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Why Auto Insurance Rates are Increasing

Why Auto Insurance Rates are Increasing

Written by Tom Dunn

Commercial auto rates have been increasing at an alarming rate across all industries and the tree care industry is no exception. 

This article is meant to shed some light on the causes behind the rate spike and point you to a few resources to help you minimize your cost. 

Distracted Driving and Accidents

As with any insurance coverage the rate that you pay is directly connected to the likelihood of a claim happening. Therefore, when there are more accidents, the cost of the insurance goes up.

For many tree care owners, their truck is also their mobile office and just like working in a traditional office, there are plenty of distractions that can take your focus away from what you should be doing. The only difference is in a vehicle, the consequences of lack of focus are always more severe, leading to property damage, injuries and even death.

Distracted driving is the largest cause of motor vehicle accidents and comes in many forms. Some of the most common are: 

  • Cell phone use: Talking or texting. Even the hands free options can distract.
  • Multi-tasking like eating or drinking while driving
  • Adjusting controls in the vehicle
  • Checking GPS navigation system
  • Talking with another passenger
  • Looking at something outside car

Inflation

Technology has led to many advances in vehicles that are supposed to make them safer, however that technology comes at an increased cost for consumers when it comes time to repair a damaged vehicle, especially delicate electronics.

Same principle at work with individuals who are injured in a motor vehicle accident. Hospital services have gone up dramatically in cost.

More Drivers

Yes, there were less drivers on the road during the peak of Covid, however, the number of licensed drivers has grown overall to over 230 million across the country.

Inexperienced Drivers 

Unfortunately, there are enough experienced drivers with the skills and expertise to drive commercial vehicles to replace the drivers who are retiring. In general, inexperienced drivers have more accidents. 

Infrastructure

Old, crumbling roads and bridges increase the wear and tear on vehicles, making accidents more likely. Roads not designed to handle the volume of traffic we see today which leads to more congestion and accidents.

Supply Chain Disruptions 

Covid did lead to a decrease in the need for vehicle parts for a short period, however as driving has returned to more normal levels, there has been an increased demand. Sadly, the supply of available parts has not caught up.

Extreme Weather

It doesn’t have to be considered an extreme weather event to lead to an accident, and you don’t have to be a meteorologist to see the increase in extreme weather events. Company vehicles can be damaged just sitting in a parking lot, however, Tree Care companies are often on the road as first responders in extreme weather events thereby increasing their chance of being involved in an accident during a storm.

Huge court verdicts

Also known as “Nuclear Judgements,” these are defined as a verdict in favor of a plaintiff with a damage award over $10M, but can be used for any verdict larger than anyone expected. 

One of the insurers that ArboRisk works with recently had a $6M verdict handed down for a motor vehicle accident involving a tree care company. An interesting look behind the reasons for nuclear verdicts shows that how a company addresses safety definitely matters:

  1. Juries have shown that if a company overlooks workplace safety, doesn’t provide adequate safety training for employees and has a history of repeat violations, they will be punished for their lack of training oversight.
  2. Failure to utilize available technology (driver monitoring systems, forward collision systems, back-up cameras, voice control-Bluetooth) can also lead to punishment from a jury.  

 

While it may seem like there is no hope for your business auto rates, know that you are not helpless in controlling your own rates. Companies that take driver and fleet safety seriously position themselves to receive the lowest rates possible. We actually recently wrote an article to give you four ways you can lower your rates. 

Additionally, every ArboRisk client has access to our extensive driver and fleet management resources on our Thrive website. Not an ArboRisk client? No problem! Enroll in our Thrive Safety Package to get one-on-one help lowering your risk of an auto accident within your company.

Tom Dunn

Key Person Insurance as Part of a Risk Management Plan

Key Person Insurance as Part of a Risk Management Plan

Written by Mick Kelly

Within the tree care industry, every business has a few key players on their team that help the business succeed. What happens when one of those key team members moves onto another company or much, much worse, suffers a tragic accident and is no longer around? Protecting the business from losing a key person is a risk management must.

What is a key person?
A key person is an individual within an organization, whether an owner, partner or employee, who makes an essential contribution to a business.

What is a key person policy?
A key person policy is a life insurance policy paid for and owned by the business. The business is the beneficiary of the policy in the event of the death of the key person.

Who can be determined to be a key person?
Any employee can have a key person policy taken out on them so long as they are vital to your business operations and able to produce profits. Typically, the policies are taken out on owners and employees that the company would find difficult to operate without. In the tree care world, this may be the best climber in your company or your crane operator. It could also be your ISA certified arborist, your office manager, or the head of a division such as PHC or HR.

