4 Ways to Lower Business Auto Insurance Cost
Written by Eric Petersen, CIC
Ooof! Is your Business Auto Insurance cost skyrocketing? We consistently hear that the largest insurance issue for tree care companies right now is the cost of their business auto insurance.
And to make matters worse, the cost is not the only thing that is frustrating in today’s Business Auto insurance environment. Tree care companies are also having trouble adding vehicles due to the value or size as well as dealing with tighter driving record requirements from the insurance companies.
So how do you gain some control of your Business Auto insurance?
To start, remember that the insurance industry needs to make a profit to be able to pay for the claims that they’ve promised to pay on the policies that they’ve sold. To do this, they analyze (underwrite) their policyholders and determine the price they feel is necessary to achieve this goal. If you, as the policyholder, can show the insurance company why you will be a profitable account for them (having less claims than expected), you will receive a lower premium.
There are many things you can do to lower your Business Auto cost, but below are what I feel are the four most impactful ways.
1) Driver Management – Your largest exposure to your fleet are your drivers. Having solid driver management procedures is the only way to begin to lessen this exposure. There are three important aspects of driver management:
a. Hiring Process – The best way to avoid hiring a bad driver is to have a process in place to identify what is required of your employees. Ensuring that your written job descriptions state the driving requirement of the position is the first step. Then run background and Motor Vehicle Record (MVR) checks to verify the information that the applicant gave you on the application is correct. Lastly, establish a set of MVR guidelines that a person must meet before they can be hired for a position with driving responsibilities.
b. Driving Test – After someone qualifies to drive your vehicles on paper, make sure they can drive in real life. Create a driving test for each type of vehicle within your fleet and make all drivers prove their driving ability before allowing them to go out onto the road for you. Remember to include the following items in your driving test: pre-trip inspection, starting, stopping, turning both directions, backing up and parking. Many companies also include trailers and operation of permanently attached equipment (aerial lift, dump body, etc.) into their driving tests.
c. Annual MVR Checks – An often forgotten part of driver management is checking the driving records of current employees. Obviously, your employees do not stop getting into accidents or earning traffic violations the moment they begin to work for you. Create an internal system to run the driving records of every driver at least once per year.
2) Fleet Management – The second way to lower your Business Auto cost is to ensure the vehicles in your fleet are used correctly, properly stored and maintained and free of any compliance issues. You can accomplish this by focusing on these four elements of Fleet Management.
a. Vehicle Inspection – Having a solid pre/post trip procedure in place, creates the opportunity to eliminate most maintenance issues with your vehicles. Not only is an inspection a compliance requirement, but it is the surest way for your vehicles to stay in tip top shape.
b. Vehicle Use Policy – Create a written policy that sets the expectation of who is allowed to drive the company vehicles and when they are allowed. This can be placed into your employee handbook or your fleet safety program.
c. Vehicle Storage – Consider where the vehicles will be stored when not in use. Is your garage large enough to store all vehicles inside out of the elements, or do you not want to have all of your trucks in one place in case of a fire or tornado. The answer to the storage question will be different for each tree service, so work through the logistics for your company and be intentional about it.
d. Compliance – Having a truck tagged out of service by a state trooper is a major productivity blow, plus the financial ramifications with a fine and the loss of use for that vehicle while it is out. We recommend having someone in your company be in charge of compliance for your fleet. Make sure you know if your state has their own DOT or if they only follow federal regulation. You can ask your insurance company to run a report (SAFER report) to get a snapshot of your historical compliance to start your effort at improving in this area.
3) Telematics – You’ve heard the phrase “data is king” right? Well it definitely pertains to your drivers and vehicles as well. There are many different vendors that offer a myriad of choices on what you can track and monitor with your drivers and vehicles. Installing a telematics program can give you so much accurate and individualized data that managing your drivers and vehicles can be very easy.
4) Insurance Policy – The first three ways to lower your cost are all done within your company, however, there are items directly within your insurance policy that can be done to lower the cost as well.
a. Presentation of Proactive Programs – If you’ve worked on the first three items within this article, make sure you let your insurance agent know about them. Give them a copy of the written procedures and a sample of the completed drivers test to prove that you are utilizing these tactics to lower your over-the-road risk. It is then the job of your insurance agent to sell this to the insurance company to get a lower premium at your renewal.
b. Deductibles – Look into what options are available for your physical damage deductibles (Comprehensive and Collision coverage). You can look to raise the deductible or perhaps drop that coverage all together for older vehicles. I strongly believe that there is nothing wrong with self insuring, however, I want you to intentionally choose to self insure versus it happening to you because you did not have the right insurance coverage.
c. Vehicle Value – The value of your vehicle has a significant impact on your insurance cost. You want to make sure the value of the vehicle and any permanently attached equipment is accurate.
If you are struggling with the cost of your Business Auto policy and want to have some guidance on the points mentioned above, reach out to an ArboRisk team member today or be sure to check out our Thrive program at: https://arboriskinsurance.com/arborisks-thrive/