Insurance Strategies

LCT Staff
Posted on December 1, 2003

No matter how careful you and your drivers are, accidents will happen. They are – quite simply – unavoidable and a cost of doing business. But by preparing for the inevitable, and by taking the right steps following an accident, you can limit their financial impact. While you cannot control the insurance industry, you can control your business and limit the effects of increased premiums.

The basics * Find yourself a good insurance broker. * High deductibles can reduce your premiums. * Hire chauffeurs with a stellar safety record. * Keep a camera and accident forms in the car. * Treat potential claimants fairly and with respect.

Before the Accident: Plan Now for the Inevitable

Shop Around for Ins. Deals Geico has been running an ad in the New York area over the past year, bragging about its low rates. The ad states, “15 minutes can save you 15% or more on car insurance.”

While aimed at consumers, the ad campaign illustrates an important point: Insurance premiums vary from company to company. Just because your current carrier is quoting you a large increase does not mean you must pay it; shop around and compare prices.

However, be careful with the product you select and make sure that the company you use has high rating from A.M. Best, www.ambest.com, or Standard & Poor’s, www.standardandpoor.com. Shopping for the best rates is important, but time consuming. This is where an insurance broker comes into play.

Find the Right Broker Too often, companies allow a friend or relative in the insurance business to obtain coverage for them. This can be a costly mistake. The insurance industry is becoming more specialized. Like lawyers and doctors, insurance professionals focus on specific industries. Finding the right insurance professional, one that knows your business, will save you time and money.

Ask for Insurance Discounts Your insurance company may offer discounts to your company if it meets certain requirements. Inquire with your broker or company as to what programs are available.

Programs may range from discounts for drivers that take safety classes, to discounts for installing safety devices in the vehicle. While the cost of complying with the program may not pay for itself immediately, it will over time.

Undertake Some of the Risk While it can be dangerous, sharing the risk with your insurance company can result in a much lower premium. High deductibles and retention limits allow your company to retain part of the risk and, in turn, reduce premiums.

Insurance companies generally like it when their clients share part of the risk. It sends a message that the client is conscious of limiting claims and is less likely to be involved in litigation. The cost savings can be tremendous. The risk, however, can be great as well.

A Camera Is a Must Every vehicle should have an accident kit in the trunk or glove box. The most important element of the kit is a disposable camera, which should be replaced regularly, before the expiration date passes.

The accident kit should also include blank accident report forms and witness statement forms/cards. In addition, the car must be equipped with a first aid kit.

When pricing your insurance coverage, be sure to ask if any discounts are available for keeping an accident kit in your vehicle.

Invest in Safety Equipment There are many different types of safety equipment that can reduce insurance risks, as well as the effects of an accident. The following items may qualify for discounts off premiums: ABS brakes, air bags, day time running lamps and back-up beepers.

Hire Safe Chauffeurs It may seem like a cliche, but it is important to keep in mind that safe drivers are less likely to be involved in accidents. Similarly, we find that a small percentage of drivers are involved in a large percentage of accidents. While it is time consuming and expensive to hire and train new chauffeurs, retaining drivers that are involved in numerous accidents, even accidents that are not their fault can be a mistake. It is just a matter of time before the driver who is involved in several minor fender benders is involved in a major collision.

Enroll in Safety Classes All drivers should be required to take safe-driving classes. In addition to qualifying for insurance discounts, these classes do provide useful information. If the driver walks away from the class with one new tip, that could be the difference between a collision and close call.

After the Accident: What’s a Chauffeur to Do?

Take Pictures at Site Chauffeurs should be aware that the actions they take immediately after an accident might have a significant impact on how any insurance or legal claims are resolved. Pictures should be taken of all vehicles from all angles, making sure that all damage is shown.

If possible, the driver should take pictures of the vehicles before they are moved. In addition, if the driver can get the other people involved in the accident to appear in the photographs – especially smiling – they should do so.

However, they should never photograph anyone who is visibly injured.

These post-accident pictures could be the deciding factor in winning or losing a lawsuit. Nothing is more effective to a jury than pictures that show no damage or smiling “victims.”

Chauffeurs: Never Apologize Drivers must also be aware that their version of what happened should not be disclosed to anyone but the police. They should not apologize to anyone involved in the accident or accept blame for the accident in any way.

Too often, drivers apologize to their passengers or accept blame when they did nothing wrong. These admissions can be devastating at trial.

Chauffeurs: Collect Information The best opportunity to obtain information is at the scene of the accident. Drivers should be trained to get contact information from all potential witnesses. The accident kit should include witness cards for the driver to fill out. The driver should also obtain the insurance information on all other involved vehicles.

Potential Claimants: Treat Them Well After the accident, it’s important to treat anyone who might make claims against your company or chauffeurs fairly and honestly. If your driver was at fault and caused damage to another vehicle, don’t delay – report it to your insurance company and get the claim settled.

If the claimant is a passenger in your car, don’t forget that they are your customer. Keep them happy. A happy client is less likely to initiate a lawsuit for minor injuries. An angry client who believes he was not treated properly, on the other hand, is more likely to initiate a lawsuit.

Remember, the goal is to prevent the lawsuit and keep the client.

There is nothing wrong with calling the injured party following the accident. Many times, simply letting the person know you care will prevent them from retaining a lawyer.

Many lawsuits are initiated over principal. However, principals do not pay for lawyers’ contingency fees – cash settlements do. Do not allow a delay in reimbursing a claimant for property damage, rental costs or medical bills.

The more time that goes by, the greater chance an attorney will get involved. Once an attorney is hired, the claim will not disappear. Keep the claimant under control and away from a lawyer.

The Cause of the Insurance Crisis Over the past two years there have been double and triple digit increases in insurance costs have for the transportation industry. The events of September 11, 2001 often get the blame but 9/11 was more like the final straw rather than the sole cause of the problems.

In the late 90’s and beginning of this decade, we enjoyed the benefits of a strong bull stock market. Technology stocks drove up prices and nearly everyone benefited. But the market began a major downward spiral prior to 9/11 when the technology boom crashed. Investors who had seen their portfolios increase two and three times over the boom lost most of their profits.

This loss of stock value affected the insurance industry as well. During the bull market, insurance carriers invested the money from clients’ premiums in the market. The profits the carriers received allowed them to keep premiums artificially low.

However, the declining stock market forced carriers to raise premiums to make up for their loss in investment profits.

The decline of the stock market also led to the demise of Reliance Insurance, which was a significant player in the transportation industry.

At a time when other carriers were avoiding the industry, Reliance was aggressively marketing itself to transportation companies. Bolstered by its investment income, Reliance was able to offer low premiums to the transportation industry. However, as the market declined, so did Reliance’s profits.

In May 2001, Reliance was placed into rehabilitation by the Pennsylvania Insurance Department. In October 2001, Reliance was put into liquidation. Less than six months later, another significant insurance company serving the transportation industry, Legion Insurance, was placed into rehabilitation and ultimately was liquidated in July 2003. The loss of Reliance and Legion has made it more difficult and more expensive to obtain insurance.

But it seems highly unlikely that the increases seen during the past two years will continue. We can expect to see a leveling off of premium increases in the next several years, allowing the industry to adjust to the increased costs.


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