A look at coverage, compliance, and cost.
Managing a fleet, whether for a traditional motor carrier or one in field services or construction, requires comprehensive insurance coverage to protect against various risks. Here’s a guide to understanding the essentials of fleet insurance. We’ll explore what’s behind rising costs, and how compliance impacts not just premiums, but your ability to obtain and renew insurance coverage.
Types of fleet insurance
Commercial insurance carriers include traditional insurance policies offered by insurance companies, covering liability, physical damage, cargo, and more. The main advantage of conventional insurance is broad coverage, which ensures regulatory compliance and the ability to bundle different types of insurance. However, premiums can be expensive, particularly for fleets with poor safety records.
On the other hand, captive insurance, a form of self-insurance, is owned by the captive’s insured members. It therefore allows multiple companies to share in the risk and profits, offering the potential for lower premiums, profit sharing, and more control over the insurance program.
However, the initial setup costs of a captive program can be high, and there can be some risks, due to captive groups generally needing to be more selective in the members they accept. A risk control assessment is typically required for prospective members to be accepted. Additionally, managing captive insurance can be complex.
Self-insurance is another option for fleets with substantial financial resources. In this option, fleets assume all risks and claims themselves. This provides complete control over claims and risk management and can lead to potential cost savings. However, it also involves high financial risk, requires significant reserves, and can be difficult to handle from a regulatory perspective.
Coverage for fleets
Most traditional motor carriers have a minimum coverage requirement of $750,000, while other modes of transport, like hazmat and passenger fleets, require a higher minimum. Fleet insurance must include several types of coverage to ensure protection:
- Auto liability insurance covers bodily injury and property damage to third parties resulting from vehicle accidents. It’s fundamental coverage for all fleets, shielding them from the financial repercussions of accidents.
- Physical damage insurance protects fleet vehicles against damage from collisions, theft, vandalism, and other perils. This coverage is crucial for maintaining the fleet’s operational integrity.
- Cargo insurance covers goods being transported by the fleet. It ensures that the value of the cargo is protected against loss or damage during transit.
- Non-trucking liability insurance is essential for owner-operators when not under dispatch. It provides liability coverage for incidents when the truck is used for non-business purposes.
- General liability insurance covers incidents off the road, such as accidents at loading docks, slips and falls, and other general business liabilities. This coverage protects against a wide range of potential risks not directly related to driving.
- Workers’ compensation insurance protects employees from work-related injuries. It covers medical expenses, lost wages, and rehabilitation costs, ensuring compliance with legal requirements and protecting the business from related liabilities.
Rising costs of commercial insurance
The cost of commercial insurance for fleets is increasing due to several factors. Nuclear verdicts, which are extremely high jury awards in lawsuits, often reach millions of dollars and significantly impact insurance payouts. Broader economic trends and social inflation, where public expectations for compensation rise, further drive up claim costs. These factors contribute to rising premiums and the struggle for insurance companies to turn a profit despite increases.
The impact of FMCSA compliance on insurance
The Federal Motor Carrier Safety Administration (FMCSA) uses Safety Measurement System (SMS) scores and Compliance, Safety, and Accountability (CSA) scores to evaluate fleet safety performance. Poor performance in these areas can severely impact a fleet’s insurance premiums and coverage options.
High SMS and Behavior Analysis and Safety Improvement Category (BASIC) scores indicate poor safety practices, while a history of frequent violations and crashes, especially preventable ones, can lead to higher insurance costs or denial of coverage. Additionally, carriers with unsatisfactory safety ratings may struggle to find affordable coverage or any coverage at all.
Non-compliance with FMCSA regulations, high crash rates, and poor safety scores can lead to increased premiums, difficulty renewing policies, and even being priced out of business. Maintaining compliance and improving safety scores is crucial for managing insurance costs effectively.
Enhancing compliance and safety with technology
No one wants to shut down due to failure to secure coverage, and no one wants subprime coverage that can cost $30,000 a truck. Leveraging technology helps fleets maintain compliance and improve safety scores, ultimately lowering insurance costs. Motive provides an ecosystem of solutions to help fleets stay compliant and enhance safety. Dash cams provide critical evidence in case of accidents, helping to determine fault while potentially reducing claims. Motive helps ensure vehicles are properly maintained, reducing the likelihood of breakdowns and accidents.
Driver Vehicle Inspection Reports (DVIRs) ensure daily inspections are performed, keeping vehicles safe and compliant. Electronic logging devices reduce driver fatigue by ensuring compliance with hours-of-service regulations. Motive Card cuts down on fraud and theft, and Motive’s GPS tracking systems, like the Asset Gateway Mini, are second to none, reducing cargo theft and claims.
Using Motive’s Integrated Operations Platform further reduces the need for countless vendors and helps fleets streamline and improve their compliance processes. This improves your overall success in meeting or exceeding FMCSA regulations, maintaining better safety records, and reducing insurance premiums.
Insurance is critical to fleet management, offering protection against risk. But don’t just take our word for it. Watch our on-demand webinar “From Risk to Reward,” where experts from Sentry Insurance show how AI dash cams can improve driver safety and lower fleet insurance costs.
