DEC. LCT: Following gradual steps can ensure cool heads and sound judgment prevail.
Motorcoach carriers looking to purchase or change insurance policies contend with several factors, including a process can seem complicated and costly.
LCT Magazine recently spoke with industry experts to get some tips on what to consider and how to ensure you get the best coverage for your company.
First, look into the several insurance companies that specialize in offering passenger transportation insurance, such as Lancer Insurance, Shriver Insurance Agency, Transportation Insurance Brokers, and National Interstate Insurance Co., just to name a few. Because these companies offer products tailored to transportation, including driver safety training, operators should seek them out when conducting a search.
Francis Walsh, vice president/senior underwriter at Lancer Insurance, says that the importance of “having an experienced insurance company familiar with handling passenger transportation claims cannot be overstated.
“Your customers are your livelihood, so how they are treated in the event of a claim is as important as anything your insurance company will do for you,” Walsh says. He also points out that the more risk an operator can afford to take through liability and physical damage deductibles, the more premium savings they will see.
Relationship, Safety, Culture are Key
Other factors to remember when researching insurance benefits and costs are the needs and assets of your operation, and how these will affect your policy.
The International Motorcoach Group (IMG) consists of more than 57 motorcoach tour and charter operators in North America. Its members vary in size and insurance needs.
President Steve Klika says that coach operators need to understand that establishing a relationship with your insurance carrier is vital. “If I were to give some advice…when buying insurance, look at [it] not only on a short-term basis, but on a long-term basis. Take a look at the relationship [you’re] going into.” He contrasts the experience with buying home or auto insurance. “Don’t look at it for just year-to-year, because the insurance company is going to want to know your experience, so in case you do have a bad year, they’re not just going to bail out on you. And at the same time, in some cases, by having a long-term relationship, it’s going to have a [positive] impact on your premiums year-to-year,” he explains.
Operators need to take the time to understand what the insurance carrier looks for as it develops premiums, and what it bases the carrier’s premiums and coverage on, including type of experience and operation, he adds. Less experience will translate to higher insurance costs, and a potentially higher premium. Conversely, an established organization with a good safety record and training programs in place will be more competitive.
“They’re going to take a look at your drivers’ records, and they’re going to want to see how you’re operating, how you’re preventing accidents.”
Klika and Walsh agree that safety features, including DriveCams and electronic data recorders, help mitigate costs. Klika points out that anything that helps prevent accidents will be to a carrier’s advantage, whether it’s technology-based, or driver training programs. Also, the safety culture of the company is closely examined. Electronic Data Recorders (EDRs ) are favored by underwriters because they help keep loss costs down, which in turn, affect premiums, Walsh adds.
Many insurance companies, such as Long Beach, N.Y.-based Lancer Insurance, offer safety training to motorcoach operators. Lancer introduced its first free and exclusive driver training videotapes in 1989.
“Twenty years later, we have more than 20 different driver and management training video tapes streaming on our website and available exclusively to our policyholders 24/7. DVD and VHS versions are available as well.”
Motorcoach customers receive weekly, monthly, and quarterly newsletters and e-newsletters addressing a variety of safety, loss prevention, and risk management topics. “Driver safety awards, pins, company safety achievement plaques, and customer loyalty awards are additional products available through our total service programs,” Walsh says.
The Importance of Ratings
Elmhurst, Ill.-based Shriver Insurance handles more than 500 accounts, with motorcoach operators making up about 300. The company has insured motorcoaches for the past 40 years it has been in business.
Vicki Carver, customer service representative, advises new operators to first call around for an idea of pricing before they buy. “Sometimes, they’re sticker-shocked, and they’ll buy and think they won’t have to pay much. Then they find out how much the insurance is,” Carver says. Most insurance companies require a minimum of $5 million in coverage.
Carver also encourages operators to make sure they select an A-rated company. She recommends using A.M. Best, a full-service credit rating organization, providing ratings and analysis that help assess the creditworthiness and financial strength of risk-bearing entities and investment vehicles. (To visit the site, go to www.ambest.com) This global organization constantly monitors and updates ratings on companies, including insurance agencies. They also publish a new book annually, listing ratings.
“They have to have [a certain amount of] financial assets, versus the liabilities, to make sure they’re able to pay all the claims,” Carver says. “The rating drops when the company has less ability to demonstrate this type of financial ability. “You don’t want anything under a B.”
The Captive Insurance Alternative
Captive insurance groups, or alternative risk financing programs, enable passenger transportation operators to take more control over insurance costs and coverage as long as they are comfortable with and capable of taking on a little more risk.
Alternative risk financing programs offer another way to buy insurance, and a self-auditing method of managing insurance policies and costs. Groups of passenger transportation operators can take on part of the risk themselves, and have potential to share risk with other operators.
“[They] retain reasonable levels of coverage themselves, so it reduces their insurance costs in the long run, and the way the groups are structured, they really focus on the risk control aspect of the business, making them better operators,” says Michelle Silvestro, AVP and national marketing manager of National Interstate Insurance Co., in Richfield, Ohio.
Typically a bus company transfers all the risk to an insurance company when it buys a policy. It has claims and an insurance company pays them. With captive insurance, it maintains some of the risk, so it self-insures part of the risk in groups with other transportation operators.
In addition to reduced cost, Silvestro says that another benefit of the program — and one of its most integral aspects — is that it gets operators to focus on continual improvement.
“It’s all in the risk management, because the way the programs are structured, we take part of their premium, we put part of their money aside to pay for the losses, figure out what we need to pay for the losses up to a specified level,” Silvestro says. “If they don’t use all that money, they get it back with the investment income that money generates. If you control your losses, you see returns in the form of dividends of that money, so the risk management aspect becomes key. Operators figure out if they have [fewer] accidents, they see more returns.”
Insurance Search Checklist
• Look for insurance agencies that specialize in covering the passenger transportation businesses. They will offer products tailored to your specific needs.
• Do your homework. Check agency ratings with A.M. Best, a global credit rating organization. Stick with A-rated companies, which can take on more financial risk.
• Review your company’s safety culture. Make sure you have ongoing driver safety training in place.
• Be sure to note any safety features on your vehicles, such as Drive Cam and Electronic Data Recorders when talking to insurance providers. If you don’t yet have them, now may be a good time to invest.
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