So That’s Why My Insurance is So High

    By Cecilia Gonzales with Leslie Thiele

    Why is my insurance so high?
    Why is my insurance so high?

    Recently we had an insured come into our office, and, upon noticing how nicely decorated our office is, he remarked, “So that’s why my insurance is so high!” What the insured did not know is that Cally Alexander has an eye for decorating.  With a couple of gallons of paint, a few nice paintings strategically placed and, of course, an office full of women, she can turn a barn into a five-star hotel lobby. I took care of the insured’s issue at the time and then proceeded to explain the real reason as to “WHY” his insurance was so high.

    In the course of the past 15 years, I have seen many insureds make the same incorrect assumption: the “AGENT” is raising my insurance premium each year to pay for all this.  It is neither the agent nor the agency that controls whether an insured’s rates increase, decrease or renew as expiring.  Though insurance companies will have a state-approved base rate, there are many other factors that will affect the premium…some being location of the business, years in business, experience of the owners, age of the units, turnover in drivers, along with other factors. And, of course, one of the main reasons is “CLAIMS.”

    Just as “LOCATION, LOCATION, LOCATION” of a restaurant may make or break their success, “CLAIMS, CLAIMS, CLAIMS” often determines a towing company’s success and the premiums they pay.  With a few extra steps, an insured can almost eliminate this issue as a reason for premium increase.  Rarely will you find a “CLAIM FREE” business, but taking the time to follow the steps below may decrease the risk of claims, therefore potentially avoiding a non-renewal or massive increase in premium.

    Know Your Driver Before You Hire

    When hiring drivers, many owners will have the prospect take a drug test, driving test and possibly a written test.  What they fail to do is check the prospective driver’s driving record.  As part of the insurance submission requirement, an agent will run the MVR (Motor Vehicle Record) on a prospective driver.  The individual may have some infractions but still qualify per the insurance company’s guidelines.  Due to the “Privacy Act,” an agent is not permitted to share with the insured as to what is shown on the MVR. If you, as an employer, are truly interested in hiring an individual as a driver, consider asking the prospect to provide you with a copy of their MVR.  For a small fee, anyone can obtain a copy of their MVR on the Internet from the Dept of Public Safety. This report will give you some indication if this individual has a need for speed, is careless in their driving, or is “Accident Prone.”  If the driver has nothing to hide, and is serious about the job, this could be beneficial to both. Most drivers have experience with another towing company; ask for and always call their references.  It’s possible they are looking to move to another towing company for a reason, one that could come with a cause for concern. Knowing who you are hiring could save you money down the road.

    Train Don’t Drain

    Whether you hire someone that has experience or is a newbie to the towing industry, TRAIN them your way and to your standards. Don’t rely on what they learned from their prior employer, as it may not be the correct way, YOUR way. Remember, they represent your business, and what they do or don’t do could result in a claim.  Most cargo claims are the result of a driver not following the correct procedure in loading, unloading or tying down a unit in tow.  Worn equipment and a driver that takes shortcuts is a claim waiting to happen.  A regular check of the equipment and the unit by a properly trained driver is essential in avoiding cargo claims.  A driver that goes from Dr. Jekyll to Mr. Hyde behind a powerful wrecker is a danger to the community and your business, with a potential of causing high liability claims and pay outs. Have you seen a tow truck with a vehicle in tow try to beat a red light? What about the driver who just “tapped” the car in front of him yesterday, today and will probably do it again tomorrow?  The next time it may be more than just a tap! What about the medium tow truck towing an 18 wheeler? Oops, did he just drop that?! Every claim, liability, cargo or otherwise comes at a price.  Deductibles have to be met, hitting the pocketbook of the owner.  Training a driver properly and holding the driver accountable to your standards will keep you from draining your bank account with deductibles and higher insurance premiums.

    Sink Don’t Swim…

    The public will remember a towing company by the driver that performed their tow.  A poorly trained or irresponsible driver could sink your business. A properly trained and responsible driver with a good attitude and a concern for others in their time of need could have your business swimming towards a prosperous future. Whom you choose to hire and how you choose to train can make a difference.  Knowing how the driver’s actions can affect your insurance premiums is a beginning to understanding as to why your insurance premium may be so high.

    As mentioned earlier, most insurance companies start at a base rate and will then increase or decrease premium based on several factors.  Though insurance premiums will almost always increase from year to year due to inflation or the cost of living, you can keep some of the cost down.  Claims are going to happen, and when they do, your insurance company will be there to take care of you.  Even when you, as an employer, are doing everything possible to avoid claims, there will be that one claim that was unavoidable.  Most insurance companies understand this and will usually work with the agent in keeping the premium increase to a minimum.

    When your policy comes up for renewal and there is a pattern of frequent claims or same driver claims, it raises a red flag.  The insurance company could view this as an indication of poorly trained drivers or lack of management supervision.  If an insured has several years of frequent claims or high monetary claim pay outs due to driver error, it could be a deciding factor in the premium.

    As a towing company, review your losses.  Why are they happening?  Is it a particular driver, a lack of following procedures, old or worn out equipment, etc.?  Once you determine the reason, decide what needs to be done to avoid the issues in the future.  Contact your agent and together form a loss prevention plan in order to potentially prevent a claims related increase.

    With a plan in place, the statement, “So that’s why my insurance is so high” could be a phrase of the past.

    Alexander Insurance Agency