A trucker friend of mine once remarked that prior to deregulation you could earn in the trucking business despite yourself. Back in those "good ole days" government protected routes bequeathed an industry with LTL powerhouses, high paying Teamster jobs, and healthy profits. Today the trucking industry operates largely inside a free wheeling TL and increasingly intermodal template with nonunion drivers and owner operators. Profit margins if they exist at all generally come down to pennies on the dollar. Truth be told that only the most productive trucking companies have survived this transformation - painful, but a net plus for consumers.
Now contrast the competitive untidiness in trucking with the inert if not orderly nature of this truck insurance web business. Life pretty much continues as it always has: same structure, same production model, same economics. Where convention breeds productivity, it certainly makes sense, but with truck insurance, convention has only meant unnecessarily high expenses.
Broadly speaking framework of the truck insurance business breaks down into two segments: agents (including brokers) and insurance companies. Agents solicit and service business, while insurance agencies underwrite, issue policies and pay claims. Agents make money on commissions. Insurance companies make money on favorable underwriting results and investment pay packet.
Contrary to the perception of truckers, operating profit margins for insurers can mirror those coming from all trucking companies. Where truckers have their operating ratio, insurers have their combined ratio. Both measures quantify operating profit as a amount of revenue. In good years, both industries typically generate ratios between 90 and 100%, yielding operating profit margins as high as 10%.
By way of comparison, margins which are more successful truck insurance agents run often 20 to 40% in good times and bad: great return considering agents bare no underwriting risk.
But let's not judge these economics too hastily. Your truck agent has done an exceedingly splendid job of establishing himself as best purveyor of value for both trucking company and insurance broker alike. Here's the perception. From the insurer company's viewpoint, the truck insurance agent offers an invaluable service have to address producing business and servicing clients. Therefore, the insurance company feels quite justified in paying healthy commissions particularly on business that generates a combined ratio of less than 100%. Correspondingly through trucking company's angle the agent gives an invaluable service deal with his knowledge of the insurance market and his ability to match a trucking company's coverage needs with more capable and affordable insurer. Why begrudge the man cash? Besides he always picks up the tab for lunch and golf.
However, with advances in technology, extremely only the insurance company matters. The Internet increasingly has relegated the agent into the status of tag along. He more time serves as the conduit for exchange between trucker and insurer. Rather at a time of instant information, he increasingly gets in the much. Need a quote? Google it. Looking for accident statistics? Go to Safersys. Curious about some insurance company's rating? Pull up A.M. Best. Concerned with the type of freight a company hauls and the place of its terminals? Check out their website. Concerned about your loss ratio? E-mail the underwriter. Fender bender? Snap a picture from your cell then fire off a text message to the claims department. It's so much more efficient than leaving a voice mail message with a brokerage.
Just as you don't need a travel agent to book travel, you no longer need an ins . agent to buy insurance cover. Strangely, both trucker and truck insurer seem unwilling to acknowledge this fact. In order to degree, custom plays a role. Historically, most contracts between agent and insurer specify that the agent owns customer list. Thus, insurance companies generally remain reluctant to communicate directly using insured's. Also truckers are in the habit of dealing with agents not underwriters.
A simple step toward efficiency hold all truckers insisting that neither agent nor insurer can claim ownership of these account. This variation in practice would set the stage for direct negotiations between trucker and truck insurer, and by extension pave the way for lower expenses.
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