Opinion: Alternative Risk Transfer Options
By Chris Mikolay
Director of Marketing
National Interstate Insurance Co.
This Opinion piece appears in the Dec. 13 print edition of Transport Topics. Click here to subscribe today.
Ensuring the safe delivery of every load should be a top priority in the trucking industry. Yet, even with the most sophisticated technologies and best risk-management techniques, bad things can happen to good people — or good carriers.
Trucking is an inherently risky endeavor, and properly managing its risk is no easy task and can be puzzling, given the vast array of insurance and risk financing options available to the trucking industry.
Smart fleet owners and executives should take the time to properly understand (1) the variety of ways in which risk can be transferred, (2) when it should be retained and (3) how various risk-financing techniques affect a fleet’s cash flows and bottom line.
These considerations are particularly important today, as we appear to be emerging from the worst economy since the Great Depression of the 1930s.
Interestingly, while the economy worsened over the past decade, premium prices for trucker liability insurance, workers’ compensation and other major lines of insurance for the trucking industry have steadily decreased as a greater number of insurance carriers entered the trucking market. With an increase in the available supply of insurance, truckers have been able to buy increased limits of insurance at historically low prices and with expanded coverage options.
Some trucking insurance experts believe premium prices may be bottoming out. As losses mount with the insurance companies that have been selling insurance at unsustainable or inadequate rates, some insurers will undoubtedly exit the trucking market, thereby causing prices to rise rapidly with this diminished supply of capital.
If insurance pricing truly has reached its lowest point, this is the ideal time for fleet owners to investigate alternative risk transfer programs.
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