Time For A More Budget Friendly Truck Insurance Model
A trucker friend of mine once remarked that ahead of deregulation you could funds from in the trucking business despite yourself. Back in those "good ole days" government protected routes bequeathed an industry with LTL powerhouses, high paying Teamster jobs, and healthy profit margins. Today the trucking industry operates largely under a free wheeling TL and increasingly intermodal template with nonunion drivers and owner operators. Profit margins when exist at all generally come down to pennies on the dollar. It goes without saying that only the most productive trucking companies have survived this transformation - painful, but a net plus for consumers.
Now contrast the competitive untidiness in trucking with the inert if not orderly nature of this truck insurance agency. Life pretty much continues as it always has: same structure, same production model, same economics. Where convention breeds productivity, it certainly makes sense, but with truck insurance, convention has only meant unnecessarily high premiums.
Broadly speaking the structure of the truck insurance business fights into two segments: agents (including brokers) and insurance groups. Agents solicit and service business, while insurance companies underwrite, issue policies and pay an incident. Agents make money on commissions. Insurance companies make money on favorable underwriting results and investment pay packet.
Contrary to the perception of truckers, operating profit margins for insurers tend to mirror those off trucking companies. Where truckers have their operating ratio, insurers have their combined ratio. Both measures quantify operating profit as a percentage of revenue. In good years, both industries typically generate ratios between 90 and 100%, yielding operating profit margins as much as 10%.
By way of comparison, margins which are more successful truck insurance agents run as tall as 20 to 40% in good times and bad: any return considering agents bare no underwriting risk.
But let's not judge these economics too hastily. The truck agent has done an exceedingly splendid job of establishing himself as the ultimate purveyor of value for both trucking company and insurance company alike. Here's the perception. From the insurance company's viewpoint, the truck insurance agent gives an invaluable service have to address producing business and servicing clients. Therefore, the insurance company feels quite justified in paying healthy commissions particularly on business that generates a combined ratio of less than 100%. Correspondingly through trucking company's angle the agent has an invaluable service deal with his knowledge in the insurance market and also the ability to match a trucking company's coverage needs with capable and affordable insurer. Why begrudge the man cash? Besides he always picks up the tab for lunch and golf.
However, with advances in technology, more and more only the insurance company matters. The Internet increasingly has relegated the agent to your status of tag along. He much more serves as the conduit for exchange between trucker and insurer. Rather toy trucks of instant information, he increasingly gets in the much. Need a quote? Google it. Looking for accident statistics? Visit Safersys. Curious about some insurance company's rating? Pull up A.M. Best. Intrigued by the type of freight a company hauls and the position of its terminals? Check out their website. Concerned about your loss ratio? E-mail the underwriter. Fender bender? Snap a picture from your cell then fire off a text message to the claims department. It's much more efficient than leaving a voice mail message with a brokerage.
Just as you don't need a travel agent to book travel, you no longer need an broker to buy insurance cover. Strangely, both trucker and truck insurer seem unwilling to acknowledge this fact. For you to some degree, custom plays a role. Historically, most contracts between agent and insurer specify that the agent owns customer list. Thus, organizations generally remain not wanting to communicate directly using insured's. Also truckers are in the habit of smoking of dealing with agents not underwriters.
A simple step toward efficiency enjoy all truckers insisting that neither agent nor insurer can claim ownership of their account. This alteration in practice would set the stage for direct negotiations between trucker and truck insurer, and by extension create lower monthly premiums.
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