For trucking and transportation companies, managing insurance isn’t for the faint of heart. Premiums are on the rise, legal settlements are increasing, and equipment is getting more expensive. In addition, new rules and legislation are changing how safety is understood and measured. As the landscape shifts, technologies that help put driver safety at the forefront are playing a key role in reshaping the industry, and also allowing technology-adapters to reduce risks and position themselves more in the driver’s seat.
Understanding Increased Premiums
Trucking insurance premium increases—combined with increases in climbing equipment costs, driver pay, and, recently, fuel—are putting pressure on trucking companies to reduce expenses where they can. According to the American Transportation Research Institute (ATRI), the average carrier cost per mile for truck insurance increased from $0.064 in 2013 to $0.075 in 2017, and the Wall Street Journal found “The cost of truck insurance premiums rose 12%, on average, to 8.4 cents a mile, in 2018 from the previous year.”
Here’s a couple of reasons why premiums have been increasing for years for trucking companies:
The severity of claims fueled by nuclear verdicts—settlements that range in the millions—has increased dramatically in recent years. The enlarged size of jury awards and settlements can partly to attributed to the increased frequency of court cases referencing data from FMCSA’s Compliance, Safety, Accountability (CSA) program.
CSA data is used to identify motor carriers with safety issues and prioritize them for warning letters, interventions, and/or investigations. The data is updated monthly and is organized into seven categories, known as the Behavior Analysis and Safety Improvement Category scores (BASICs). Five of the seven BASICs are publically available online through FMCSA’s Safety Measurement System. (Congress removed some CSA data from public view in December 2015—including the Crash Risk Indicator and Hazardous Materials BASICs—due to concerns about the data accurately portraying carrier performance.)
With BASIC scores like Hours of Service, Unsafe Driving, and Vehicle Maintenance openly accessible, lawyers can use compliance history in combination with accident details to try to establish negligence in a court of law. This strategy can result in high jury verdicts and defense costs.
As a result, claims that might have been $200,000 five years ago have risen to $500,000 in some cases. Significantly higher settlements, jury verdicts, and fear of potential jury verdicts have increased reserve forecasts, which in turn have had a direct effect on defense costs and insurance premiums. Premiums that may have averaged $6,000- $7,000 earlier in the decade can now run 20-50% higher, especially if the voluntary insurance market continues to decline and State Assigned Risks programs are the only takers.
Some companies believe the factors that contribute to BASIC scores have no direct correlation to how safe they are as a company. Although the CSA scoring is not perfect, the methodology is directionally accurate and typically the motor carriers that complain about their scores do not perform as well as their competitors. When carriers choose not to invest in safety policies and proven safety technologies, it is arguable that profitability is being placed ahead of safety, which can further increase litigation costs.
CSA Scores Changing to More “Rigorous” Data-Driven Model
Currently, the Federal Motor Carrier Safety Administration (FMCSA) uses CSA scores as the primary means to identify high-risk motor carriers. But a new statistical model—the IRT model—being explored by the FMCSA would utilize data to measure a motor carrier’s “safety culture,” rather than attempt to predict its likelihood of a crash, according to a piece in Transport Topics. However, it has been widely reported that FMCSA officials will not make a decision until September 2020 about whether to adopt the IRT model, which is complex and may be difficult to explain to the trucking industry.
In this litigious environment, carriers that choose to invest in safety technology and embrace statistical models will have more data-driven resources to help try to dissuade claimants from landing a lottery-type award.
Improving Safety Proactively
Instead of just going along for the ride, trucking companies can consider taking matters into their own hands by investing in technologies that can help substantially reduce risks, as well as gathering data that can reinforce a culture of safety. In many cases, the cost of avoiding one nuclear verdict may offset, or even pay for the investment. Here are a few of the most popular safety technologies being implemented by trucking companies:
- Dash Cams: Dashboard cameras on trucks are becoming table stakes and have already been positively reducing premiums. In some cases, cameras can completely eliminate a possible accident claim which would had been a difficult “he said / she said” battle in the past. Even in the case of a head-on collision, dashboard cameras simplify determining who is at fault. An easy video review process can even exonerate a driver on the spot.
- Collision Avoidance Systems: Smart anti-collision technologies that sense when a vehicle is getting too close, and apply the brakes on behalf of the driver, are already mitigating risks. While the technology has been around for several years, more 2020 rigs promise to come equipped with this technology already in place, and other retrofit options have recently come to market for older trucks. These technologies don’t just help drivers avoid accidents; they also lay the foundation for safer practices by collecting data that can be used to retrain drivers, or to create full driver safety programs for a company to make the entire fleet safer. While equipping rigs with collision avoidance technology may cost $30,000-$50,000 extra, with fewer collisions, diminished severity of claims, and more affordable premiums, the dividends can pay off down the road.
