Tim Rose brings his expertise to next year’s highly anticipated event.
Limo fleet insurance rates have risen substantially in the last few years as the soft market of the Great Recession subsides and insurance companies have exited the limousine industry because they could no longer profit from inexpensive policies during the economic rebound.
“This is what happens during these cycles,” said Matt Mushorn, vice president of Lancer Insurance, based in Long Beach, N.Y. “In a soft market, certain carriers were overly aggressive and underpriced their product to an extent, and now as their losses catch up to them, they eventually exit the market.”
Paul Zizzo, managing principal at Euclid Insurance Agencies, Melbourne, Fla., said, “This is a niche business and the long and short answer to rate increases is that livery insurance has been cheap for a long time because it was a soft market.”
Mushorn said he realizes that some operators have experienced “sticker shock” over recent rate increases, but he attributes that reaction due to operators coming off inexpensive policies written during the recession. “It’s not that prices have increased dramatically, but when an operator goes from cheap pricing to more realistic pricing, it is a bit of a sticker shock — especially for some new operators who have never before been through these ebb-and-flow pricing cycles,” he added.
Zizzo noted that in Florida, for example, there were some 21 companies writing policies for limousine companies three to four years ago, while today that number has dwindled to about 10. “A lot of companies pulled out and some rates have increased 30% to 40% on average in the last three years,” he said. However, rates have not risen for all operators, with some seeing only a 10% increase depending on such factors as geographic location and risk assessment, Zizzo added.
“Unfortunately, in the transportation industry as a whole, the good guys take the rate increase, too, due to the guys that are costing the insurance companies money,” he said.
Fortunately, the uptick in rates coming off the soft cycle should stabilize in the near future. “I haven’t seen stability yet, and maybe we are looking at 18 months from now where the rates will stabilize and possibly come down — but remember anything can happen to affect rates, such as a hurricane or some other unpredictable catastrophic event,” Zizzo said.
Tips to Keep Rates Low
Mushorn and Zizzo remind veteran and new operators that there are a variety of ways to help secure the best policy rates.
“When it comes time for renewal and when you go out shopping with your broker, treat the process like it’s your resume because you want what’s coming across an underwriter’s desk to showcase all of the good things you are doing as an operator,” Mushorn suggested. Specifically, he advises operators to make sure they have a chauffeur safety training manual and ongoing safety processes that they adhere to, and also recommends operators have a chauffeur incentive program as a way to keep their best chauffeurs.
Recognizing that chauffeur turnover has always been an industry issue — and now compounded because of competitor TNCs dipping into the professional driver pool — Mushorn said retaining experienced chauffeurs is the first line of defense in keeping insurance rates low. “As underwriters, we do look at driver turnover, so there [are] cost benefits to keeping your well-trained drivers,” he said. “A happy, experienced driver behind the wheel is an operator’s first line of defense in running a safe operation.”
In addition, Mushorn said operators who add vehicle cameras are a plus but it depends on how the cameras are deployed. “We love the technology because they can be used in case of an accident and also used daily, weekly or monthly as part of basic chauffeur training.” In case of an accident, cameras help insurance companies determine fault and settle quickly, or if the video reveals the chauffeur was not at fault, then “we’ll fight the good fight, which benefits the operator because we save some dollars,” he said.
Operators can help keep premiums affordable by taking all necessary precautions on loss control, Zizzo added. “Do you have a driver training program and regular driver meetings? Are vehicles properly maintained? Do chauffeurs conduct pre- and post-vehicle inspections after a run? Do you have cameras and fire extinguishers? Something as simple as making sure you don’t have a brake light out helps mitigate risk.”
Insurers also help operators receive the most favorable rates through an onsite audit to examine an operation and recommend ways to improve loss control.
Another way to keep rates low is to assume more of the physical damage risk. “Most vehicle lien holders require a $1,000 deductible, but we have policy holders that take a $2,500 deductible so they are sharing more in the risk and that lowers costs,” Mushorn said. Zizzo added that a higher deductible can help bring down rates because “it tells the underwriters that you are willing to share in the risk in order to bring the rate down to a reasonable number in order to run your business.”
Zizzo advises that operators “think like an underwriter.” With insurance companies paying out huge sums in the wake of the deadly San Francisco limo fire for example, insurers are looking for ways to minimize risks. They want to know that the companies they serve are doing the same. “So you have to ask yourself — what risks does my company face? What practices have I put in place to minimize those risks?” Zizzo asked. “From keeping a strict maintenance schedule to participating in ongoing driver training, these programs can help save you money on your insurance coverage.
“It’s not enough to just identify the areas that need improvement. You actually need to invest the time and resources to making those improvements. Whether it’s an unreliable driver or vehicle that could use repairs, take the time to address these concerns and make any necessary changes.”
Both Lancer and Euclid provide information on their respective websites to help operators in their loss prevention efforts. There are blogs and information resources with tips and advice. Lancer also offers chauffeur training videos /DVDs, safety e-bulletins and e-newsletters, accident report kits and other materials to help operators maintain affordable insurance coverage.
Information: www.lancerinsurance.com; www.euclidinsuranceagencies.com
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