Long-haul trucking

Rough Notes, Aug 2003 by France, Larry G

That is the way Julian James, director of the Lloyd's Worldwide Markets Division, described today's insurance climate at the AAMGA (American Association of Managing General Agents) Annual Meeting in Boca Raton, Florida. That phrase certainly fits the long-haul trucking market. The market or number of carriers or MGAs that have the ability to place coverage has declined over the past 10 years. The number of questionnaires that stated, "We no longer write this class of business," was the most ever received by Rough Notes.

The "thinning of the herd" may be a good thing overall. The remaining market is still up and running because the players focused on profit and placed a priority on underwriting. The market is not softening; it is just not seeing the 25% rate increases of the past two years. A major fear is that someone will enter the market and try to buy the business, which will destroy all the prudent measures put into place in the past.

Jerry Ferguson, senior vice president of Occidental Fire and Casualty, states that he feels "that the long-haul trucking market will hold its current pricing firmness for the foreseeable future if the slowly returning former markets will recall their own past unprofitable experience and govern their new pricing accordingly."

Ferguson says that history would support the fact that some carriers have a short memory of their ineptness in pricing their product prudently and sometimes come back in the marketplace following the perfume of the premium. "We hope that these re-emerging markets have learned their lesson and will be responsible, which is ultimately in everyone's interest."

The opinion is that pricing is somewhat stable and future entries in the marketplace are today's standard.

"The marketplace is allowing only normal rate increases at renewal versus double digit in the 20% plus," says Doug Hathaway, vice president of Transportation for Swett & Crawford. Hathaway comments that long-haul trucking accounts are operating under less distressed economic conditions and are beginning to find more opportunies to increase transport rates. "Expect recent firming of prices to continue with more MGU-driven programs to enter the marketplace as reinsurers gain more confidence in tracking facilities."

New laws concerning drivers' rest time will go into effect January 4, 2004. The Federal Motor Carrier Safety Administration made changes to the Hours of Service rules for truckers in the United States-the first since 1939.

David Goodwin is the national director of Safety & Training Services for Markel Insurance Company of Canada. This department provides fleet loss control advice and corporate and driver training to policyholders and other clients. Goodwin also is national director of Markel Professional Transport Training. This wholly owned subsidiary of Markel Insurance has operated its own fleet of tractor-trailers for the purposes of driver and corporate training since 1988.

Goodwin says that the new rules are easy to understand and enforce. "They move drivers toward a 24-hour Orcadian rhythm, closer to the body's natural clock. While the maximum On Duty time has increased from 10 to 11 hours, mandatory Off Duty Rest Time for drivers has also increased by 25%. By replacing the old eight-hour off-duty break with the new mandatory 10-hour off-duty hours, drivers might actually be able to manage eight hours of uninterrupted sleep. The new rules should still help to promote highway safety between Canada and the United States. The rules are not identical to the current Canadian HOS, nor are the proposed changes coming down the pipeline next year. The new legislation fell short of mandating On-Board electronic recording devices, 'Black Boxes' if you will, which is long overdue and needed in the trucking industry."

Goodwin says that rest breaks and team driver operations will require change and better management. Drivers will no longer have the luxury of logging off duty for three or four hours while trailers are unloaded at a time convenient to shippers. Small fleets, particularly those in long-haul operations, will have the hardest time adjusting and running legally, as their costs of doing business will increase. The best carriers proactively address unrealistic shipper demands and scheduling practices. Some, according to Goodwin, already conduct regular driver health education and fatigue awareness programs to reduce fatigue while still maintaining a reasonable level of productivity from their fleets.

From Markel's perspective, the seven most common problem areas for heavy trucking fleets today are indifferent management, poor dispatch control, unprofitable revenue sources, poor driver retention, lax vehicle maintenance and replacement policies, ineffective management systems and a lack of basic benchmarking. "Controlling internal costs is the key," says Goodwin.

The new rules should hold down fatalities and driver and passenger car injuries, but be forewarned that the more time it takes to go between point A and point B, the more cost will be tacked onto the product that is being delivered. But-that is the trade off.