How To Lower Your Trucking Insurance Premium And Total Cost Of Risk

Hey guys, I'm Hunter with Nelson Insurance. I'm going to go over total cost of risk versus just insurance premium. I gave a speech on this at South Dakota Trucking association. So I'll kind of post that video too. But I'll just kind of narrow down into one section here on looking at your guys insurance policies. So whether you guys are one truck, 100 truck, thousand trucks, I see that a lot of people are going in there looking at, hey, what's my insurance premium? How can I get this down? Insurance is just a, you know, expense, blah, blah, blah, blah. All I have for control over this thing is quoting keb. So if you're one truck guy, I mean, yes, a little bit, this is going to apply to you. It is going to be less applying to you on circuit on certain things. But I'll kind of go over this for everybody here, right? So I'll show you guys how you can either have less payouts of your own pocket if you guys are having a lot coming out of your pocket, or you can take out more of that exposure. So when you guys are buying insurance, you are, you are buying the transfer of risk, right? You are transferring the risk to the insurance company and you can either take on more that risk or you can, you know, give more of it away, right? So it depends on how much you guys are actually paying out. So like every dollar, the statistic is every dollar that you guys pay an insurance premium, you guys are going to incur two to five dollars in indirect cost. The time associated with all that, the driver being a home, the truck being in the shop, the reputation damage, the time associated with it, the lost revenue, the all that, you know, the list goes on and on. The extra expense you guys got to pay for risk management, it feels bad or whatever the case is, right? So with that, you guys kind of get the two routes to go. Saying you guys can either look at your insurance policy, review it, see, hey, how can I pay out less next time if you guys are having lots of claims? Or you can kind of go in and go, well, I'm already paying 2 to $5 on the indirect costs. How can I low. Instead of paying so much on insurance because it's only, you know, cover a dollar of it, how can I actually even lower that, right? So I'll get into the. If you guys are clean risk, you're betting on yourself, you want to pay for as little on insurance as possible, right? The options you guys have there are your deductibles, your sirs and captives, okay? So let's say you guys paying $700,000 a year for insurance, okay? And you're like, at this point, I feel like I'm donating money to the insurance company. You're paying 700,000. They're paying out $70,000 in claims a year. But you got a bunch of trucks, and so there's not really much weight. You can get to below 700 grand. Yes, you can go shop. Great. I found some for 600,000. Whatever. Okay. You just saved yourself 100 grand. Shopping, I'm not saying is a bad idea. I. You should be shopping every couple years. Just make sure things are right. You take a big grade increase, whatever the case is. Right. You need to be shopping every couple years. We shop all of our clients every single year just to make sure nobody's cheaper. Or they are. Hey, you know, we're going to get your rates down. I mean, we had somebody where 19,000 for their one truck was the best option. They were getting by a long shot. Okay? Everybody was really expensive. Whatever. It's kind of a weird situation. And we got them 19 grand. Renewal went to 22,000. Shopped around, sure enough, it was $8,000. So that exact same thing, because that. You're in business. Clean operation that year, whatever. Now it's eight grand even the second best option was 14 grand. So saving a lot of money. Okay, so I'm not saying. I'm not saying shopping is bad, but I'm saying it shouldn't be the only thing you're relying on, Kev. So if you guys are just donating money to the insurance company, you guys have deductibles. How much can you keep? How much can you guys take on? You're like, I don't want to turn any claim under $50,000. We really don't have a whole lot of claims. I. I can pay $50,000 in a claim, and I don't want to be taking on all the exposure. Okay, so bump your deductible to 15 grand. See what it looks like. But you guys got to do the math on it. The total cost of risk versus just the premium, right? So if you guys have a $50,000 claim and you bump it from 1,000 bucks, let's say, okay. And you go to $50,000. Well, let's use 50 grand for each math here. If you turn in a $50,000 claim once a year and it saves you 50 grand, you guys are breaking even, right? If it's more than once a year, you guys do it five times every Four years you're losing money. You guys do it four times every five years. Now you're making money, right? Just depends on the total cost of risk there in sir. Well, a deductible