- Anti-Fatigue Technology: A slew of innovative new technologies are beginning to hit the industry to help diminish driver fatigue. While dash cams can retroactively show whether a driver was asleep at the wheel in the event of an accident, predictive technology can reduce the likelihood of dangerous scenarios. For example, fatigue meters technology uses hours-of-service logs to predict driver fatigue levels, updating managers with thorough assessments for every driver in the fleet. Wearables (like a Fitbit-like device) are similarly analyzing fatigue by measuring body movements, assessing sleep quantity, and predicting when alertness will start to decline. Even facial mapping technologies that look for symptoms of fatigue from a driver’s face, such as yawning or head nodding, can estimate driver alertness.
Data gathered from these new safety technologies can not only help identify and sideline potentially dangerous or fatigued drivers, but also help lead to more personalized training and hours-of-service regulations for each driver to increase safety.
It’s been said that you can’t stop progress. In this case, technology has come to the trucking and transportation industry. While retrofitting trucks with safety-centered technology or buying new trucks with technology already installed can seem expensive and arduous for many industry veterans, encouraging a safety-centered culture that protects drivers can pay off in the long term in the form of reduced accidents (and lawsuits), as well as lower premiums. Those in the industry quickest to embrace a safety-first mentality and support it with the best tools and protocols currently available will be ready to evolve and be more attractive to potential employees.
An annual review of your insurance coverage may be the time to make changes in coverage, endorsements, or carriers.
Any time you make changes in the way your business runs, you can also change your exposure to risks. As your organizational needs evolve over time, it’s a good business practice to consider whether there are other carriers that can offer reduced premiums or expanded coverage better suited to your requirements as you grow, move, or expand your offerings.
Fortunately, the insurance marketplace is responsive to changing risks that buyers face. In some cases, it may make more sense to remain with your current carrier but update the terms of your program agreements to reflect your current operations. In other cases, a new carrier may be able to provide coverage more tailored to the new risks your company is encountering. Transitioning to a new insurer could have unintended consequences, however. The experience of your insurance advisor can be invaluable.
Should you choose to make a change, a strong relationship between you, your insurance broker, and the carriers will make the transition as smooth as possible.
Here are four ways your insurance broker can keep you informed about your choice of carrier to help you avoid any surprises.
1. Stay Ahead of New Market Conditions/New Insurers/New Coverages
Your broker can keep you apprised of factors impacting the overall market to prepare you for possible premium increases or decreases with your existing carrier well in advance of renewal. The broker should also be aware of insurers that are offering new lines of coverage and should approach the carriers for quotes on your behalf.
In addition, brokers can help you stay ahead of emerging coverages and potential exposures that may affect your business, which is critical to avoiding losses that may not be covered under your current policies. Understanding the differences among your policies, knowing what they do and do not cover, and advising you on what endorsements you should obtain for your standard policies can help ensure that your company isn’t exposed to unnecessary or avoidable risks.
Recently we worked with a new client to provide coverage for social engineering fraud (SEF), which occurs when a hacker imitating a senior executive, sends a phishing email to an employee telling the employee to wire company funds to a bank account on an emergency basis. The business owner mistakenly believed that either the cyber policy or the crime policy covered the loss. But neither of the policies had been endorsed to provide SEF coverage, and the business was left with a gap in coverage that the risk manager hadn’t realized until we brought it to the manager’s attention.
2. Update the Fine Print of Your Program Agreements
Most carrier agreements stipulate that in the event you transition to a different insurer, the collateral amount can be reset at the carrier’s discretion. If your policy is on a large deductible or other type of loss-sensitive program, you might experience substantial cost implications. Your broker can thoroughly review your program agreements with your insurers and, if possible, amend this wording by setting specific parameters around how the collateral will be calculated. For example, the calculation might include predetermined loss-development factors or consideration of the insured’s outside actuary calculations.
3. Review Outstanding Claims
When you change carriers, there will inevitably be outstanding claims to process, but standard agreements typically nullify any special claims-handling procedures that were put in place while you had your coverage with the insurer. As a result, you will still be dealing with claims, but you might lose the ability to have any or all of the following:
- Free claims reviews
- Use of a pre-selected defense counsel
- Notification of reserve changes
- Ability to have input on settlement amounts
- Continuity of adjusters because the insurer will most likely move any open claims to a different unit
Your broker should review the agreement around what happens if you move from the insurer and, when appropriate, modify the agreement to create as much certainty as possible around the way outstanding claims will be handled.
