was their fault, 50% of the deductible will be deducted from their next paycheck. But what about the bodily injury cover? Leave it alone. If there is property damage, there is probably going to be a BI claim. But if there is no PD claim, it is unlikely there will be a BI claim. The first driver hit with a 50% penalty will be more cautious from then on. The word will spread. If there is a union CBA, the union will be hard pressed to object. AND, if the insured has a debit mod due to PD claims, the carrier is required to recalculate the mod with the deductible in mind. Had one client where the mod went from a +2.00 to a minus .75. The debit was due to numerous small claims. All were wiped out with the deductible factored in. Basic risk management.
AAAAAAAAAAAMEN !!!!!!!
I don’t know, most places where driving is a main aspect of the business have pretty strict policies in play regarding drivers with multiple accidents. Usually if the accident is that bad or you have more than one max two small accidents you’re out. Putting the cost on the worker instead of the industry is going to pull more people away from what is already a dying industry. Most drive-for-hire job positions will be gone in the next ten-fifteen years as it is.
If you’re talking about autos in general as opposed to strictly commercial, the world isn’t ready for the rebellion we would feel if drivers were put on the hook for their accidents like that. We’d end up with a ton of litigation as a result, and limits would end up destroyed that way anyway.
The entire auto insurance market is on the rise, and with good reason. We all use our phones, everyone. Until we start having to lock our phones in a box to turn on the car, increases are on the horizon for a good long while I’d suspect.
Craig, Jon, Bob, etc.
This forum is not the place for your off-topic and personal bickering, diatribes, labeling and character attacks that have been increasing in number and difficult to keep up with. Please take those elsewhere. As we have said numerous times, one person going off-topic or being inappropriate does not justify following them. Driver: “But officer, that driver was also going too fast but you didn’t pull them over. That’s unfair.” Officer: “Here’s your ticket.”
So you DID mean to post it to this board?
I don’t mean to poke the bear but that is pretty funny guys.
Commercial physical damage should have a $5,000 deductible minimum. The value of vehicles has grown at a much faster rate over the past 20 years than most insured’s deductibles. That said, I see little value in a small deductible like $500 or $1,000. Certainly, the auto liability line has not been running 100%+ combines for the past decade because insurers have just not figured out they need to put a small deductible on the policy. I would argue that the real problem is the frequency of accidents costing $250,000 or more that are tough to solve for in underwriting. Seeing an account with a frequency of severity is an easy pass. But what do you do when the account has never had a loss that large, how do you guess that they are due? What’s the right price for that risk? Is it $10 more per unit, is it $100 more per unit, is it $1,000 more per unit. All of those figures ultimately become inadequate on losses of that severity. That said, the temperature in commercial auto liability has been a combination of multiple items, that all need addressing. The driver shortage will never be solved so long as their continue to be a “cheap ass for the seat” mentality in commercial freight. The Owner Operator trucking model is a farce. So long as the cost of entry to trucking is simply how much down (little) and how much a month at the Penske/Ryder counters of the world, and getting out of the business is as easy as turning in the rented unit at the end of the week the shortage will continue. When transportation companies wise up and take back drivers as employees, hold them to the same standards as the rest of the workforce; to show up on time and be engaged in your own safety and that of others. The results will improve. This however will cause many companies to shrink temporarily as the industry evolves, and demands higher freight prices from shippers, which can in turn be used to pay better wages for truly better drivers. Simply not having an accident in the past 3 years does not make you a good driver. The AVERAGE American is in a car accident once every 18 YEARS. Not getting in accident once every 3-5 years does not make you a good driver. Even if you argue that a professional driver is on the road 5 times more than the average commuter, then the baseline should be 1 accident every 3-5 years. A “good driver”, should have far fewer accidents than the average. Consumers need to wise up too. The price of free next day delivery is congestion on our roads, inexperienced drivers behind the wheel, and increased accident frequency.