is typically going to be put on just the physical damage and cargo. You can put on the auto liability. But more commonly it's gonna be an sir. A self insured retention. A deductible will be taken out of the payout or you're gonna be paying it afterwards. An sir you're going to pay that. Then the insurance company is going to step in, okay. So that you can go and usually put in your auto liability where it's deductibles are less common. On the auto liability you can do, you can do both. And then you guys have a captive. Okay, I made another video on a captive. A captive is like your next step to self insurance. Okay? You guys can totally be self insured. I'm not going to get in that whole spiel here. You guys got to have a ton of trucks. You better be having a lot of money set aside. Okay. A captive is going to be like you own the insurance company. So I'm go get a captive. I am. Without getting too much into it here there are single parent captives and there are group captives. A group captive is. You're going to be in a group in a captive with other. With other trucking companies is single parent. Captive is going to be single person, single company, whatever. Right? It is Jimmy, just you and that captive. Now for a single parent, you're going to be paying 1 million, usually at least $2 million a year. A group captive, you can get in at $250,000 a year. You can get in at $600,000 a year. Depends on the captive what their minimum is. But usually the lowest minimum would be 250 grand. A cap doesn't automatically mean you're going to be cheaper. You can't get into a captive if you're paying 250 grand a year. And every year you turn in $300,000 in claims. It ain't gonna work. You gotta be turning very little claims, typically under 20% loss ratio. So $100,000 in premium, $20,000 in claims, 20% loss ratio, okay. And then you gotta have five years in business, blah, blah, blah. And how that works is. Okay, I'm being the insurance company. How do insurance companies make money? They have invest that money. You guys pay in your million bucks a year. It gets invested, you earn dividends on it or interest. You guys start Building up a cash flow there. The reserve of the insurance company, how much money they got set aside for claims. You guys turn into less claims on what you're paying. It's going to start building up there. You can take, you can take some of that money back now. Okay. You are going to pay a captive fee. And so some of that money is going to go to the captive, but most of it's being going to your, what's called a fund. Okay. If you're in a group captive, you guys are going to be having basically a huge deductible, let's call it 300 grand. Okay. You'll be paying out all claims under $300,000 and then the insurance company stepping on massive stuff, the reinsurance. That's what the captive does. You guys are basically be self insured here like an insurance company be reinsured for massive stuff. So over $300,000 in a claim or if that thing runs dry, your reserves run dry. Just like insurance company, they have reinsurance. Oh hey, I'm, I'm such and such insurance company. I got a billion dollars in premium. I just used it all. I just use all my reserves. Boom, here comes reinsurance. Right. But you got to pay for it. So that's where the captive fee comes in. Okay, so if you guys are really betting on yourselves, you guys got all sorts of options there, how to lower your total cost of premium, your total cost of risk, all that sort of stuff. Okay. Let's just say you're looking at it. I'm buying insurance to the marketplace. That's like going to a great west progressive century Midwest Family Mutual. 104 list goes on and on. Right. You're not paying insane amounts of premium, you don't want to take on the risk. You don't have a couple hundred grand land around. Right? What do you do now? Lower your total cost of risk which will lower your premium and lower your indirect cost. That's going to be safety teams, tech maintenance for maintenance. Get a mechanic, get some software, have that thing break down as least amount as possible and have less fires, have less claims, have less everything. Right. We just had $117,000 trailer fire and I don't know what happened there but probably started from mechanical issue, right. Or something along those lines. Tech, dual facing dash cams, keeping on your drivers, are they causing you problems? Distraction detection on them if they're getting fatigued, any of that type of stuff. Right. ELDs, collision avoidance, software turnover avoided software or hardware, whatever. Tech. Okay. Automatic braking. I know some of you guys don't like this. Some of you do. Whatever. There's all sorts of tech to lower your claims. Get a safety team. Hey, you're, you have, I don't know, three alerts on your CSA scores for one. It's going to hurt your revenue, right? But you spend a