4. Adjust for Changes in Insured Operations
Many insurance policies limit coverage to events that occur in a certain geographic area. The insured area is often referred to as the “coverage territory.” If your company expands its operations outside the United States, your broker will need to review the coverage territory in all policies to ensure there are no exposures in your new areas of operation that aren’t covered in the existing policy. Similarly, if your company begins offering new products or expands on the scope of existing services, an in-depth review of your existing coverages is necessary to make certain no new coverage is needed.
Here are two examples of changes in insured operations that we’ve helped our clients with recently:
- An insured established a new 401(k) plan and began providing health coverage to employees. They now needed fiduciary liability coverage because these plans are subject to ERISA and present possible personal liability to plan administrator.
- An Insured decided to hire a sales force who will be driving on company business. After reviewing their options, they elected to increase the limits carried on their automobile liability coverage and added to their umbrella coverage limits.
Anticipating and planning for change is part of business. Don’t be lulled into a sense of complacency and simply renew with the same insurer year after year. You have options. Your broker is a trusted business partner who can help you actively avoid any of the potential insurance minefields that come with change, as well as choose the right path forward for your continued business success.
About the Author
Joe Tatum is the CEO of Relation Insurance Services, a premier insurance brokerage that offers risk-management and benefits-consulting services through its family of brands across the United States.
This article originally appeared on the PropertyCasualty360 website here and in a printed edition of National Underwriter.
With Hurricane Florence gaining in strength and intensity and due to hit the East Coast in a matter of hours, we urge all of you to make sure you have a plan in place and are prepared for the worst-case scenario, even if you or your business are in an inland county. Your safety and wellbeing are important to us and we want to let you know that we care and we are here for you during this storm.
To be available to YOU when you need us most, our Relation Storm Team will be working remotely with extended hours from 7am-7pm throughout the storm, starting Thursday, 9/13, and continuing every day through Monday, 9/17 (including Saturday and Sunday).
We will be available to take your calls and respond to emails and file any necessary claims as needed. We have also included direct claims reporting and payment information for our major insurance carriers below for your convenience to report your claim directly on a 24-hour basis.
If you are unsure of your carrier or policy information, you can call our main number at 704-688-1228 or 800-456-1696 or email us at [email protected] during our extended hours to assist you in getting your claim filed. During normal business hours, you may continue to reach out to your account manager as you do currently.
Florence is expected to be the most powerful storm to make a direct hit on the Carolinas in decades. Experts are expecting wide and significant impact to our area, no matter where it ultimately comes ashore. At the very least, we can expect Florence to bring heavy rain and wind which can easily cause flooding and power outages. There is additional concern due to the large expected area of impact and the extended time that it may stay in our area. Many of our client families and businesses are already under a mandatory evacuation with more on the way. If you are in an evacuation zone, please heed that warning and DO NOT attempt to stay in your home. If you are not under an evacuation order, there is still time to prepare. We have attached some storm tips as well as a blank emergency plan that might be helpful to your household in this process.
Our Coast is expected to feel the blast early tomorrow with damaging and life-threatening storm surge, wind and rain. In central areas, we expect to feel the impact due to sustained rainfall and significant wind. In western areas of our states, we should still be prepared for heavy and sustained rain that might trigger flooding and mudslides. Please stay alert and take this storm seriously no matter where you live in our Carolinas and East Coast states. If you are under an evacuation order, please heed that order. If you aren’t under an evacuation order, take this time to gather your supplies: food, water, flashlights, extra batteries, medications and important documents. Remember to make plans for your pets. Clear your yard of debris that can cause damage in high winds.
Both North Carolina and South Carolina have some great resources and mobile applications for your use in preparation for and during the storm:
The ReadyNC mobile app gives information on real-time traffic and weather conditions, river levels, evacuations, and power outages and is an all-in-one FREE tool for emergency preparedness. The SC mobile app can help you build your emergency plan, keep track of supplies and stay connected to loved ones. In addition, coastal residents can now “Know Your Zone” instantly using the maps feature as well as locate the nearest emergency shelters when they are open. The tools section features a flashlight, locator whistle and the ability to report damage to emergency officials.
