The emerging cost issue
Rates were already on the rise pre-ELD Mandate. Over the past few years, insurance rates for long-haul trucks and trucking companies have doubled, according to Markets Insider. Premiums that earlier in the decade averaged $6,000 to $7,000 now run anywhere from $12,000 to $14,000, and some are as high as $20,000.
According to data from the American Transportation Research Institute (ATRI), rising insurance costs account for the largest increases in operational costs for trucking firms, and have for some time. Insurance costs rose by 11% from 2013-2014 and another 29% from 2014-2015. Meanwhile, equipment costs, driven by technology, continue to climb—the average cost of a new tractor-trailer rig now ranges from $140,000 to $175,000—at a time when a growing shortage of drivers is pushing up industry salaries.
Yet many in the industry expected that post-ELD rates would trend back down. After all, the big selling point was that ELDs were all about safety—even if was clear that wasn’t the only motive. Regardless, according to SONAR data, insurance rates are rising. We actually see a volatile marketplace over the past few years, but with a trend upwards over the past several months.
Chad Eichelberger, president and COO of Reliance Partners, says that in general the auto liability market losses are still an issue for many insurance carriers in the truck insurance space. “We have not seen any major insurance carriers leave the marketplace as we witnessed over the past few years, but we are hearing that more insurance companies are at or near their premium capacity. This means that in general, insurers can afford to be more selective or get additional premium per truck that is needed to offset what has been an unfavorable overall auto liability market,” he tells FreightWaves.
In some respects, carriers might say such market forces are more or less out of your control. That’s not quite true, however. First, if you want to be a “fleet of choice”—desirable to a preferred insurance provider—you want to keep your scores topline anyway. Second, you always want to do everything you can to maximize your margins, or, put another way, to beat back excessive or unnecessary costs, regardless of market forces.
Lead with principles
First, let’s start with the obvious, but the “easier-said-than-dones”: hire well, plan well, and be repetitive about “obvious” safety prep. As we’ve discussed before, most drivers have no doubt have “heard it all before,” but there’s a place for this kind of repetition. Reminders, among other things, keep the basics as top of mind, and reinforce priorities. Also, encourage drivers not to speed in order to meet the rigid hours-of-service issues. We only have anecdotal evidence that this is happening, but it makes sense how and why it’s occurring. Better planning helps head this issue off at the pass until the FMCSA passes more flexible guidance.
Beyond that, the focus should be on your CSA score. FMCSA’s CSA program utilizes seven categories to prioritize carriers for possible interventions. Those categories are: Unsafe Driving, Crash Indicator, Hours-of-Service Compliance, Vehicle Maintenance, Controlled Substances/Alcohol, Hazardous Materials Compliance, and Driver Fitness. Data collected through roadside inspections, crash reports, investigations and other violations from the previous 12 months are used to populate the BASIC categories, ranking carriers in each category on a percentile scale of 0 to 100. Much like a pitcher’s ERA, or in golf, the higher the number the worse the score.
Lights and Tires and Brakes (Oh my!)
If you want to get a lot of bang for your buck, start with the basics. Much like with Maslow’s Hierarchy of Needs, in order to achieve the higher benefits of life, you have to meet the basic needs.
According to various sources, broken lights are one of the most common roadside violations. In 2014, broken lights constituted approximately 28% of all roadside violations. Also, they carry a whopping penalty of 6 points. On the other hand, approximately 11% violations are for tires. However, most importantly, tire-related violations carry a severe penalty of 8 CSA points. Make sure that you properly inspect tires and keep them in an excellent shape in a bid to improve your CSA score.
As we’ve previously reported, CSA scores often take a hit during Operation Safe Driver Week or Brake Safety Week campaigns where law enforcement ramps up roadside inspections and citations. The programs are effective in that they raise awareness of how many aren’t following the basics. Let’s learn from what the safety organizations are trying to teach. Brake safety is an often-overlooked aspect of pre-trip inspections.
Lead with principles and process, and remember to build on them from the fundamentals. You heard it here first.
By: Chad Prevost at Freight Waves