We are often asked about the Hard Market, Soft Market cycles by trucking companies. The global brokers put out white papers annually on the subject, but this is largely inaccurate for transportation insurance. I have long said that truck insurance is its own market. The long tail of loss resulting from the severity side of auto liability litigation keeps many, less savvy, non-specialty insurers in the market too long. Since insurance companies are all looking at the same data, eventually rising rates hit a tipping point where it looks profitable. Companies pour into the trucking market, gobbling up these large premiums. Eventually, the severity “tail” begins to wag the insurance “dog” and they all exit en masse, typically within 3 – 6 years. What remains are the informed, competent, transportation experts who didn’t let the perfume of the premium outweigh the stink of the risk. Who charged a fair premium for the exposure.
Knowing this and successfully forecasting many of the cycles, Dillon Risk Management actively counters the ill effects of this enterprise risk by finding or constructing alternative risk strategies. These strategies greatly reduce the amount of insurance you buy, and therefore your exposure to the schizophrenic insurance marketplace, which can impact insurance costs by 50% – 100% overnight.
In this environment, you have two choices. You can either ride the waves created by the market cycles, or tame them. The way to tame them is to assume responsibility for the predictable losses. In that event, you need a broker that can do the analysis necessary to strike the correct balance between the predictable level of loss to retain and the unexpected level you need to insure. At Dillon Risk Management, we specialize in “cost of risk” analytics which will qualify and quantify your loss patterns to help you determine the proper retention strategy for your company.