Federal sites are also helpful, or download the FEMA mobile app for resources on how to plan and prepare for a hurricane event as well as steps to take afterward to minimize damage and to get back in business or back in your residence as soon as possible. You can also text PREPARE to 4FEMA (43362) to receive useful tips about how to prepare for disasters.
Please be safe during this storm and reach out to us at any time with questions and concerns.
Other Helpful Resources
Personal Lines Claims Reporting Phone List
Personal Lines Direct Bill Payment Phone List
Commercial Lines Claims Reporting Phone List
Commercial Lines Direct Bill Payment Phone List
Relation Storm Tips
Household Emergency Plan
What to Take to a Shelter
19 Post-Florence Tips: What to Do After the Hurricane
By Steven J. Billings, Michael Williams, and Travis Vance
Safety incentive programs have long been used by organizations to promote safe working environments and to encourage safety in the workplace. But a recent memorandum from the Occupational Safety and Health Administration (OSHA) states that “Section 11(c) of the OSH Act prohibits an employer from discriminating against an employee because the employee reports an injury or illness. Reporting a work-related injury or illness is a core employee right, and retaliating against a worker for reporting an injury or illness is illegal discrimination under section 11(c).” Given OSHA’s recent scrutiny of incentive programs, discipline programs and drug testing post-incident, employers should take this opportunity to review their safety program to ensure its compliance with OSHA’s new rules.
Consider the following 10 tips to make your incentive program OSHA compliant and more effective:
- First, a safety incentive program should be behavior-based rather than being injury-rate-based. It means employers should provide incentives to workers practicing safe operating procedures and practices instead of incentivizing plans based solely on number of accidents.
- Reporting near misses, hazardous behavior and situations on the front end should be a point of focus, which will prevent future accidents and injuries. (Leading vs. Lagging Indicators)
- Praise and recognize employees through top management, in a timely manner, and in front of others to acknowledge their safe behavior and encourage others to act in the same manner.
- Monetary rewards are okay for safety programs as long as they are not based on “reporting an incident”. You can also utilize other rewards such as keeping points, safety bucks, certificates, days off, safety pins and recognition boards.
- Reward employees for a wide variety of safety activities such as providing safety suggestions to daily operating procedures, guiding a co-worker or new hire to perform a task safely, identifying a hazard or participating in safety committees.
- Programs cannot be vague or limited to the actual reporting of an incident. “No injuries reported” or “Acting Safely” is not a safety incentive program, as these metrics give clear motivation for employees not to report injuries, or they are unclear as to what needs to be done in order to qualify. Direct incentives based on employees behavior, and the qualifying metrics/procedures should be documented clearly. A basic example would be “drivers must be on time every day, turn in all paperwork on time, follow all company outlined safety procedures and day to day tasks as outlined in the fleet safety manual to qualify for our company incentive plan”.
- Make sure your safety program is robust and clear, outlining how you want your employees to conduct themselves and how you want them to perform the key elements of their job (3 points of contact getting in and out of truck, using all required PPE, wearing hard hat at jobsites, observing and following all posted road/traffic signs, not following too closely, observing smith system rules, etc.).
- It is vital to incentivize/discipline all employees equally. If you observe someone not following a company safety procedure, but no incident occurred, they should be disciplined the same way as someone not following the same safety procedure that led to an accident. The accident/incident is the byproduct. What we want to do is applaud/discipline the behavior/action, not the end result, evenly across your workforce. This also requires management/supervisors to be engaged and actively observing all the time.
- Ensure management commitment by demonstrating that organizational leaders care about safety. This can be done by having them give presentations and establish safety as a core value of the company, believing that all injuries are preventable, and having zero incidents is possible.
- Allow employees to set safety goals for themselves. This will motivate them to ensure their own commitment to safety and work towards achieving it.
The Bottom Line
Adopting these suggestions will empower your safety program, help minimize incidents and at the same time prevent OSHA violations. To make things easier, think as if you are an employee working for your company. Does your plan incentivize you to become more safety focused, or afraid of the repercussions of reporting an incident or injury? If the answer is the latter, then refocus your efforts in going through the 10 suggestions listed above, and find a partner that is well versed in safety incentive plans to help guide you.
By Joe Dunn, Angel Mendez, and Scott W. Dunn
Agribusiness clients are acutely aware of the high premiums they pay for workers’ compensation, premises liability, health insurance and the steps they can take to mitigate those costs. On the other hand, automobile liability has historically been a low-cost, low-visibility afterthought. Not anymore.
The risk associated with catastrophic vehicle-related losses is on the radar of underwriters who insure agricultural operations.
