Insurers Weigh Pricing for Natural-Gas Trucks

This story appears in the April 29 print edition of Transport Topics.

Insurance underwriters are just starting to wrestle with how to price policies for natural gas-powered trucks, as there is not yet enough operational history available to create the actuarial tables on which the industry typically depends, according to interviews with brokers.

Multiple underwriters declined comment, but the brokers who act as intermediaries between underwriters and carriers said that for now, trucks using liquefied or compressed natural gas are generally seeing pricing comparable to diesel-fired trucks, with an obvious exception for covering the higher prices on new LNG and CNG trucks.

“Universally, we are not seeing any difference on liability coverage between diesel and natural-gas trucks,” said Tom Dickmeyer, CEO of the Cline Wood Agency in Leawood, Kan., after talking to primary underwriters and reinsurance companies.

For physical damage to the trucks, Dickmeyer said policies are more costly because the premium for a CNG or LNG tractor is at least $50,000 more than the cost of a conventional diesel truck.

“We’re just not seeing enough on natural gas yet, but all of the underwriters know it’s hanging out there. . . . Pricing from underwriters is typically behind the curve,” Dickmeyer said.

“Underwriters look at the world through a rearview mirror,” explained Ron Inberg, executive vice president, McGriff, Seibels & Williams.

“We’re not seeing a surcharge for LNG vehicles, but policies are calculated based on the value of the trucks, which is greater with natural gas,” he said. “So far, there has been no evidence that natural-gas trucks are less safe.”

Beyond insuring the trucks themselves, companies have to insure maintenance shops and fuel-storage equipment, said Ryder System Vice President Scott Perry, who works on the company’s CNG and LNG program that operates 300 vehicles for 40 customers.

Perry has studied reports from fire marshals and writers of building electrical codes and said maintenance shops that work on LNG and CNG trucks must be well-ventilated, especially at or near the ceiling because natural gas is lighter than air and tends to rise if it escapes from a truck. He also said it is important for electrical devices near ceilings to be shielded or moved so as not to create ignition conditions.

Perry also recommended methane-detection systems for shops working on LNG or CNG trucks.

“You also have to pay attention to your ‘hot sites’ where there’s welding, grinding and battery charging,” Perry said.

While the shop modification is costly, once it is done, “our experience thus far is that we haven’t seen a meaningful change in the cost of insuring a shop,” Perry said.

Another aspect of risk management is fuel storage. Perry said drivers and technicians need to be trained on how to work with CNG and LNG equipment, and in this aspect, natural gas might even have an advantage.

“A diesel spill can become a very serious environmental issue,” Perry said. As for gasoline, he said that “if it were just discovered now, it would probably have so much trouble meeting [federal] standards, it would be very difficult to adopt as a transportation fuel.”

In contrast, escaped CNG or LNG just rises, which is hazardous as a greenhouse gas, but it does not generate a cleanup situation, he said.

Perry did caution that people must be trained on how to dispense LNG, which can be dangerous to human skin because it is stored at minus 260 degrees Fahrenheit.

Southern Counties Express, Rancho Dominguez, Calif., purchased extra warranty coverage from the manufacturer for its LNG tractors, said sales manager Sherry Hertel, and that is a type of insurance.

In terms of policies, though, “There is no additional liability cost for the alternative fuel,” she said.

Hertel did recommend installing natural-gas detectors inside the truck cabs. If gas collects there, it could either cause the driver to pass out or create a fire hazard, she said.

“This is a great question, on pricing, but it’s so early in the game now you can’t say,” said Mike Natalizio, CEO of HNI Risk Services.

“In our office, we’re seeing more CNG rather than LNG, but so far, the underwriters are neutral. It’s still very new, and underwriters usually follow a trend.”

Paper Transport of Green Bay, Wis., uses CNG tractors for some of its fleet and HNI for insurance brokerage.

“So far, it’s not an underwriting obstacle,” Natalizio said.