The way Tim Clinton sees it, if federal size and weight limits for commercial trucks increase, insurance rates are going to increase as well — pretty much across the board for the entire trucking industry. “From a purely physical standpoint, you're talking about a bigger trailer that can haul more cargo. Obviously, the cost to insure both of them will go up, because there's more to cover,” says Clinton, assistant vp at the trucking division for Cincinnati, OH-based Great American Insurance Group (GAIC). “A higher rate on that is easier to see, because the value of both is higher.”
Yet that's only a small part of the insurance puzzle when it comes to greater size and weight rules in trucking. Liability is the big piece, especially when heavier and longer trucks create the potential for more severe crashes.
“There's some probability we'd see an increase in crash severity with heavier trailers, in part because you need more stopping distance as the weights go up,” Clinton says. “But if the exposure of the fleet does not change as the weights go up — if we do not see an increase in loss or severity of accidents — then rates may not go up. Some insurers that issue a blanket rate increase at the outset of expanded size and weight rules might reduce them for clients that don't have greater losses and claims.”
That's why Bob Holtzman, an agent with Western Truck Insurance Services in Inglewood, CA, doesn't think insurance rates would rise automatically if weight limits for commercial trucks rose from 80,000 to 97,000 lbs., simply because other variables are more critical in a carrier's risk profile.
“An extra 17,000 lbs. is significant, but I don't believe there will be any immediate changes in insurance rates affected by any new rules,” he says. “Key rating variables are driving record, commodity carried, radius of operation, experience of driver, previous insurance history and claims history.”
Jerry Davis, executive vp with Hope, AR-based Fikes Truck Line, agrees that driver skills and experience should trump concerns over size and weight increases. “When I started driving, I pulled 40-ft. flatbeds. That steadily increased to the 53-ft. trailers we haul today,” says Davis, who joined Fikes' corporate ranks in 1985. “I'm neither for nor against heavier trucks, but in my view, it's all about your drivers not size or weight. They really determine your losses and claims in the end.”
If a fleet maintains a good loss/claim record and employs experienced, safe drivers, you'll get good rates from your insurance provider.
“It all goes back to the driver, their skills, and the environment they operate in,” he says. “Heavier weight, in my mind, is not nearly as much a problem as the number of vehicles a driver must contend with on the road. We can improve braking power and add other safety systems to the truck easily. Crowded highways, however, can't be cured so easily. Traffic congestion is a much bigger problem than weight from a driver's perspective. So if you can haul more freight with fewer vehicles, that might improve things.”
PIECES OF THE PUZZLE
Of course, in many states, longer and heavier trucks have been the rule for some time. For example, the maximum truck weight in Michigan is 164,000 lbs., more than double what's allowed elsewhere on the U.S. Interstate Highway System, and state laws require up to 11 axles on such ultra-heavy trucks to spread the weight out to minimize wear and tear on the roadways.
Fleets in Michigan say that with heavy weight the norm and not the exception, insurance carriers keep a close eye on a variety of other factors when calculating rates.
“The insurance market on a whole drives the options that we have in underwriting,” explains Greg Manchik, president and owner of sand and gavel hauler F.J. Manchik & Son Trucking, Richmond, MI. “A soft market [which we are now in] puts more companies out there that will underwrite in our industry [sand and gravel]. This provides more competition and drives rates somewhat lower when all of the other underwriting standards have been met.”
Manchik, a truck driver who took over the family business when his father died unexpectedly at age 56 in 1993, says claims history and years of experience in his particular niche are two major factors used to calculate the insurance rates for his 11-truck, 22-trailer fleet.
“Our insurance agent looks back with a five-year window,” he notes. “They look at driver MVRs [motor vehicle records], conduct ride-along inspections, and look at driver experience. We do not hire drivers with under two years' experience, and we do not hire drivers with DUI [driving under the influence] convictions or high points. They also look at our safety and maintenance programs.” Manchik adds that the newer the fleet, the better you are rated. “Obviously, newer equipment makes for less brake failures, less pin failures, etc.,” he says.
His fleet's relationship with its insurance agent is another critical piece of the puzzle. “They know what companies are offering insurance at any given year and they can also state a case of good risk if we have had a problem with any of the above,” Manchik says. “Their relationship with the underwriter can also make a difference, such as if we added any new safety features, they would have to present it to the underwriter and see if they could convince them to drop rates.”
Finally, Manchik doesn't consider his relationship with his agent to be set in stone. “For us to make sure that our rates are competitive, we get outside quotes from different agents to make sure our agent is doing his or her job,” he stresses. “We are not married to an agent. Bad service [or] not competitive — we change.”
INSURANCE PERSPECTIVE
From the insurance carrier's perspective, it's not the size and weight of the vehicle alone that leads to higher premiums. It's how bigger and heavier combination vehicles alter a fleet's safety profile, says Timothy Good, president of Leola, PA-based Goods Insurance Agency.
“If you increase size and weight, more stopping distance and power is required, so your ability to maneuver may be affected,” says Good, whose brokerage maintains offices in Pennsylvania, North Carolina, Alabama and Arizona. “An increase from 80,000 to 85,000 lbs. isn't a big deal. Go from 80,000 to 97,000 lbs. and it's a whole different ballgame in terms of safety risks.”
Where a carrier operates, however, also impacts their size and weight issue. “If you are out in the Midwest operating in rural areas, it's not as big a deal as if you are running from New York to Virginia on heavily congested highways delivering into major metropolitan areas,” he says. “Driver experience plays into this as well. If your drivers have worked in California or Michigan, hauling 120,000-lb. oversized loads, that's one thing. If all they've done is drive dry van freight, that's something completely different.”