Many have seen loss ratios spike to 90 percent or higher on their auto liability book of business and are alarmed by the skyrocketing frequency and severity trends. In an informal poll, agricultural insurers expressed concerns that the market for auto coverage is seriously underpriced, and some are considering rate increases as high as 30 percent. Said one underwriter, “If you can’t get enough rate, you just have to walk away from some accounts.”
Consider the following scenarios:
- As he does every day, a California farm labor contractor transports employees to and from job sites. One evening, while driving six workers home, the contractor drifts off the highway. He overcorrects, causing the van to flip several times. All six passengers, including two underage girls, are ejected from the vehicle. Three men are pronounced dead at the scene and one of the underage girls later dies from her injuries.
- After inspect-ing a field to be harvested, a farm labor contractor employee stops at a bar and consumes five shots of whiskey and two 22-ounce beers in a three-hour period. He subsequently climbs into his truck and, while texting, rear-ends a car stopped at a red light. A four-year-old boy in the rear-ended car is killed instantly, while his mother and sister are injured.
Catastrophic vehicle losses have a significant impact on the agribusiness industry and create turmoil for both insureds and insurers. The emotional and financial toll in the case of a death or severe disability resulting from a vehicular accident can affect victims and their families forever. Employers dealing with vehicle-related claims involving their employees also face the devastating financial consequences of insured and uninsured costs increasing exponentially.
The insured costs most likely to be impacted arise from automobile liability, umbrella/excess liability, workers’ compensation and employers’ liability policies. Insureds typically have deductibles, or self-insured retentions and claim costs will need to be paid. In the longer run, a poor motor-vehicle or employee-injury-loss history can result in premium increases, mid-term cancellations, or worse yet — the unwillingness of any carrier to quote the account. Uninsured costs, including the following, are frequently overlooked but can be even more costly:
- Lost production time;
- Damage to crops/other products;
- Increased overtime for existing employees;
- Loss of experienced staff;
- Need to hire and train new/temporary labor;
- Damaged employee morale;
- Investigation and legal expenses;
- Governmental agency audits/fines;
- Loss of management’s time; and
- Negative publicity.
The risk associated with catastrophic vehicle-related losses is on the radar of underwriters who insure agricultural operations.
According to the National Highway Traffic Safety Administration (NHTSA), 2016 was a deadly year on the roads with 37,461 deaths — a 5.6 percent increase over the number of deaths in 2015. In addition, vehicle crashes are the leading cause of work-related deaths, accounting for 24 percent of all occupational fatalities, according to the National Safety Council.
The silver lining in the NHTSA study is that more than 94 percent of accidents are caused by human error and are thus preventable with proper training.
For employers, the best preventative tools are careful driver recruitment and comprehensive driver and fleet safety education. The “gold standard” of driver training is the National Safety Council’s Certified Defensive Driver Courses, which are available in either a classroom setting or online. For employers that are unable to commit their workforce to the time and expense of an intensive certificate program, insurers and broker loss control and claims consultants can tailor short “tailgate talk” training sessions that focus on, amongst other things, the following topics:
- Driver-selection tips;
- Drug-and-alcohol testing protocols;
- MVR-review policies;
- Defensive-driving techniques;
- Cell-phone usage;
- Vehicle inspection and maintenance;
- Accident response and investigation procedures;
- Post-loss claim-mitigation strategies;
- Driver-incentive and discipline programs; and
- Mock DOT and OSHA audits.
Employers’ negotiating positions on auto liability, umbrella/excess and workers’ compensation program renewals are strengthened when they can demonstrate to underwriters the tangible steps they have taken to become a better-than-average risk. The potential return on investment? Objectively, a well-designed safety program that has achieved meaningful reductions in auto and employee injury claims can yield the following financial benefits:
- Increased competition for the account as underwriters vie for quality risks.
- The ability to effectively counter upward premium pressures.
- The confidence to increase deductibles or retentions, thus lowering premiums.
Subjectively, employers will have a safer workplace and more contented workforce.
The farm labor contractor from the first scenario did not have a driver’s license and ended up being sued by multiple parties. He filed for bankruptcy and ultimately went out of business. In addition, the U.S. Department of Labor sued the grower that hired him for violating worker safety and transportation laws.
The alcohol-impaired driver from the second scenario was sentenced to a mandatory 16-year prison term for gross vehicular homicide. His employer’s auto and umbrella liability coverage ended up paying out a multi-million-dollar settlement.
This whitepaper was featured in Insurance Journal’s Workers’ Compensation Newsletter on March 1, 2018 and published as an eMagazine on February 19, 2018.
