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Bus and Motor Coach Library

Minimizing Insurance Risk, Minimizing Your Costs

Author - Randy O'Neill, Lancer Insurance (2003)

There have been busloads of articles, columns and letters to the editor over the past two years attempting to explain ways motorcoach operators can control their insurance costs in an uncertain business environment.  And, while many were insightful and helpful to understand the "big picture", much of the commentary avoided the simple choices that must be made to achieve the objective. Simply put, it's all about drivers and an appetite for sharing the risk.

Drivers Are The Key
While ours and other's advertisements and promotional literature say we insure buses, the truth is the five million per vehicle exposure transferred by the insurance transaction lies literally in the hands of whomever you put in the driver's seat. 
So, in fact, any bus insurer worth its salt clearly recognizes that its real exposure is with drivers.  That being the case, any discussion or article on how an operator can reduce claims and insurance costs begins and ends with drivers. And whether you're receiving free support from your insurer or are paying a consultant to get a better handle on your driver training efforts, it is essential to undertake the effort.
Operating a motorcoach with dozens of passengers and hundreds of fellow motorists to contend with is a tremendous responsibility.  And, with all due respect to the bus industry's "cousins" in the trucking industry, freight and fruit are far less contentious than a busload of enthusiastic passengers.  So it is critical that drivers work in an environment in which safety is paramount.  And it all begins with senior management. If a safety "culture" is not only preached but practiced at all levels of the operation, good things will happen - including lower insurance costs.

If it Ain’t Written, It just Ain’t!
The road to reducing risk, accidents and insurance costs begins with a written company policy that clearly emphasizes the importance of safety.  And, once written, it can't be put on a bookshelf or the safety manager's desk drawer; it needs to be distributed and posted for the benefit of all employees.  And recipients of the safety policy statement will know it means business if it's signed by the boss.      
Because all that follows flows from the safety policy statement, its specific guidelines and demands must be fully understood and, if necessary, discussed with all employees-especially drivers-so there can be no misunderstandings about the absolute emphasis the company places on safe operations. 
Once distributed, understood and accepted, management should regularly monitor safety policy compliance by assigning the responsibility of implementing and supervising the company's safety program.  And, to assure effectiveness, that designated individual needs to be given the authority to take immediate corrective action if carelessness or unsafe practices begin to develop.
But all the written safety policies and safety directors in the world are meaningless unless that safety mindset and culture is taken to heart by drivers and practiced on each and every trip.  In fact, the entire driver selection, training and supervision process should be driven by the company's commitment to safety.

And it begins at the point of hiring.
The first step in hiring is to analyze the driver job requirements and establish employment standards.  Remember to include all non-driving responsibilities as well as the ability to drive a particular type of equipment.  While it's fairly obvious, it's worth repeating that untrained or poorly trained drivers will fail to maintain the company's safe work practices and have a high probability of accident involvement. 
And, while the sputtering national economy has eased the driver shortage and put more candidates into the driver pool, "churning" or constant driver turnover is a surefire recipe for disaster.
At Lancer, we see the accident frequency of drivers with less than 18 months of driving experience significantly exceeds the frequency (and severity) of more experienced drivers.  So it's clear that those drivers who have demonstrated poor driving habits and/or have been involved in preventable accidents should be given additional training and counseling to correct their problems.
The good news is that, after the first perilous year and a half, those drivers adjust and look no different than their more experienced colleagues when it comes to accident frequency.
But, if possible, it's obviously better to weed out the potential problem drivers before they ever get behind the wheel of a bus.  So the selection process should be taken very seriously and careful consideration should be given to analyzing what type of person that driver (i.e. company representative) should be. 
Many successful companies list the specific tasks and duties of the driving job; establish a clear job description; recruit, screen and interview with the knowledge that person could be the key to the success-or failure-of the company; and do everything possible to ferret out useful (MVRs, recommendation letters, etc.) background information on the driver applicant.  If a solid step-by-step plan is followed, the resulting hire should be an individual that understands the critical role he or she plays in the company's success and will perform accordingly.
Watch the Front Door-And the Back Door
As already mentioned, with an increasingly unpredictable climate to recruit new drivers, it is best to maintain a stable workforce.  And driver retention begins during the new driver recruiting process.  For example, if a new driver only finds out about working nights and weekends after he/she is hired, no matter how good that driver graded in the selection process, chances are it'll lead to a prompt resignation.
Driver retention also is closely tied to how fairly and consistently drivers believe they are treated.  While pay and benefits are very important, job satisfaction and the feeling that "this is a great place to work" can go a very long way to reducing turnover.  And a stable driver force is critical to accident reduction and insurance cost control.