A carrier's previous loss experience is a direct indicator of that all-important safety profile, adds Greg Golden, vp and COO of Chicago-based Aon Corp.'s trucking practice. “That past loss experience is the very first benchmark we use to gauge whether a client is a good, average or poor risk,” he says. “Next are their financials. If they are in dire financial straits, more than likely they are cutting corners on equipment maintenance and hiring practices.”
Good safety practices, from rigorous hiring guidelines to ongoing driver training programs that are rigidly adhered to regardless of the economic challenges, are another factor, Golden says. “There's the expectation that the severity and number of truck crashes would increase over time due to size and weight increases, but you won't really know that until you are several years into such a rule change,” says Clinton.
“You wouldn't see a difference in their loss/claims ratio for 12 or 36 months even,” he explains. “So the question is, do you raise rates at the outset of the size and weight change then lower them, or offer a credit if the fleet's safety profile doesn't change? Do you wait and see how it goes? The answer will be different for every fleet.”
The long and heavy of it
There's a single question insurers are asking when it comes to potentially broad increases in the size and weight of commercial trucks — would such a change increase a carrier's risk exposure, or reduce it? On the one hand, says John Conley, president of the National Tank Truck Carriers Assn., allowing trucks to carry more weight would reduce the number of trucks on the road, thus reducing the physical amount of exposure. Yet, on the other, bigger loads would result in bigger losses of product in a crash — and could also potentially increase crash severity — which increases a carrier's level of risk.
One source of data that may offer some answers is a 1983 study conducted by the California Dept. of Transportation (Caltrans) that tested and videotaped the performance of several longer combination vehicle (LCV) types along a 1,200-mi. stretch of highway, studying LCV behavior on freeway interchanges, open-road travel, urban traffic, narrow lanes, two-lane roads, rest areas and weigh stations. It also looked at issues such as off-tracking, speed on grades, braking, acceleration, travel in rain and wind, noise generation and fuel economy. According to Caltrans, there are both advantages and disadvantages to using LCVs.
On the positive side of the ledger:
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Productivity — LCVs improve productivity due to an increase in cargo-carrying capacity by 30 to 100% per driver. This results in fewer truck trips, lower cost and fewer miles driven.
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Cost — Transport costs may be lower due to fewer drivers needed per cargo unit, and more efficient use of fuel. The cost savings may be passed on to consumers or used to increase profits.
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Traffic — Improved productivity may result in fewer trucks on the road.
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Air Emissions — LCVs may produce lower air emissions per unit of cargo transported.
The agency did stress, however, that there are many disadvantages to LCVs as well:
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Safety — Large trucks are involved in a disproportional percentage of fatal collisions; however, statistics on LCVs are difficult to obtain because of the low number of vehicles involved. Triples tend to sway and can leave the lane they are traveling in, although sway can be lessened by advanced connector types. Triples also require more passing length, spray more rain and snow, and have a history of being underpowered while climbing steep grades.
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Pavement damage — Heavier trucks deteriorate the pavement structure at an accelerated rate. A study at the University of Texas found that one big rig pass causes the damage equivalent of 2,000 to 3,000 cars. Increasing the number of axles could mitigate extra pavement damage caused by LCVs.
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Infrastructure damage — LCVs, especially Turnpike Doubles and Rocky Mountain Doubles, demonstrate wider off-tracking on curves than current combinations. Off-tracking can damage shoulders, curbs and roadside signs along ramps and intersections.
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Parking — The parking spaces at rest areas and truck stops are not designed for trucks longer than 80 ft.
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Traffic — In theory, LCVs could result in fewer trucks on the road, but if rail cargo is diverted to trucks due to lower costs, then any traffic advantage would be negated.
Measuring the risk
Driver behavior and experience are two of the most critical factors insurance providers consider as they calculate rates for commercial fleets of all shapes and sizes. Now, insurance carriers are promoting a variety of technologies that record driver operating habits to help better determine actual risk levels within their client base.
Chicago-based insurance broker Aon Corp. and San Diego-based SmartDrive teamed up earlier this year to start providing a joint service called AonSmartDrive that aims to reduce commercial fleet accidents by 50% and offer some legal protection as well, explains Luke Harrison, director of Aon's Global Risk Consulting practice. “This service supplements a company's risk management program by influencing driver behavior and preventing accidents,” he says. “This is a key message, through which companies should proactively identify and manage the risks posed by the vehicles, their drivers, and the job that is being undertaken. We feel that, in this litigious environment, AonSmartDrive will help companies to show that they are taking all reasonable steps to reduce costs and save lives.”
The system consists of a dual-lens camera that uses G-force and speed sensors to capture 30-sec. video clips before and after a triggered incident. These are then reviewed to identify possible driving errors, such as tailgating or speeding, or common distractions, such as eating, using a cell phone, or reading a map, says Harrison. Entirely Internet-based, the system allows clients to easily and quickly access events, run reports, and counsel drivers. “Benchmarking means good drivers can be appropriately rewarded, while drivers displaying unsafe behaviors can be retrained,” he notes.
Tim Clinton, assistant vp for the trucking division within Cincinnati, OH-based Great American Insurance Group, says that his firm is currently pilot-testing a tracking and tracing technology package called Truck Tracker that will help fleets locate stolen cargo and also record vehicle operation metrics such as speed, hard braking incidents, engine idle time and more.
“This is a tool that should help carriers reduce their risk exposure on several fronts,” he tells Fleet Owner. “Not only will it help in terms of cargo theft and reducing risky driver behaviors, it will also help them be more fuel -efficient through better engine idle time management. We intend to apply insurance credits to carriers that adopt this system.”
Clinton expects the pilot test to wrap up by the end of the fourth quarter of this year, with the technology package available on the market some time in the first quarter of 2009.