Joe Dunn is the claim services manager, Mendez is a senior loss-control consultant, and Scott W. Dunn is vice president/risk advisor specializing in agribusiness, all of Pan American Insurance Services, a Relation company.
SF Biz Times Exclusive: Startup Zendrive to triple workforce at new San Francisco headquarters
Transportation data company Zendrive this month moved into a new office to expand its San Francisco operations and says it wants to triple its workforce here.
The company analyzes mobile phone data to predict driving behavior and helps insurers identify risky drivers. Its customers uses these analytics to manage their vehicles, drivers and liabilities.
Zendrive charges enterprise customers a fee per driver monthly and earns commissions through its insurance agency ZD Insurance Services, LLC. The affiliate acts as an agent for its insurance partners.
By using smartphones to track cars and driver behavior on the road, Zendrive works with insurance companies and transportation planners to lower their costs and collisions using data analytics. It is building out a new headquarters with 7,500 square feet on the third floor of 929 Market St. to triple its workforce. The company has 61 employees in San Francisco and Bangalore, India, with most of the anticipated growth here.
Distracted phone use causes a quarter of car accidents in the U.S., according to the National Safety Council. Zendrive said its technology and data can improve driver safety by collecting data on behavior, like speeding and hard braking, and phone use. The company said it is amassing data on tens of millions of drivers and tens of thousands of crashes but keeps the data anonymous and does not share with anyone.
These insights could affect how auto insurers set their prices and help transportation businesses learn more about what causes accidents, where they happen and types of drivers who cause them, Zendrive said. However, the startup said it doesn’t directly report data to insurance companies, and it cannot identify drivers, their companies or insurance from their data.
Zendrive has raised about $20 million in funding, backed by investors including First Round Capital and BMW iVentures. It was founded by Jonathan Matus and Pankaj Risbood in 2013 to focus on using data analytics to improve road safety. Matus, who spent several years at Google then Facebook working on mobile products, said he felt responsible for working on smartphone technology that added to people’s distractions on the road.
“I didn’t feel that was a meaningful use of the people around me and the use of my time,” said Matus, founder and CEO of Zendrive.
Smartphones were killing people, but they could also be used to save their lives, Matus said. So Zendrive has created a developer platform for companies to analyze driver behavior in order to prevent accidents and develop insight on their fleets.
Using smartphone sensor and GPS technology, it captures data around collisions, distracted driving and aggressive driving and then sends driver coaching insights and recommendations through its dashboard, an API, emails or text alerts. The app scores drivers’ performance and sets goals for them.
Zendrive said its driver coaching, which costs $4 per driver per month, can help reduce crashes by up to 49 percent, and the tool will get better as it accumulates more data. On average, the company analyzes more than 15 billion miles of data every two months, totaling about 50 billion miles so far.
That’s compared to Progressive Insurance, for example, which in 2017 reported collecting 15 billion miles of data over 18 years, Matus said.
“We’re going to hit 100 billion (miles) soon,” he added.
Zendrive will continue growing its team in India, which occupies a large building with two floors and will add two additional floors. The company has also been working with autonomous vehicle partners to research safety and road conditions in that upcoming market.
Using insightful data to determine prices has caught on in the business. Insurance company Metromile, also based in San Francisco, is using a small GPS device installed in customers’ cars to bill based on usage, and the company raised some $150 million in 2016 alone. It now has more than $200 million in funding, according to Crunchbase. It is available in seven states and expanding service to New York, Texas and Florida.
Tom Pataluch, director of software development at Walnut Creek-based Relation Insurance Services Inc., said these technological changes have enabled insurers and businesses to look beyond aggregated data, which traditionally included information like driving history and deductibles. Now they can collect more personal history and data in real-time to come up with more accurate rates.
“Data is becoming increasingly important. I can definitely see cases where it can help companies with fleets and the trucking sector to manage risk,” Pataluch said.
But not everyone will see savings on Zendrive. Rates are still tied to driver behavior: Drivers going slower on shorter trips will see rates go down, and drivers going faster over longer distances might see rates go up.
“It will lower the rates for some and increase the rates for others,” Pataluch said.
This article, authored by Antoinette Siu, originally appeared in the San Francisco Business Times on January 22nd, 2018.
Written by Greg Merrill
For more than 15 years, Pan American has been fortunate to count one of the oldest family-owned wineries in Northern California amongst our clients. This vineyard enjoys unique geology and diverse soils that enable the production of high-quality wine labels.