A Final Point on Driver Training
A final point on driver training concerns one fact--- it never ends.  While most companies will accept that new hires need training, too many companies believe it ends there.  Nothing could be further from the truth, or potentially more dangerous to the company. 
For example, as new vehicles are rotated into a fleet, all drivers -new and experienced -need to be trained as to the unique characteristics (e.g., mirrors, turning radius, vehicle height, etc.) of that equipment.  Also, regularly scheduled driver safety meetings that are clearly focused on a single topic should be part of an ongoing training effort. 
These meetings are a great forum for drivers with all levels of company tenure to share their experiences with each other for the mutual benefit of all.  And driver meetings also provide company management the opportunity to invite in "special guests" to share their specific expertise with attendees. 
Whether it's a local law enforcement official to discuss a regional concern, an insurance company representative to discuss claim trends or a customer service specialist to discuss ways in which drivers can help cultivate future business, it's a stimulating and inexpensive way to engage drivers and impress upon them that they are key contributors to the company's success.

A Need for an Effective Driver Recognition Program
Finally, I want to share a few words on driver recognition and disciplinary programs.  While everybody wants to talk about disciplining drivers, the fact is that those who fall into that category are the noisy minority.  The silent majority of drivers are those who log accident-free miles on a regular basis and, in most cases, do so anonymously.  If that's indeed the case, strong consideration should be given to establishing a formalized safe driver recognition program. 
This initiative will appeal to a driver's self esteem and recognize the value of their contribution to the overall success of the company.  The most effective driver recognition program includes the following characteristics: it is clearly defined; it has simple rules; it is achievable (and meaningful); and it is presented in a public forum, preferably before the recipient's driver colleagues.
As for disciplinary actions, they are important if for no other reason than they serve as a clear signal to other drivers that safely lapses and shortcuts won't be tolerated.  The key elements of a successful driver disciplinary program include: it must be written, distributed and understood by all drivers; and it must be applied uniformly, consistently and predictably.

Chipping Away At Premiums
Clearly, the driver selection, training, re-training, recognition and disciplinary responsibilities are elements under management's control.  But also under its and its insurance agent's control is the ability to differentiate the company in the eyes of an insurance company's underwriter. While most probably believe that their bus company is different and better than their competitors, management needs to communicate what specifically distinguished their company, and should be considered before a premium is calculated. 
While paper applications are good as far as they go, company managers shouldn't be shy to blow their own horn by enclosing supplemental information to bolster their case.  Niche players should enclose their company's own promotional material to "educate" the underwriter. 
If you've spent a lot of time, money and effort has been spent developing a safety program, agents should communicate that to the underwriter.  If positive feedback has been received from customers in the form of letters, e-mails, etc., it should be attached. 
An underwriter's lifeblood is information, so everything within reason should be done to provide as much relevant information as possible to give that underwriter the "whole story".  It certainly can't hurt a company's premium reduction chances, because it will transform that application from dry responses on a sheet of paper or a computer screen, to a company with clarity of direction, solid operations-and satisfied customers.

Sharing the Risk
And, while better explaining a company's uniqueness is very important and potentially money saving, the surest and quickest way to lower premiums is by accepting higher deductibles on liability or physical damage coverage, or both. 
And taking higher deductibles is much less of a problem to companies that spend a lot of time on driver selection, training and retention.  If a company owner is putting a driver behind the wheel who would theoretically be trusted to drive the family car (which doesn't carry a $5 million policy limit) chances are the bus company owner won't think it necessary to buy first-dollar coverage. That confidence can be demonstrated by taking a deductible. 
When drivers are good, claims are lower and deductibles work very well.  If loss experience shows a company to be superior, it should parlay that good experience into lower premiums by selecting a deductible it's comfortable with. 
There's  really no benefit "trading dollars" with an insurance company when the money saved by the prudent use of deductibles can be put to better use in marketing campaigns, equipment upgrades-or driver training programs.

There’s No Silver Bullet
Which brings us full circle - It's all about drivers!
Find them, train them, reward them and keep them.  And when the men and women in the driver's room are as good as it gets, exercise the option to better control the insurance component of your budget by "selling" your company's unique attributes to your agent and underwriter and both by sharing in the risk by selecting a comfortable deductible level.
By doing so, you'll be taking a significant step towards bringing predictability and stability to your insurance costs.