Insurance professionals in the trucking industry gathered earlier this month for a webinar hosted by Insurance Journal to discuss the current challenges and opportunities in transportation insurance. The panel featured experts who shared insights on the tough market conditions and the benefits of alternative insurance options, such as member-owned captives.
Kenny Planeta, a senior vice president at Heffernan Insurance Brokers, noted that premium increases of 5-10% are now seen as a positive outcome for trucking clients. He explained that flat renewals or decreases in premiums are rare due to ongoing carrier losses in the industry. The fear of large jury awards, often referred to as "nuclear verdicts," is heavily impacting trucking companies. Planeta emphasized that the anxiety surrounding these potential verdicts affects companies even if they are not directly involved in a lawsuit.
Cheri McGonagill-Spann from Crawford and Company echoed these concerns, stating that claims are on the rise and that nuclear verdicts pose significant challenges for commercial transportation. David Hoag, also from Crawford, added that the current hard insurance market complicates the process of placing business for companies seeking coverage.
As traditional insurance options become more frustrating for many, the panel discussed the advantages of member-owned captive insurance programs. Garrett Yates, another panelist from Heffernan, pointed out that these captives allow companies more control over their premiums and risk management. Unlike traditional insurance, where the insurer bears most of the risk, captive programs require companies to take on more responsibility, which can lead to greater accountability and predictability.
While there are initial costs associated with forming a captive, Hoag explained that these costs can be lower in the long run, especially for companies that manage their risks effectively. He noted that successful captives require a dedicated team to handle claims and financial matters.
The discussion also highlighted the structural elements of captives, including claims funding and the role of third-party administrators (TPAs) like Crawford. Planeta mentioned that some groups have even changed TPAs when they were unhappy with claims handling, emphasizing the importance of good partnerships in this model.
So, who should consider joining a captive? Planeta suggested that trucking companies with a strong safety record and good claims history are prime candidates. He explained that those who see their premiums rising despite good performance should look into captives as a viable option. However, companies must be prepared to take on more risk and ensure their safety practices are solid.
Looking ahead, the panelists noted that the landscape for captives is changing. Ten years ago, businesses often considered captives when they had fleets of 50 trucks. Now, they are finding that even fleets of 25 trucks can make captives feasible due to rising premiums. Heffernan has seen many trucking captives double in size over the past five years, indicating a growing interest in this model.
This webinar was the first in a series leading up to the Insurance Journal’s Risky Future Summit, scheduled for November 4. For those interested in learning more, a recording of the panel discussion is available on the Insurance Journal’s website.