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During the September meeting of the Long Island Limousine Association
(LILA), an audience member blasted skyrocketing insurance costs. His complaint resonates. Operators nationwide are paying more for fleet insurance — or, even worse, can’t find an insurer willing to provide coverage. Mike Marroccoli
, regional vice president with The Capacity Group
who addressed LILA members, said bluntly that the insurance marketplace has entered what is called a “hard market,” which is characterized by premium increases from all carriers.
That scenario is especially relevant for operators who run buses and motorcoaches — a growing segment of the limousine industry.
“I get worried when a company complains about insurance,” says Tom Holden, general manager, Rose Chauffeured Transportation of Charlotte, N.C. “When you look them up on the Federal Motor Coach Safety Administration (FMCSA) website (www.fmcsa.dot.gov) you see how many out-of-service write ups they have and why. There are companies running up and down the highway that rate 98%. That means they are 98% worse than everyone else. They should be shut down, but sometimes FMCSA hands are tied.”
Rates depend on loss runs and the insurance provider, Holden says. “What many operators have come to realize is that insurers are looking deep into your driver history and age and medical condition. It’s hard to insure a driver who has less than one year DOT medical card. Also, they are watching your FMCSA ratings, drivers and vehicles.”
Why Are Rates Increasing?
“In transportation, the two main drivers of rates are the frequency and severity of vehicular accidents,” says Tim Delaney, CEO of Lancer Insurance. “The industry frequency of losses can be influenced by things like miles driven, the state of infrastructure, overall driver quality, and even the weather.”
Delaney explains that the severity of losses, or how much the average loss costs, varies by jurisdiction but is primarily driven by rising medical and vehicle costs, and larger jury awards in lawsuits spurred by plaintiff attorneys and media coverage.
“The severity of loss can be significantly larger for vehicles carrying 15 or more passengers,” he says.
Richard Ackerman, regional sales producer for P.A. Post Agency LLC, says, “Generally speaking, there are four indicators that conspire to put upward pressure on property and casualty rates. These consist of a steady rise in casualty insurance rates since pre 9/11 lows, loss cost trends that continue to rise, persistent underwriting losses, and the lack of investment income returns. These influences are otherwise tied to the macroeconomic conditions found in the U.S. and rarely, if ever, are within the control of buyers and sellers of commercial insurance.”
Amy Perkins, marketing manager for insurer Western Experts in Transportation, says one of the main causes for higher rates, or insurers not underwriting motorcoach business, is that the “$5 million insurance limit is not adequate in a bus accident.”
Amy Perkins marketing manager for insurer Western Experts in Transportation
, says one of the main causes for higher rates, or insurers not underwriting motorcoach business, is that the $5 million insurance limit is not adequate in a bus accident.
“The market is hard for operators because many insurers have gotten out of the motorcoach side of the business, so those left are really picky on accounts and don’t have to fight for them anymore; operators come to them,” she says.
Major motorcoach accidents that get a lot of media attention have a “ripple effect” throughout the industry, Perkins adds. “There are more claims and lawsuits today getting media attention, and that scares insurers who see reports of a huge claim loss. That will have insurers look into every aspect of accounts to see if operators are doing business the right way to make sure a big loss doesn’t happen to them.”