As with any new business, it is hard to start a successful trucking company and keep it in business in the first few years. It is common to see around 80% or more of new carriers fail in their first year.
New trucking businesses fail due to lack of planning, not paying careful attention to variable costs like maintenance or food costs, low cash-flow, no collection strategy, failure to stay compliant, no knowledge of market rates, and no professional help.
The carriers who survive generally have a better understanding of the costs in running their business and the importance of keeping their safety record clean.
Regarding trucking insurance, new carriers face high insurance rates due to no safety record and higher risk. Reducing insurance costs requires looking at your operation the way an underwriter does.
As a trucking company, there is one major question you should be asking yourself.
Are you doing everything you can to reduce risk?
One secret in the insurance industry is that carriers who prove their low-risk safety history will get much lower preferred rates as they go into their third year of business.
What will hurt you from becoming a preferred carrier?
As a new carrier in your first 2 years of business, your safety history will be held under a microscope before your insurance rates are reduced.
To an underwriter, the story your public records tell determine how risky you are. The most common areas that hurt a carrier’s safety history are any professional, personal, and financial issues that underwriters have access to that show high risk.
- Speeding tickets and other traffic violations found on your Motor Vehicle Record
- Accident reports and vehicular crimes found on your Motor Vehicle Record
- DUI convictions or other police tickets around open alcohol containers or illegal substances in the truck found on your Motor Vehicle Record
- Any safety violations that are found on DOT reports
- Frequently paying bills late or a high credit utilization rate that are found in a credit history report
- Filing for bankruptcy found on your credit history report
How to build a successful safety history in the first two years of business
Generally, trucking companies with minimal loss activity, utilizing telematics data, and great CSA scores are in a better position to gain access to more insurers with better pricing.
Below are tips to lower your trucking insurance risk history:
- Maintain a clean driving record: While mistakes can happen, new carriers should do everything possible to keep their driving record clean. This means practicing defensive driving habits to reduce likelihood of vehicle accidents or speeding. For example, do not use a handheld device while driving but utilize Bluetooth capabilities or hand-free options, pay attention to work and school zones and their reduced speeds, and park in legal parking areas for large trucks. A hand held violation is one of the worst violations you can have on your record because your not paying attention. Similarly, one speeding ticket can raise your annual premium from $4,000 to $12,000 for one truck, depending on other factors, as speeding is considered reckless driving. Also the severity of the violation makes a difference. For example, if you have a 15+ mph violation you will be on the high end of the premium range. Another example, if you have the 15+ and bad credit then your screwed.
- Check your motor vehicle record: The records underwriters have access to are an important part of how you are rated. Be sure to pull your motor vehicle record (MVR) at least once per year to check that it shows the correct information and always challenge incorrect information. An annual review of the driver is required by the FMCSA and must include an updated MVR. Similarly for the FMCSA, review the violation history found in the federal MCMIS database that generates safety measurement scores and PSP report. If there is incorrect or duplicated information on record, carriers can use the DataQ process to request the removal or correction of violations incurred during roadside inspections.
- Build good credit history: A higher credit score means a better rating. The theory with credit is that if you manage your personal financial affairs well, you are more likely to take your driving and safety seriously. Be sure to pay your bills on time, including mortgages or rent, credit cards, auto insurance, and car or truck payments. Another way to keep your credit score high is to make sure your credit utilization rate is below 30%, if possible. For example, if you have a credit card account with a $10,000 limit and a $5,000 balance on the card, your credit utilization rate is 50%. This means making sure you pay down any credit to below 30% of your total credit limit available to you. Another option is to ask for your credit card limit be increased on a card or two to make the credit utilization rate lower quickly.
- Follow DOT compliance rules: As a new carrier, you will have to deal with roadside inspections, compliance checks, and safety audits within the first 18 months of operating. Be sure to follow all hours of service, drug testing, licensing, and safety requirements.
- Have a written safety policy: Written safety policies detail how you handle accidents, drug and substance abuse, and other safety-sensitive issues and can be a key to telling your safety history and lowering truck liability insurance premiums. The best place to start is showing proof of documented safety policies for drivers and managers as well as proving that they are being followed, such as documenting completed training as more training equals a better safety profile.
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