How much insurance coverage is needed?
The amount of coverage will vary from person to person and is dependent on their role within your company. You can figure out the exact amount of profit the company would lose without that person and multiply it by the time it could take to replace them. The cost of recruiting and training should also be taken into account. Keep in mind that the size of the policy will be restricted by the key person’s contribution to the company.

Can I only use it to replace a key person?
The money can be used to offset short term loss of revenue while a replacement is found. It can also be used to fund recruitment. In the current employment market, it may take months to replace a skilled climber or crane driver and it may take even longer to replace the skills of a company owner/founder or office manager.

The benefit may also be used to pay out the family of a partner in the business if there are multiple partners.

Types of key person policies
Like life insurance, key person policies can be term policies or whole life policies. Term policies run from 10 – 30 years and are the most cost-effective way to purchase key person insurance.

Whole life policies cover for the life of the insured. Whole life policies also have a Cash Value account associated with them and a portion of each payment is deposited there. The Cash Value can be counted as an asset of the company and can be used to secure loans or paid out if the policy is terminated.

Are there any tax implications?
Key person policies are paid using after tax dollars in most cases and the benefit is typically paid without income tax liability for the company. The exception to this is with C – corporations where the benefit will be included in your AMT calculation.

There are no tax implications for employees so long as the business owns the policy. If the policy is sold from the business to the employee, it may need to be declared as compensation and discussed with an accountant.

 

If you have an employee your business will struggle without or if your business will struggle without you – considering a key person policy is essential to the survival of your business.

For more information on key person policies, contact a member of the ArboRisk Insurance team! Eric, Tom or myself are happy to discuss these policies with you and answer any questions you may have. If you need additional help with any risk management concerns, check out our Thrive Risk Management Packages! These packages are available for purchase and can help take your business to new heights!

Margaret Hebert

Driver Risk Management

Driver Risk Management

Written by Eric Petersen, CIC

One of the largest employee management issues that we hear about from our clients is that of how to deal with drivers that have bad driving records. With a slim talent pool to choose from, many tree care companies hire individuals on the spot without doing a driving record check. All too often, that new hire has issues on their driving record that either prevents them from being insured or soon after being hired displays undesirable conduct in a vehicle or on the job site.

While not a perfect science, analyzing an employee’s driving record is a great way to predict their future behavior. If you are not running Motor Vehicle Reports (MVR’s) aka driving records on each of your employees and prospective employees, follow this step by step process to get started.

This risk management activity will position you to minimize vehicular accidents, limit injuries, increase productivity and provide you with ammunition to give the insurance company to lower your insurance cost.

 

Understand Your State’s Law – The rules regarding employer’s viewing driving records for employees or potential employees varies state by state. Check with your state to determine whether or not you, as the employer, can access a person’s driving record. You most likely will need to have received written permission from the driver in advance. Many states allow you to gain access to the driving record directly through an online portal, making this a fairly easy process for your administrative staff to complete. It’s important to note that there typically is a charge for doing so, anywhere between $5 and $15 per record depending on your state. In states where the driver needs to make their own request, make it easy for them to do so with simple directions on how to acquire their MVR. You may also want to consider reimbursing a potential employee for the cost of the MVR.

Create Written Policy – After you know what your company can do within your state for ordering MVR’s, write out your driver policy. The policy should walk through the steps that your company and each driver (or potential driver) must take. Answer these questions to create your policy:

  • Who will be responsible for pulling and paying for the MVR’s?
  • What type of violations will be acceptable on an employee’s driving record? (ask your insurance company for help creating these guidelines)
  • Will you require a Driving Test before an employee is allowed to drive a vehicle?
  • What will the Driving Test involve and who will be responsible for administering it?
  • What forms or supporting documents do you need to include? (MVR Authorization Form, MVR Guidelines, Driving Test Scorecard)
  • What disciplinary actions will the company take upon learning about any violations or accidents?
  • What personal driving violations are the employees required to inform the company of? (ex. Operating Under the Influence, Reckless Driving, etc.)
  •  Are any positions within the company allowed to take a company vehicle home and or use it for personal use?
  • Will employee family members be allowed to drive the vehicle?