lot of time getting inspected, you spend a lot of time getting audited. Get that stuff lowered. Have them look at your hiring your, and look at your training, your compliance. Have it be a prevention versa cure, right? This is how you save money on insurance and you go ahead and shop too, right? But you don't want to go shop every year and go, well I've been paying 100 grand a year and I've been turning $200,000 a year in claims. Who's going to be the cheapest option? Now you're sticking a band aid on a missing wound. You're going to keep bleeding out and go out of business, right? You have to lower your risk to go into the insurance company and find and be a better prospect for them, right? They want, they're taking a bet on you. They're, they're obviously not a charity. They're trying to make money off of you. So show them that, that they're going to make money off you, right? And then they want to be competitive and own as much marketplace as possible. So they're going to lower your premiums if you're looking good. So going to do that. Also make sure you guys have insurance for the stuff that matters. You are transferring risk. So anything you do not have insurance for you are, you are keeping that risk, right? So if a cyber attack happens, you are seven times more likely to have a cyber attack happen than have a fire. And 61% of businesses that have a cyber attack go out of business. If you can't pay for two months of sitting still or a fake invoice happening or somebody getting a hold of your fuel card, then you should, then you should definitely have cyber insurance. It's really not that expensive. Maybe a couple, maybe a thousand, two thousand bucks a year depends on policy buy. You guys go pay 10 grand a truck. You know, so cyber insurance, pollution liability, there are the, There is the MCS90. If you guys don't know what that is, that's your federal filings, that's what activates your MC number, your authority on that MCA9 MCS90. You guys sign something saying the insurance and the insurance committee is too saying you. They are going to pay for all public, for all public liability which I'll, which I'll just explain what that is. Public liabilities, bodily injury, property damage, environmental damage, no matter what. Even if it's not supposed to be covered, the insurance company's gonna pay it out. Then they're come sue you for everything. So there's no settling in court, they're gonna come sue you for everything. It's already been paid out. Right. You're not going to go to the state of Minnesota and go hey, yeah, I polluted the river, I don't have money for it. You know, let's settle. See we can do here, right? Let's work out a payment plan, whatever. No, no, somebody's going to go, the insurance company's going to pay it out and they're going to be like, well you owe us the money, give us it now, you know, whatever, right? So I have pollution, epli, employment practice, liability, all this sort of stuff. Know these coverages because if you can't afford to pay for them out of pocket, you're going to go out of business. And that's ultimately what you keep insurance for, is to keep you in business, right? So there's total cost of risk versus premium. Yes. I'm not saying shopping is bad, but shopping being the answer to solve your problem, it's not what you want to do, right? You guys are gonna be looking at a three year plan. Shopping might get you a win. Year one, you want to go shop every single year. You may want to find insurance company that's going to take a bet on you, show them what you're going to do and then they'll keep decreasing your premiums. If you find a good underwriter who's got common sense underwriting, right? Not like a progressive who you just go rate it online and whatever happens next year at renewal, there's no say to it. Go tell the insurance company what you plan on doing, then go do it. They'll save some money first the first year and you keep doing it. And after you guys got, you're like heck yeah, I'm as low as risk possible. Go to captive, get sirs, raise your deductible, Go find insurance companies like holy crap, these what these guys have done, I'm gonna make stupid money off them. Shoot, yeah they are. And that's what you guys want because then you know you're really low risk. And once you guys qualify for a captive or high SARS or whatever, your insurance is going to go down. You can stop paying for insurance on some of the stuff. Like you can go be a captive and just start buying back some of that exposure, right? So if you guys have any questions on this, please let me know. I'm a hunter with Nellis Insurance Agency. Just trying to educate truckers on every chance I get, Keb. So if you guys like this, please, like and subscribe. Please reach out to me with any questions. A lot of guys do, and I love talking to truckers. Appreciate you guys watching. Thanks again.