Mike: Please reread my post. I was not talking about the collision cover, I was talking about the PD liability cover. Two very different things. In the case of the client, it was an ice company. The drivers had a “habit” of pulling under the awnings at the convenience stores and hitting the canopy. Couldn’t / wouldn’t read the height sign. The damage was usually not more than $2,000, but the frequency was crushing the loss ratio. It only took ONE charge back to a driver, and ALL of those claims stopped. And yes, the policy was legal. We even had the drivers sign a release giving approval to debit their next paycheck for the 50%. Saved BIG $$$$$ in premium. The agent looked a little silly, and was soon replaced. I do agree with your position regarding the collision deductible. But until drivers have a financial interest in preventing an accident, no amount of training will work.
Mike, I’ve been an advocate your methodology for years. But any recommendations on how to collect the DED. What I’ve found is that applying a PD DED, I wind up chasing the said DED. ultimately non-renewing and stuck with paying the PD Claim anyway. Yeah, we can secure a LOC but once exhausted it’s not easy going back to the well.
Commercial Auto will continue to tank CR’s until we somehow stop the frivolous lawsuits and/or take an aggressive stance in litigation. Anyone in the industry knows there are more and more law firms that do nothing but chase these claims. I could go on and on about these frivolous suits I have seen over a 20 year career!
Here is the problem I see in the commercial auto industry and trying to effectively UW a trucker. Back in 2009 the FMCSA decided to post truckers safety scores publicly in a few limited states. In 2010 this program went nationwide and was called CSA 2010. So I ask, when was the last time commercial autos CR was under 1.00 – answer 2010 (prior to the FMCSA releasing this data).
Common sense here will clearly show the commercial auto insurance industry has tanked since the publication of this data by FMCSA. FMCSA did this to try and clean up the industry and get rid of the bad apples, I am not sure how posting “poor data” publicly will clean up anything. In my opinion all it did was teach a large group of lawyers how easy it is to fleece this industry. All the “data” they need is publicly available and there is no defense to any federal regulation that has been violated.
I come from a law enforcement family and spent 10 years in law enforcement myself. I have the utmost respect for all law enforcement, but this system has to change. The number of violations these carriers are written up for are staggering to say the least.
Here are a couple classic day to day violation that happen everyday:
Example #1 – Trucker has a blowout on a new set of tires (different story if he was driving on bad tires) and safely pulls to the side of the road and calls for service. Now here comes a DOT officer and pulls in behind him to check on the situation. This everyday event just turned into an OOS violation for the driver/motor carrier and posted publicly, many times this will also turn into many other violations too depending on the drivers attitude and officers attitude. This is equivalent to you or I having a blowout in our car and getting a ticket for reckless driving!
Example #2 – Driver does his pre-trip inspection and everything is working properly. He hits the road and gets pulled over for an inspection. During the inspection the officer discovers his trailer lights that are not working. The driver tells him they were working when he did his pre-trip inspection and they wiggle the connector and they start working again. So you would think common sense would come in here and this would not be written up as a violation….wrong! What typically happens in this situation is the driver is issued multiple violations (running lights, tail lights and brake lights) all counting against him and the motor carrier. Even though the problem was fixed onsite and was clearly a short or bad connection DOT is still issuing “multiple” violations instead of one violation for the short/bad connection. All of these points are added to the carriers SMS Score and again NOT defensible in litigation, so to a jury this guy looks bad!
This is equivalent to you or I getting a 5 tickets for going 5 MPH over the speed limit, one for each MPH infraction.
Speaking from a law enforcement background there is way to much officer “opinion” interupations in all of these regulations. For this matter alone this data in my opinion is very “poor data”.
Here comes the BIG picture of the problem we face today. Insurance carriers love data, data alone is what they live on. They will try everything to make sense of the data so they are able to underwrite to profitability.
We need to wake up and realize this “data” is poor at best. Yet today almost 100% of carriers and underwriters are required to use this data. This data is being downloadeed daily into an underwriting report sold to them by Central Analysis Bureau (CAB). Might I also add CAB then charges more than $3000 per user for access to this poor data.
So here is my take on this:
1) Get the poor data removed or all this data removed from public view. It was originally designed for a law enforcement as a tool. Leave it as a law enforcement tool only.
2) Disallow any of the SMS data in civil litigation.
3) Allow underwriters to underwrite on “real” information from there own loss control reports and what the agent is telling them about the account.