Commercial transportation is becoming an increasingly expensive industry to insure. Claims frequency is increasing due to an influx of new drivers, deteriorated infrastructure, more distracted driving, and additional vehicle miles traveled. Claim severity is growing due to those same new drivers, increased medical costs, the effects of litigation financing, and the sophistication of the plaintiffs’ bar in producing Hollywood like productions exploiting the reptilian theory to win more nuclear verdicts.
Many non-specialists (and even some specialists) in the transportation insurance space exacerbated these issues over the past decade by focusing on efficiency instead of effectiveness. Instead of focusing on building transportation dedicated claim specialists with a manageable caseload for optimal claim resolution, many in the market focused on hiring generalists and driving up caseloads for the sake of expense ratio savings. Ill-equipped, the effect of this for insureds is an inexperienced and unqualified claims adjuster handling complicated accidents and significantly increasing an insured’s claim history.
Brokers and insureds added to this perfect storm by looking for short term cost savings and underappreciating the value and return on investment provided by an insurance company dedicated to and built upon a premise of expert claims handling. It has not been uncommon for insureds to choose cheaper insurance solutions given the current rate environment, and it hasn’t been uncommon for those same insureds to be dissatisfied with the service and expertise of those same insurers when the inevitable accident requires precision and quality claim handling. Unfortunately, less than a handful of insurers view this level of service as critical.
Our most recent history has evidenced some of the most fraying impacts of not protecting a strong three-legged partnership between a safety at all costs insured, an invested and proactive broker, and a specialist and disciplined insurer. There are many sources of friction in play in the past few months: insureds unable to make ends meet due to poor claims handling and rising costs (and blaming brokers in many instances for not helping the insured base make a more educated decision), brokers dissatisfied with insurers exiting, non-renewing, or applying significant rate increases, and insurers unable to see the forest through the trees and applying blanket rules on their books of business without having the discipline to really study and fix the root issues at play.
Looking forward, loss costs will continue to be volatile, and insurers, brokers, and insureds will continue to get the opportunity to take additional control of their destiny. Insurers (those that haven’t exited the industry due to unprofitability) will get the chance to once again focus on claims service as their most important promise and source of sustainability. Brokers will get the chance to think about the highest quality insurers as the only source for customer satisfaction and retention. Insureds will get the opportunity to think again about the difference between buying discount grade insurance and the implications of using insurers whose adjuster force understands neither the transportation industry or high dollar claim management.
Looking forward, there are several questions every insured should ask of their broker or any potential insurance carrier:
- Who is this insurance company and how do they make sure they know the insured’s business?
- How does the insurer ensure every claim file is handled and by a trained and specialist transportation adjuster?
- What process does the insurer use to make sure every file is reviewed with enough frequency to make sure no one is taking chances with an insured’s claim file getting unnecessarily inflated?
- Does the insurer have the financial backing and commitment to the industry to make sure a three-legged stool (insured, broker, insurer) partnership will continue well beyond an individual market cycle?
- Has there been any significant disruption with the insurer to put their ability to invest further in their abilities and our partnership at risk?
- Am I protected to an appropriate extent of exposure given the rapidly devolving state of transportation claim results? What balance of limit and insurance carrier should I select to best protect my business?