We began handling the winery’s crop insurance in 2002. Since then, our business relationship has strengthened, and the client has become familiar with our expertise in the agricultural sector. In 2009, the client entrusted Pan American to place all other lines of coverage.
This decision was heavily influence by Pan American’s recommended approach on covering their property risks. As we explain to all current and prospective clients, vineyard and winery operations have unique property-and-casualty exposures, yet many brokers default to a simple Package Policy to cover stock. As a result, there can be numerous exclusions and policy-form limitations. Rather that instituting a one-size-fits-all strategy, our approach comprises investing significant time with our clients to fully understand their potential risks, followed by outlining a range of alternative strategies.
For this particular client, we explained the advantages of using a “Stock Throughput Policy” (STP) rather than the Property Coverage part of a Package Policy. (An STP is an “all risk” insurance policy that provides seamless coverage from the field to final sale.) Unlike the Property Coverage in a Package Policy, a properly tailored STP can offer growers and distributors comprehensive protection against numerous perils, including earthquake, flood, and contamination.
Earlier this year, during production, a valve malfunctioned and several hundred gallons of fine wine in process—valued at more than $250,000—were lost. Coverage could have been excluded had they relied on a basic Package Property coverage, but because they had already implemented the “all risk” STP, it was fortunately a covered loss.
Do you have the correct coverage in place for your unique exposures? Contact us for a consultation today.
About the Author:
Greg joined Pan American more than a decade ago focusing on crop insurance. He soon began to practice other lines of insurance and is now versed in both Property/Casualty and Life/Health. In 2009, Greg was appointed Director of Pan American’s crop insurance division. Greg is dedicated to excellence in his field and is committed to providing comprehensive insurance coverage solutions to his clients. He specializes in agribusiness and has clients throughout Northern, Central & Southern California.
Designations & Achievements:
CIC – Certified Insurance Counselor
AFIS – Agribusiness & Farm Insurance Specialist
National Alliance School for Producer Development (Graduate)
2009 President’s Award
Technological breakthroughs in self-driving—AKA autonomous—vehicles are dramatically changing life on the highway. The transition to machine-led driving is affecting how consumers and the auto and insurance industries view auto coverage. As this market continues to develop, the Ascension Transportation Practice is monitoring developments and sharing our take and the observations of others, with you.
We are currently seeing two ways autonomous vehicles are affecting the risk-management and insurance landscape:
Effect #1: Risk is Shifting
Autonomous vehicles are proving to be safer than human-piloted ones. Crash rates for Teslas have dropped 40 percent since the company introduced Autopilot technology. This trend is starting to directly affect the cost of auto liability insurance. In response, Farmers Insurance recently reduced premiums 25 percent for a ride-sharing firm that uses Teslas in its fleet.
Commentators note that over time, driverless cars will shift liability to the manufacturer. Accenture’s Head of Global Insurance sees greater products liability and cybersecurity exposures ahead.
Effect #2: The Way We Buy Auto Insurance is Changing
In a recent Berkshire Hathaway briefing, Warren Buffet indicated that the increased prevalence of autonomous vehicles and artificial intelligence is a threat to the current business models of traditional players like its auto-insurance subsidiary, Geico.
New players like Google, Apple, Amazon, Verizon and Tesla are in an excellent position to disrupt the industry and corner as much as 20% of the auto insurance market. Tesla is already selling insurance with its vehicles in Australia and Hong Kong.
Why Does This Matter to the Transportation Industry?
With the introduction of self-driving cars, humans inside the vehicles will essentially become passengers. Who will be held responsible for accidents and malfunctions—the driver, owner, manufacturer, or all? Much of the focus of that debate, to date, has been on cars. However, Google subsidiary Waymo has begun quietly testing autonomous vehicle technology on Peterbilt semi-trucks. In the transportation sector, self-driving won’t mean driverless. It’s likely a trucker will still be in the cab, most likely sitting in the driver’s seat, ready to take control if something goes wrong. In that scenario, insurers will need to consider potential risks to the drivers, their loads, and other passengers and cars, as well as who (or what) is ultimately held responsible.
This post is brought to you by the specialists in Relation’s transportation practice group. Do you have an interest in this topic? Get in touch.
In July, The Lodi District Grape Growers Association and the Lodi Winegrape Commission held a grape harvest safety seminar for vineyard workers and supervisors to help prepare them for a safe 2017 harvest. Dan Castillo, senior loss-control consultant at Pan American, an Ascension Insurance company, presented and shared his expertise on safety-procedures for night harvesting. Click here to read the article.
