5 Reasons Insurance Providers Could Cancel Your Commercial Trucking Policy

The one thing that can kill your trucking business immediately is having your insurance provider cancel your policy because they feel you are too much of a risk.

New venture motor carriers face three years to drive as carefully as possible before they can qualify for “preferred carrier” rates.

While insurance companies aren’t in the business of cancelling policies, if they do, other insurers will not want to insure you unless the rates are incredibly high to mitigate their risk.

But why could you be canceled in the first place?

All insurance companies write policies and weigh risk differently (looking at over 40+ criteria), but there are 5 main reasons that you could get canceled.

Remember, providers can drop your policy midterm with written notice. Read it carefully and be careful not to give them reasons to cancel you.  

1. Non-payment and cashflow issues

If you haven’t realized it yet, trucking is expensive.

Purchasing or leasing a vehicle can cost over $100,000, operating a single truck will cost you $20,000 each month, and it takes 35 to 45 days to receive payment after completing a load.

New owner-operators have a huge learning curve of finding good loads, managing payments, maintain the vehicle and driver files, and creating proof that their loss history is good.

In our previous cashflow article, consultants recommend that new owner-operators should save up to 2-6 months of operation before starting out, which is around $20,000 – $100,000.

Motor carriers need to be prepared to pay for their “monthly” insurance rates as well. Although a policy covers 12 months, insurance is not a loan, and the premium must be paid in the first 10 months.

The difficulty that arises is when you add a truck 6 months into your policy which doubles the average $10,000 insurance premium. The total, now increased premium, still must be paid in full in the next 4 months. So, carriers must have cashflow to pay for the $10,000 extra of insurance in only 4 months.

This is compounded if you hire a third driver and add a third truck to your policy.

If you do not have enough positive cashflow, then you do not have the money to pay for your expenses on-time.

When it comes to insurance, cancellations in most states can occur with a 10-day notice for non-payment of your premium while it is a 30-day notice for other reasons.

2. Rapid growth increases your risk

Every owner-operator and motor carrier fleet should have short-term and long-term growth goals for your trucking company.

However, these goals must consider how rapid growth can hurt your business.

If you grow too quickly, this is a huge red flag for insurance providers and can get your policy canceled if you do not provide adequate proof that you can handle this growth.

For example, the largest trucking insurance provider may allow a new owner-operator to grow their fleet by 4 trucks and drivers in a year. However, Lancer Insurance usually will not allow new venture growth for at least 1-2 years.

So, if your goals do plan for growth, Progressive will be the best providers for you so your policy doesn’t get canceled.

The risk providers worry that new carriers do not have the management experience or adequate cashflow to handle this transition.

It is usually recommended to grow gradually by adding one truck two months into operation and a third truck 6 months into operation. Do not immediately add multiple trucks and drivers at the same time to your policy.

Additionally, your company must have good CSA scores and the drivers need proof of safe history of driving. 

3. Unscheduled equipment hidden from your insurance policy

The trucking industry is full of drivers and carriers looking to skirt the rules to operate more profitably.

One way carriers try to avoid paying more on their insurance premiums is by having “unscheduled equipment” hidden from your trucking policy.

For example, hiring a second driver and purchasing another truck will double an owner-operators insurance premium. Maybe there is a couple months before their insurance renews, so they hire the driver and do not tell the insurance company of the changes.

Well, if the driver is inspected, the VIN shows up during the inspection and will quickly catch an unscheduled vehicle. The insurance company hears about this and will reach out to ask why this happened. If you do not have a good reason, they can cancel your insurance immediately and basically shut your company down.

Another way this happens is if you want to hire a friend to be a driver but they were denied by the insurance company, but your company hires the driver anyways. If there is an inspection or accident, the insurance provider is given another reason to cancel your policy.

4. Multiple out-of-service violations

Safe driving history is one of the most important criteria when underwriters weigh your company risk.

One of the easiest ways to have your insurance policy cancelled is showing proof of unsafe driving by getting an out-of-service violation.

The top driver out-of-service violation categories are:

  • Hours of service
  • Wrong class license
  • False logs
  • Suspended license

The top truck out-of-service violation categories are:

  • Braking systems
  • Tires and wheels
  • Brake adjustments
  • Cargo securement
  • Lighting devices

Drivers have mentioned that Progressive will cancel their policy if they receive two out-of-service violations in one year of their policy.

Motor carriers need to make sure they are training drivers on the trucking regulations, keeping maintenance a priority, and performing quality pre-inspection and post-inspection daily reports to catch any issues before they become a serious violation.

5. Hiring drivers with unsafe driving history

Lastly, hiring drivers with unsafe driving history is a red flag for insurance providers.

Usually, if an owner-operator adds a driver with unsafe driving history, in addition to double their policy premium for the second person, it will increase even more for the safety risk of that new driver.

Even though some insurers do not charge for adding more drivers with their own trucks, if they have negative safety issues on their record, rates will still increase.

Additionally, if you hire an out-of-state driver, this can increase your insured risk. For example, if you are based in Pennsylvania but hire a driver in California, insurance providers worry about how you will manage this driver.

If there are too many red flags with these drivers, your policy could be canceled.

Remember, insurance companies aren’t in the business of cancelling policies, but if they do, there is a valid reason for it.

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If you are interested in a Commercial Truck Insurance quote, please call CNS Insurance at 717.625.0066, email us at info@cnsinsures.com, or fill out a quick quote.

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