Verify MVR Guidelines with Insurance Company – Send your company’s written policy with your MVR Guidelines included to your insurance agent for review by the insurance company. Most insurance companies utilize similar standards for driving violations, however, it is always best to ensure that you are both on the same page. This also shows the dedication to proper risk management that your tree service believes in which will help for better insurance pricing throughout your relationship.

Run MVR’s Annually – Your insurance company will most likely run your employee’s driving records about 60 days prior to your insurance renewal. Unfortunately, they will not share any information with you unless a driver is ineligible to drive based on violations or accidents that the employee incurred the following year. Because the insurance company will not share this information with you, we suggest that you run your own set of MVR’s 90 days prior to your insurance renewal. This allows you time to take disciplinary action before the insurance company forces you to and eliminates the potential for a serious accident by putting you in control of the drivers for your fleet. No one wants to have a bad accident occur with a driver who has a subpar driving record. This is a gold mine for any plaintiff attorney who gets involved. They will extort you and your company for negligence in allowing a dangerous driver to operate one of your vehicles.

Enforce Disciplinary Action – Follow your company’s disciplinary process that you established in your written program. Many tree services have difficulty in hiring qualified employees that also meet driving regulations to begin with and then are more lenient when a violation does occur. Doing this opens your company up to more liability exposure and could create an employment lawsuit if you enforce the rules differently between employees. Once you write your disciplinary actions, follow them for everyone within the company, even the owner.

 

Because every tree care company has a large exposure on the road (traveling daily to and from job sites and driving large vehicles), the management team must take every precaution they can to minimize that exposure. Implementing a driver policy will help you avoid unnecessary accidents and unproductive administrative issues within your company.

For help creating a policy like this or other risk management processes, contact an ArboRisk team member today.

Margaret Hebert

How Marketing is Risk Management

How Marketing Is Risk Management

Written by Eric Petersen, CIC

Yes, you read that title correctly. The marketing your company is doing to attract new customers and employees is actually a form of risk management. In a previous article, Building a Risk Management Mindset, we discussed how a business intentionally creates opportunities and avoids problems by installing a risk management mindset. Those same principles are very true when looking at your marketing. 

Let’s first define what I mean by marketing. Marketing can be any outward action or impression of your company that is released into the world that will either attract customers or employees to your company. Most people think of marketing in an active sense only, where the sales flyer or social media post that is created is marketing; however, many times marketing happens in a passive way without the business owner truly knowing that it is occuring. The appearance of who you are sets the stage for the customers and employees that will be drawn to your company. 

We are going to explore marketing from a risk management perspective to help you intentionally create the business you desire by looking at both external marketing (for customers) and internal marketing (for employees). 

 

External Marketing – This is what most people think about when they use the word “marketing,” which is the action taken by a company to attract new customers or sell more products/services to existing customers. All too often we see tree services advertising or promoting a unique one-time job that they did for someone, that, while they are really proud of that job, chances are they won’t be doing it again for a long time. This could be a removal job on an island or large crane job or a project in a remote area. Whatever the job is, when the company advertises it, their potential customers begin to connect that unique job to the expertise of the tree service. 

Those unique jobs typically are not ones that you want to rely on as a business and more often than not don’t fit into your Sales Sweet Spot. Your Sales Sweet Spot is where your Specialty Service intersects with your Ideal Customer. (To learn more on the Sales Sweet Spot read our article here). When you are operating outside of your Sweet Spot, the risk to your company increases dramatically. 

Therefore, it is the goal of your marketing to showcase the type of work that you are truly experts in and the type of work that you want more of so you can continue to operate within your Sweet Spot. To help your marketing team utilize a risk management mindset, ask yourself these questions: 

  • Have you defined the Sales Sweet Spot? (For one-on-one help in developing this, enroll in our Thrive Sales & Marketing Package)
  • Does your entire team, including the marketing team, understand your Sales Sweet Spot?
  • What type of jobs are you attracting through your marketing materials? 
  • Do your social media posts talk about and show the type of work that you want more of? 
  • Does your website accurately depict what type of work you want more of?
  • Have you ever run a marketing campaign that focused on a product/service that was outside of your Sales Sweet Spot? If so, how did the results end up?

 

Internal Marketing – Internal Marketing is the action or inaction to get new, quality employees interested in your company. This can be more difficult than external marketing, because it often happens without your conscious thought, yet is one of the main drivers for whether or not you are actually attracting quality employees. It goes without saying, but the better, more professional employees you have, the lower the risk of injury and accidents happening within your company is. 

