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| BUSRide Magazine - June
2006 |
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During a
recent visit with a motorcoach client, a question came
up that insurance companies often hear:
“I’ve
paid my insurance company significant premiums over the
past several years. My loss experience has been
outstanding so why aren’t my premiums being reduced
accordingly?”
This is a legitimate question. It
is important to understand and accept the fact that even
the most efficient, well-run bus company can be the
victim of a serious incident. According to the law of
averages, considering the amount of logged miles, it is
likely some accidents will simply be
unavoidable.
Federal law mandates most operators
to carry a limit of liability of $5 million. Because
some losses are unpredictable, insurance carriers find
it difficult to determine exactly what will occur with a
particular risk during any period. This is partly
why insurance carriers do not reduce premiums simply
because an operator has run his business profitably for
their insurance partner over a given period of time.
Of the current 3,900 property and casualty
carriers in the United States, only a select few
carriers specialize in motorcoach insurance. Because
losses are random, insurance providers must devise a
plan to charge rates that spread the exposure they
assume among all the companies they insure rather than
just a select few.
Lancer Insurance Company, the
nation’s largest motorcoach insurer, says that during
2005, it wrote approximately $86 million in premiums. Of
that amount, it currently appears as though $79 million
will return a loss ratio of 50 percent or less. The
remaining $7 million will generate in the area of $37
million in potential claim exposure. Lancer further
reports that over the past 20 years, 9 percent of its
premium has generated 41 percent of its losses.
Lancer and National Interstate have found a way
to structure their rate plans to spread the losses of a
few over the premiums of many. They have been able to
spread their large cost exposure equitably over all
rural, urban, commuter account types throughout all
geographical locations. This has enabled them to retain
their financial health and viability and provide the
continuity of coverage.
In addition to providing
coverage in the event of an accident, any motorcoach
insurance specialist should be able to manage the risk
of the client. In the event of an accident, it is quite
likely that a motorcoach company will be scrutinized by
investigators from the National Transportation Safety
Board and Department of Transportation representatives
and members of the local media. Driver files, prior
accident history, any previous safety-related violations
or reprimands, compliance with state and federal
guidelines and equipment safety will be examined.
The most effective way to withstand this
investigation is to make certain that record-keeping is
current in motor vehicle reports, drug screenings,
criminal background checks, prior employer inquiries,
equipment maintenance records and driver logs. Most
insurance carriers and your insurance agent should be
thoroughly familiar with these requirements and
compliance should be an ongoing and daily process within
any motorcoach company.
Risk management is about
ongoing communication between the parties involved, and
includes identification of claim trends and tendencies
for an individual entity. An action plan in the event of
a serious incident should be part of the program.
A motorcoach company is like a fingerprint —no
two are alike. Each one has its unique personality. The
insurance agent should be a member of the operator’s
support team along with the attorney and accountant. An
operator must be able to solicit the opinion of his
insurance carrier on all issues relative to running the
safest operation possible. The agent must be prepared to
advise on everything related to insurance protection
plan, and keep the operator abreast of changes in the
insurance marketplace so that plans and budgets consider
current trends and expectations.
Insurance is one
of those intangibles. Paying on an insurance premium is
a means of providing the amount of protection from risk
factors that normal exceed the amount of financial
protection an operator could provide on his
own.
In addition, the payment includes the claims
expertise of the insurance partner who is familiar with
the nuances of protecting the insured assets as well as
their own in the most efficient and timely manner
possible.
Peter R.
Cohen is regional vice president of Capacity Coverage
Company of New Jersey, Inc. in Mahwah, NJ. For more
information contact pcohen@capcoverage.com
(201)
661-7801. | | |
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| Copyright ©1999-2006 Power Trade Media, LLC
All rights reserved. | |
