Self Insurance. The Deck is Stacked in Trucking
I got a phone call from Tilden Curl earlier. It seems that Bloomberg News has become aware of his paper calling for the elimination of a carriers ability to self insure. This is great news as the public needs to be aware of how the deck is stacked!
Here is an excerpt from Tilden’s Paper:
Any company purchasing insurance coverage must have a risk assessment completed by the insuring company to determine the risk exposure of the insured party. This creates a three party scenario; the insurer, the insured, and the claimant. This system functions well because the risk assessment and settlement is made by a third party (the insurer). When the insurer and the insured are the same entity, a claimant is forced to negotiate directly with the offending party.
Some large self-insured companies in the trucking industry are considered “Training Companies”. For this reason, a risk assessment should be determined by a third party and not by the company holding the financial responsibility for the actions of its drivers. The fairest method is to require insurance company professionals make that evaluation to maintain an industry standard.
To further understand how the carrier’s ability to self insure affects the trucking industry
read the entire PDF- Tilden’s paper on self insuring
You will realize, there is an unfair advantage that the self insured carriers have.
It’s like sitting in on a poker game and everybody has $5.00 but one guy has $50.00. We know who is going to walk away the winner.
Self insured carriers have underwriters just as insurance companies, as I understand it. They have to work with the underwriters to establish terms of responsibility, who is responsible for what, for how much and under what conditions. The underwriters position is very much like an insurance companies position but on a much larger scale.
Consider it to be like your auto insurance policy. The higher the deductible, the more risk you assume. A higher deductible relieves the insurance company of risk meaning they can charge you less. You are one customer, possibly with several vehicles, doing business with a large company that has many customers like you. The insurance company has their risk spread out over many customers who have few vehicles each.
The self insured part of this is comparable to the carriers having a HUGE deductible. By setting things up this way, the carriers have assumed the role of the “Settling Party” for they, themselves, the “Offending Party”.
We have all heard nightmare stories of the mega carrier who inflicted costly damages only to not pay out a dime or only a small percentage of the damage they inflicted.
The claimant or the claimant’s insurance company does not have opportunity to work with the offending parties insurance company so that the details of a just settlement are compromised upon. The self insured carriers ARE the offending party AND the insurance company.
The underfunded small guy is up against a well funded FAT CAT who has time on their side when a claimant goes up against a self insured carrier. There is too much power in the hands of the “Offending Party”.
The self insured carriers are the guy at the poker game with $50.00, they are in position to bluff and hold out.
By eliminating the third party insurance companies from their business model, the self insured carriers have positioned themselves to influence higher insurance cost on all other carriers because they, the self insured, do not contribute to the overall insurance pool from which claims are paid.
At a savings of say, $800.00 per unit per month in insurance cost, a carrier of 1,000 trucks has $800,000 dollars a month less overhead allowing them to bid freight at approximately .08 cpm less than the average carrier.
Being self insured also permits these carriers to hire those who may not yet be competent drivers at a lower pay rate. In effect, the self insured carriers have positioned themselves to hire inexperienced, unproven, Novice Drivers at a Rock Bottom Labor Rate. This in and of itself gives these carriers the ability to set the minimum labor rate for ALL Drivers
Some suggest that the Sherman Antitrust Act of 1896 has been breached by enabling self insurance to exist at the level of the corporations.
The ability to self insure places to much power in the hands of a few to influence the going market rate and this Directly Affects the Value of All Drivers.
Lower operating cost and lower labor cost place the mega self insured in position to dictate lower market rates that we must all compete within.
Don’t forget, it was the self insured carriers that supported a 400% increase in OUR liability insurance. I wonder why?
You can read Tilden’s paper on this subject:
© 2017, Pat Hockaday. All rights reserved.