Therefore, by intentionally marketing to the type of employee that you want, you are practicing risk management. To subjectively look at the internal marketing that is happening within your company today, ask yourself these questions:

  • Have you defined what your ideal employee’s characteristics are? (For one-on-one help in developing this, enroll in our Thrive Hiring & Recruiting Package)
  • What type of employee are you attracting through your external marketing? The adrenaline junkie or a professional arborist? 
  • Are all of your marketing pictures and messages focusing on projects or jobs outside of your Sales Sweet Spot? 
  • Does your messaging align with your staffing needs, today and into the future? 
  • What do your trucks, equipment and uniforms say about the professionalism of your team?
  • Do you promote employee appreciation in your social posts and on your website? 

 

Simply put, marketing, both external and internal, is happening every day within your company. How intentional you are about getting your desired customer and employee is what separates the good companies from the great ones. Employ a risk management mindset when thinking about your marketing and your company will be miles ahead of others in your area. 


If you’re struggling trying to implement a risk management mindset within your marketing, reach out to an ArboRisk team member today or enroll directly into our Thrive Sales and Marketing Package for one-on-one help.

Margaret Hebert

Budgeting

How To Help Budgeting Be Less Painful

Written by Joseph Toppi

Whether it is with personal or business finance, budgeting can be a struggle, time consuming, and sometimes down-right complex; not to mention the uncertainty and the questions that come up when thinking about making a budget.  For example:

“What do I include?”

“How much should I budget?”

“How do I follow my budget?”

Budgeting does not have to be painful, and it is vital to running a business. Being diligent with a budget can also be the difference between profitability and insolvency… direction and chaos… predictability and guesswork.

There are different types of budgets, but for this article we are going to take a look at an overhead budget, and answer the questions above. 

What Do I Include?

To best answer this, we must first look at what overhead is. In the simplest form, I define overhead as “the amount it takes for a company to be in business with no work going on.” If there is no work going on in your business, what are the things you would still need to be paying – rent, utilities, sales person, CEO, etc. Without knowing what to include in your overhead budget, you could inadvertently be charging too little, and hemorrhaging money.  It is important to make an extensive list of the overhead of your business. Some commonly missed items on an overhead budget are:

  • Warranty & Service
  • Un-billable Hours or Indirect Labor
  • Professional Fees (lawyer, accountant, etc.)
  • Estimating & Bidding
  • Indirect Materials
  • Sundries
  • Company Events
  • Bank Fees & Interest
  • Company Apparel (and other promotional items)

If you are unsure on what to include, ask yourself the question: “If I had no work going on, would I need…?”

How Much Should I Budget?

The amount you should budget per line item is going to be different for every company. The best way to get started knowing what to budget, is to look at the previous couple of years’ income statements.  The income statement is broken into revenue, costs of goods sold, and expenses.  The items under expenses are what your overhead is – for the most part. Take the line item amounts as your starting point, then ask yourself a few questions:

“Based on my goals set for the year, will this be enough?”

“Was I efficient last year spending this amount on ‘X’, or can I decrease my budget through better efficiency?”

“Do I anticipate a growth – or lull – season that I should account for?”

Do your best to be as accurate as you can be to achieve optimal control of your business’ profitability.

 

How Do I Follow My Budget?

Just like with goals, a budget can only be achieved and followed if it is before you, and the progress is tracked. The simplest answer is data tracking and budget-to-actual records. Let’s take a look at each of these.

Data Tracking – This does not have to be complicated or stressful, but does take diligence and a good system. It starts with discipline from the business owner to ensure that the expenses are accounted for, followed by good bookkeeping that allocates these expenses to the right line item. A good bookkeeping software will be able to track this for you, as long as it is entered in correctly by the bookkeeper.  That is why it is so important to have a good bookkeeper, and bookkeeping system.

Budget-To-Actual (BTA) – This is done by taking all the data you have tracked, and putting it into a program or spreadsheet next to your budget.  Having the amount budgeted next to the amount actually spent allows you to see where you are.  Updating and reviewing your BTA often allows you to make more budget friendly decisions, and will lead to more control over your budget.  For example, let’s say your Company Apparel budget for the year is $5,000, and in September your BTA shows you have already spent $4,500 on company apparel, then you can make better choices on how much winter clothing you are going to buy.  

Without creating a budget, tracking data, and compiling it in a way that allows you to review it; you are running your business blind. At that point, the financial aspect of your business – and it’s profitability – is just a guess. 

For more specific one-on-one budgeting help, sign up for our Thrive Finance Package today!