Nut theft is no joking matter—it’s a significant and growing threat to California’s $9 billion+ nut-tree business. With more than 30 nut-theft events in 2015 compared to just one in 2009 and four in 2014, what once warranted only local agricultural area media coverage now garners national mainstream attention. The 2015 price tag? $4.6 million.
That’s enough of a hit to a vital California industry to make the state’s legislature sit up and take notice. Last year, both houses passed a bill—in record time—to establish a statewide, cross-jurisdictional “Agricultural Cargo Theft Working Group.” This funding mechanism would have activated and aligned numerous law-enforcement agencies in helping target these crimes, but Governor Brown unexpectedly vetoed the legislation on September 21, 2016. Additional legislation is in the works to increase criminal penalties for thieves from a misdemeanor to a felony.
Tailoring Insurance Coverage
In the event they are the victim of nut theft, growers should have a strong post-loss solution. As such, it’s important they work with an agent or broker with specialized expertise to ensure they have properly structured insurance placements. The analysis starts with contract review: Who bears the risk, and are there “handoffs” along the path from tree to processor to final end-user? Only when these terms are understood can insurance coverage be negotiated and implemented.
Why Steal Nuts?
- They’re valuable: A truckload of nuts, especially almonds, walnuts, and pistachios, can range from $100-500K.
- They’re in demand: Touted health benefits and drought have strained supply.
- They’re not easily traced: Unlike electronics, nuts don’t have serial numbers!
- They vanish quickly: By the time a theft is discovered, the nuts are often already on a ship or broken into smaller loads and dispersed to out-of-state destinations.
The following approaches are available to growers and distributors:
- Commercial-Package Policy
There may be some coverage for Business Personal Property Stock in Transit under the basic policy form. However, this transit coverage tends to cover only a limited number of perils, so relying on this extension could lead to an uncovered loss.
- Cargo/Transit Policy
Once the shipment is in the correct trucking carrier’s control, ensure the trucking carriers’ cargo policies do not exclude theft for any reason other than employee dishonesty, which is excluded by most cargo policies (this can be easily covered with a separate crime policy). Many trucking cargo policies will exclude or limit theft coverage if the vehicle is unattended or if a trailer is dropped. Additionally, consider requiring a crime policy to cover theft by employees of the trucking carrier (including theft by the dispatcher and/or the driver).
- Stock-Throughput Policy (STP)
An STP offers growers and distributors the most comprehensive protection: Goods are covered at all times whether they’re being moved, processed, or stored. An STP can be an “all risk” type of insurance policy that provides seamless coverage from end to end and protects against perils including earthquakes, floods, and contamination.
Pre-Loss Risk Control
Growers and distributors should do everything possible on their end to prevent a theft situation, but orchard premises security (i.e., fencing, cameras, a guard service, etc.), is not an end-all-be-all solution. Nut theft is more commonly an act of fraud rather than an act of force.
Perpetrators are often part of organized crime groups, using sophisticated technologies to hack into trucking firms and utilize Department of Transportation databases. “Drivers” show up with high-quality, legitimate-looking paperwork. These forged documents incorporate burner phone numbers and enable thieves to steal shipping information and to quickly move the product to the black market stream of commerce. The thieves, and their loot, become immediately untraceable.
Growers/distributors can take any of the following precautions to prevent theft:
- Develop a relationship with a few select trucking carriers with whom a consistent protocol can be established to confirm the correct drivers are picking up the loads.
- Ensure your computer systems’ security is state-of-the-art, and ask carriers about their data integrity.
- Call the carrier on the phone number provided during the originally contracted shipment and not the phone number given on any shipping documents (given their potential fraudulent nature). Require those firms to advise detailed information at least 24 hours in advance of pick up.
- Get each driver’s license number and thumbprint.
- Photograph both the driver and his/her truck.
- Consider using radio-frequency trackers to ensure the loads end up where intended.
Because of the potential high profits and low risk, nut theft continues to be alluring for thieves and a challenge for growers/distributors. Taking a 360° risk-management approach—contract review, insurance program design, and pre-loss prevention can go a long way towards minimizing or, at best, avoiding exposure to loss.
About the Authors
Greg Merrill is Senior Vice President and Director of Crop Insurance Services of our Pan American business unit. Greg has been helping agribusiness clients manage a wide range of operating risks for more than 13 years.
Andy Sharpe is Regional Transportation Leader for Ascension’s Transure business unit. For more than 15 years, Andy has focused on transportation risk management and insurance, and is a renowned industry specialist.