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IS THE ROAD GETTING LESS BUMPY? [Rough Notes]

By Willis, Dave
Proquest LLC

Motor carrier business experiencing modest shifts

Trucking in 2012

Over the last few years, says Doug Setters, CPCU, president of Creative Underwriters, the trucking industry has been, "rightsizing. They've been changing how they do business, just to keep the wheels turning. In some cases, they're going to areas they're less familiar with. Or they're being a little more diverse in the commodities they transport."

For the last couple of years, motor carriers have delayed replacing equipment. "Ever since demand started shrinking a few years ago, many trucking companies held on to their equipment," explains Deane Sager, director of transportation marketing for Northland Insurance Company. That's starting to change-as are other industry health indicators.

According to Sager, the mood at the annual American Trucking Association convention this fall was decidedly upbeat. "The industry is in a slightly better position than it was at this time last year," he explains. "Tonnage indications generally follow the slow GDP trend, and trucking is in a better place financially.

"Truck and trailer manufacturers indicate that capacity and demand have finally reached equilibrium," Sager adds. "Actually, demand is slightly higher than capacity in certain niches. Increased shipping coupled with reduced capacity is allowing motor carriers to get more rates, which lets them replace equipment and hire more drivers."

For years, driver age had been trending upwards. The recent economic downturn interrupted this. "A lot of people retired rather than not run their trucks as much," he explains. "Many took jobs closer to home, and some left because of increased government regulation brought on by CSA (the Compliance, Safety, Accountability program of the Federal Motor Carrier Safety Administration). Many who left aren't coming back."

According to Sager, "Some truckers felt that CSA, which was basically an extension of measurement they were already doing, but in greater detail, was one regulation too many, and that contributed to people getting out. However, the bigger drivers of the exodus were age and a desire for greater stability."

Those who remained found help among carriers and agents. "Companies and agents spent a lot of time in 2011 educating motor carriers about CSA," says Nicole Lawrence, Northland's Midwest regional vice president. "That really helped them adapt and change and get used to working with it."

Today, as motor carriers look to add staff, they are eyeing the best drivers. "It's easier for larger companies to attract and retain drivers in a competitive market because they can offer more benefits and services," Sager notes. "For smaller motor carriers, it's more problematic. But it's an important issue because insurance companies are looking for motor carriers that can hire those better drivers. That's always been an insurer concern."

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Fuel costs continue to pose a challenge. "The industry is constantly watching the cost of diesel," he adds. "Fuel surcharges let motor carriers recoup some of those costs. When fuel prices move gradually, trucking firms can do this. If they start moving wildly, as they did in 2007, trucking falls behind."

General economic conditions are tempering growth, as well. "As long as banks are reluctant to loan money, commerce is going to be rather slow," Setters explains. "Small business runs on cash flow, and as long as the banks are sitting on the cash box, the recovery will take that much longer."

Insuring motor carriers

Over the last few years, the insurance industry has "beaten each other up on pricing," Setters notes. "They've trained customers to expect premium and rate decreases. As a result, producers have focused largely on price. We're reaching a point where they won't be able to do that any longer. The industry won't bend any farther, so agents will have to refocus on value and product and selling themselves."

Pricing is showing signs of leveling off. "Carriers are starting to gather up in more stable ranges now," Setters adds. "We will see what happens in the next few months, but it looks like companies are ready to start drifting prices back up a little bit. It's time for what some in the industry have referred to as 'rate nourishment.' "

He believes the way agents can shift to selling value is by knowing their product and understanding their customer more and selling differences. "A lot of our forms are pretty much the same," Setters notes, "but there are options.

"You have to look at the quality of the carrier," Setters explains. "Does the carrier provide loss control services? Are you comfortable with the company's integrity and expertise? What is the strength of the insurer's paper? These are all factors agents and brokers need to consider. It's very important to find a carrier that is outstanding at claims administration and that can resolve claims and get damaged equipment back on the road quickly."

Setters encourages agents and brokers to work closely with insureds and prospects to understand their business and share this knowledge with insurance markets. "Agents need to be involved in surveys," he says, "because they represent that customer. To reach out to the market for good, accurate quotes to cover the exposures requires good survey work."

Agents and brokers are responding to industry and market shifts. "Agents are really making sure that, as customer needs change, they adapt," says Lawrence. "As insureds are adding new equipment and adjusting their driver base, agents are making sure they're properly covered."

"It's really about taking care of customers and being there to meet their needs," she adds. "Whether it's helping them with CSA or just being there to help with changes so they can get that next load and stay on the road, it's definitely about customer service and being transportation experts for those motor carriers."

According to Lawrence, meeting customer needs requires a combination of automated and personal contact. "Technology plays a part, particularly in terms of speed of response," she notes, "but in the trucking industry, it's about that personal relationship and direct contact."

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Sager concurs. "As a company, we evaluate how we service agents and are constantly looking for ways to become easier to do business with and give agents tools they need to service their insureds," he explains. "But trucking is still extremely relationship driven. The trucking community values that."

More and more, technology is part and parcel of trucking and driver interactions. "Drivers are carrying iPads and national coverage iPhones," he adds. "Information delivery, such as weather and traffic and more-has totally been transformed. Technology has changed their lives.

"They use Facebook to keep in touch with family and friends," he says. "If it's a useful application, whether it's an insurance app or Facebook or something else, they will use it if it works for them."

Parting advice

Sager is optimistic about the trucking market going forward. "The industry certainly experienced significant contraction over the last several years," he explains. "The net effect of that is that the remaining players are relatively healthy. And that's good news."

Adds Setters, "Agents and brokers definitely can succeed in this market. All companies have their own recipe and their own approach to handling the business, but agents that understand the markets can do well. Those that do great survey work and develop relationships with customers will be the winners."

Lawrence concludes, "Those agents and brokers who go above and beyond will do well."

"The [trucking] industry certainly experienced significant contraction over the last several years. The net effect of that is that the remaining players are relatively healthy. And that's good news."

-Deane Sager Director of Transportation Marketing Northland Insurance Company

Copyright:(c) 2012 Rough Notes Co., Inc.
Wordcount:1248



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