Insurance transfers the cost of accidents to an outside company by contract. Insurance costs should be managed like any other costs in the company independent of efforts to manage the accidents themselves.
Insurance costs are one of the larger costs of a fleet operation. There are several strategies to reduce your costs while not endangering your company, drivers or the public.
Check-off Sheet for Insurance
- Read your policies. This may seem surprising but most fleet managers (even ones that are responsible for insurance) don't read their policies. Some people think the clauses are fixed, dictated by the insurance companies. In actuality some contracts protect you better than others and some clauses can be negotiated. You may be paying for coverages which you don't need or want.
- Shop your insurance coverages the same way you shop for everything else. This is especially true if one broker or agent has supplied coverage for a number of years. In our small fleet we saved 15 percent by shopping.
- Institute a driver/mechanic risk management program as discussed in the last issue. Identify your risk. Take steps to manage your risk. Your insurance carrier can advise you on specific effective changes, training, and procedures you can use. See next section for details about risk management programs.
- Consider elimination of coverages that are not needed or cost effective. Coverages to target could include towing, rental units or other non-essentials. You may decide to self-insure these risks because it is cheaper for you to provide the service than for the insurance company to provide them.
- Lower the upper limit of liability insurance while insuring that your umbrella will still pick up coverage. Sometimes there is an overlap of coverage where the liability goes to $2,000,000 but the umbrella starts at $1,000,000.
- How high of a deductible can you afford? The first dollar of coverage is always the most expensive. The higher the deductible the better (if you can afford the loss). See 6b for a detailed discussion.
(By the way, this is even truer for your own Auto policy and Home Owners insurance.)
6b.Consider partial or total self-insurance for specific overages. This is a big area of potential savings and potential pitfalls. For some of you that will mean higher deductibles, or the complete elimination of collision or comprehensive coverage. Always look first at what you can afford to lose and then at the worst-case scenario.
Without proper thought, self-insurance can be a nightmare. However, you can supplement self-insurance with re-insurance that sets an upper limit on your loss.
Be careful of the situation where you've just eliminated comprehensive coverage and saved big money. For example a fire at night when all vehicles are together in your yard could be catastrophic. Or a thief enters your yard and steals all your trucks. You're now totally responsible.
With some planning even that scenario wouldn't destroy your company. There are insurance instruments to deal with the situation. The usual solution is to purchase a stop-loss policy which starts to cover you at $200,000 or higher (but at a level you can afford).
- Be sure your drivers aren't double covered for liability insurance. They should only be covered under the truck policy, not the general liability policy.
- Check that your mobile equipment (lift trucks etc.) has the correct liability coverage. It should probably not be covered by your truck policy (for liability). The truck policy is designed for the hazards of over-the-road liability, which is higher.
- Do some investigating about various leasing arrangements. It might be less costly to lease units with insurance coverage already in place.
- We had some tragic catastrophes in 2005. Are your insurance coverages up to the catastrophes that are common in your area? Do you have coverage for a 100-year event (flood, storm, etc.) or an uncommon hazard? Is there any coverage needed for some of the new risks such as health pandemics?
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