Tim Rose brings his expertise to next year’s highly anticipated event.
The main reasons include: Fewer insurance companies, economic cycles, more lawsuits filed by hack lawyers, operators who run sloppy operations, party bus liability, and more 15-plus passenger vehicle incidents that generate higher claims and medical costs.
It’s no wonder the 2016 LCT annual Fact Book industry survey (June issue) for the second consecutive year ranked insurance rates as operators’ No. 2 business concern — right behind TNCs.
“In general, the limousine industry is the worst performing sector in the insurance industry regarding claims,” says Timothy H. Delaney, senior vice president of passenger transportation for Lancer Insurance. “We’ve seen huge developments in all claims and there are two basic things driving this — frequency and severity.”
Thanks to a rebounded economy, operators are logging more fleet miles which means more accidents. Add in higher medical and legal costs and you get even more pressure to raise rates. Operators are also “scrapping for drivers,” Delaney says, as they settle for less experienced people behind the wheel.
Also, as demand for group transportation rises, operators add larger, more diverse fleet vehicles. They are shocked to find 15-plus passenger vehicles and motorcoaches require a $5 million limit in liability insurance instead of the $1 million to $1.5-million limits for sedan insurance. “When you have an accident with multiple passengers the claims get more complicated,” Delaney says.
Another reality of the hard insurance market is fewer returns on investments for insurers when the economy slows. Insurers pass these costs on in premiums because they need to more money to underwrite policies.
Sue Happy Hacks
Michelle Wiltgen, assistant vice president and national commercial marketing manager for the National Interstate Insurance Company, blames lawsuits for driving rates higher. “In every newspaper and on TV you see these ads from lawyers telling the public to ‘make them pay’ for whatever injury or wrong they may have,” she says. “That means they will go after operators and try to find anything they can find that proves they were negligent.”
Delaney and Wiltgen agree operators can reduce lawsuit risks and stay in good graces with insurers by adopting strict safety rules and procedures. “Every run, operator and chauffeur has to follow to the letter every company policy, so if there is a claim the lawyer can’t rip apart their procedures to find something they did not follow on that run,” Wiltgen says.
Nightclub On Wheels
The industry is abuzz over insurers clamping down on party buses. Mixing perimeter seating, entertainment poles, and drunk passengers creates a liability nightmare. To be clear, it’s not the safety conscious operation with one or few party buses that cause the problem. Rather, it’s the small weekend warrior party bus company running at low costs with few or no safety practices. Still, insurers have outlawed the poles and comb through every aspect of running a party bus to reduce liability for accidents and injuries.
“We don’t insure party bus companies,” Wiltgen says. “However, if we have, say, a 15-year relationship with a limousine client and they have or buy a party bus, we’ll pass that part of the insurance on to a reinsurer company that will take the risk at a high premium.”
Wiltgen recalls talking to fellow insurance industry executives, agents and brokers at last year’s International LCT show in Las Vegas. “Only one out of the 15 I spoke with insured party buses and charged $30,000 per year per vehicle. I think many operators don’t know their true costs when they only operate the party bus on weekends. Are they making any money?”
A red flag for insurance companies is the party bus company with a website and marketing items that depict its business as a nightclub on wheels with martini glasses, dancing and people partying. “It’s hard to defend that in court because when you see a bus that’s marked ‘party bus,’ the intention is obvious.”
Delany and Wiltgen don’t fault the 15-plus passenger vehicles with surround seating used for corporate bookings, since such trips do not involve alcohol and passengers stay seated going from point A to Point B.
“When a customer asks about chartering a party bus, we do most of interviewing about them because when we find out their expectations is to convert the bus into a nightclub, we decline that business,” Main says. “That may result in losing a lot of business, but we are all about luxury transportation and safety.”
In fact, Baja’s party bus vehicles have no dance poles or privacy windows. “Our buses are built with a four-and-a-half foot open pass through so our drivers can always see what’s going on through the rear view mirror,” Main says. “If there is a problem, he can pull over to a safe area and walk back to address — and resolve — the situation.”
Main advises operators to post and enforce clear policies, procedures and penalties if passengers get out of hand, cause damage, or violate any provision in the contract. “We make the client read the contract, sign it, and then we add a security deposit from $750 to $1,500, depending on the risk level.” When the credit card holder realizes any violation can result in costly fines, the client more likely encourages good behavior on the trip.
Crucial to safety, operators should enforce the same policies on every trip and empower drivers and chauffeurs to stop if a trip gets out of control. As proof his system works is a recent award from his business management firm for going seven years without a single claim or employee injury. “They said that’s an all-time record, and it comes down to people management — that’s what it’s all about.”
Main shares his policy and procedure client contract below to help fellow operators run a safe party bus operation:
Our company provides luxury transportation. The safety of our clients is our utmost concern. It is important those boarding our equipment understand the rules and fines associated with potential damage that could occur if not cautious. Clients must read and sign the agreement and provide a credit card that will be billed for any damages according to prices listed in the Damage Agreement:
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