Smoother Ride Ahead for Primary Auto

The road ahead may be opening up in the primary auto market after last year’s nationwide economic dislocation brought on by the pandemic. The trucking industry, in particular, endured months of turmoil amid massive shifts in demand as people nationwide began not only working from home—but also staying at home after work. In commercial auto, the shutdown-induced reduction in traffic congestion may have brought a decline in accident frequency. That would be welcome news for insurers in a market where the combined ratio overall has remained above 100 for a decade. 

Featuring

• Stewart Brown, TRIP is Senior Vice President & Senior Broker and CRC Transportation’s Southwest Regional Manager. He is also a member of the Casualty Practice Advisory Committee.
• Pete Feeney leads CRC Transportation as Regional Director and is located in Scarborough, Maine.

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Transcript

Dan Wentz: 0:22

Is there a smoother ride ahead for primary auto? In this episode of the podcast we talked with two transportation specialists from CRC group to discover the latest trends in trucking and commercial auto. Pete Feeney lead CRC transportation as regional director is located in Scarborough, Maine. Law Stewart Brown is the Senior Vice President and Senior broker and CRC transportation Southwest regional manager. We'll check in with him both next, right here on the placing you first podcast. This is the placing you first podcast I'm Dan Wentz. And this podcast features news and insights from CRC his vast knowledge base of 2000 plus associates who write in excess of $10 billion of freemium annually, and we're giving you insider access to what's happening in our company and the types of insurance we place. This is the placing you first podcast. Okay, so we're joined by Pete Feeney and Stuart Brown, both great transportation producers with us here at CRC group wanted to pick their brains a little bit about what's going on in the primary auto market. A lot has happened in the past 12 months, the pandemic, its effects on transportation at large. I'm interested in what you guys have to what your opinion is on the primary auto market right now. And if we could, let's start with P. P, what's going on? What are you guys seeing? Well, right now, we're seeing kind of the freight levels are back to the where they were pre pandemic, which is great. So we're seeing a nice bounce back. And certainly in the long haul transportation segment.

Pete Feeney: 1:59

As everybody knows, when pandemic hit a year ago, we saw just a quick drop in freight, you know, the economy came to a halt. motor carriers had depart vehicles, it was a very difficult time, but we actually start quite a bit of bounce back in the second half of 2020. And into 2021. Right now, freight levels are good. We're still in an increasing rate environment. marketplace is still pushing rate, I would say mid single digits to low double digits, depending on the quality of the account. We are seeing increased competition.

Dan Wentz: 2:38

That's great. And steward. You know, are you seeing the same thing? Or things? Uh, you know, you're out there in Seattle? What's going on? What do you What's your opinion on what's going on right now?

Stewart Brown: 2:49

Yeah, we're definitely seeing still carriers continuing to push rate on the renewals, we're definitely seeing increased competition. I think it's combination of some, you know, slightly improving loss ratios in some cases, and then getting, you know, beat up a little bit in premium writing. And some of the carriers are trying to make up some of that in, in writing new business renewals continue to see a lot of pressure from competition with the incumbent carriers trying to continue to push rate. So a lot of renewals are moving from one carrier to another. We're trying to maintain those as best we can and or find a different market to put them with if that's what needs to happen. And that's, that's a little bit different than what we've seen in the past couple of years. Yes, sir. Do you think that things are overall improving, or at least heading in that direction? I think it's probably improving somewhat, some of it has to do again, with the pandemic and the lack of travel on the roads for part of the year last year. In addition, there, there is more adaptation of telematics and cameras, cloud based cameras, for improving some of the the loss results. However, you know, the carriers are still struggling to make money in commercial auto. So we're still seeing some of that pressure in price.

Dan Wentz: 4:16

So Peter, you see in competition from carriers increasing? And specifically, you know, like on what type of risks?

Pete Feeney: 4:24

Yeah, absolutely. I mean, I think, certainly in the in a better than average category. We're definitely seeing more competition this year than we saw last year. I think it's important to note too, when you when you think about the pandemic last year, I think most motor carriers out there had a lot on their plate, whether they were losing freight, because they weren't carrying essential goods, or they were picking up additional freight because they didn't have the capacity to carry essential goods. And that's due to take more. A lot of carriers didn't market their business last year. And, you know, they went through this in the carriers that came through it are on pretty solid ground now. But they're marketing their business and make no mistake about it. If you're good account, good driver profile, good loss history. There's plenty of capacity out there that wants to quote your business. And so we're seeing increased competition on those types of accounts, both non fleet and fleet and certainly more so in the fleet space because You know the fleets are, or there's larger premiums involved, their fleets tend to have better safety practices. And as Stuart alluded to, you know, you're gonna see more telematics on the fleet side. And each year we pass, we'll see more and more telematics get into the fleet space. still kind of early in that process. But But every year, you see more of them.

Dan Wentz: 5:45

Stuart, are you seeing that? The competition is helping rates so far is are we still a little bit off from that?

Stewart Brown: 5:54

Yeah, I mean, I think that, in some cases, you know, we might be talking about still a rate increase from year to year overall, for the insured. However, instead of a 15, or 20%, increase, it might be a five or a 7% increase, because of competition. So there might be some improvement rates. But let's, let's not get confused with that versus, you know, a year over year price differential, we're still seeing some of those rate increases, even if they're a little less aggressive than they were in previous years, I think on the distressed business, that's certainly the case where we were regularly seeing 15 30% increases on accounts year over year. Now, that's, that's become more commonplace in the 10 or 15% range. And then in some cases, as we mentioned earlier, we are seeing some, you know, flat renewals or flat rate changes for the client because of competition, either the incumbent, you know, trying to keep the business in keeping the rates flat, or competition, knowing what was out there last year, and trying to match up with that and try to write a piece of new business

Dan Wentz: 7:04

about, that's great. What about capacity and underwriting? Right now?

Pete Feeney: 7:09

Pete, you want to take that one? Sure. Yeah, I think there's plenty of capacity in the marketplace. And I would say that goes all across the board, both in the distressed area. And in the Better Business or the standard area, there's plenty of capacity, you know, rate levels right now are as high as we've ever seen them think about, you know, per unit premium levels. And and that's attracting capacity. And if you look at, you know, from a loss standpoint, for the industry, the industry hasn't made a underwriting profit since 2010. Now, we saw the results come in, for 20, around about 102, less than 102 combined ratio, still not under 100, quite a bit better than the 109, that was posted in 2019. But again, that was really driven by, you know, dropping frequency because there wasn't as much traffic on the road. So will that replicate itself in 2021? That remains to be seen. But roll that all up. And there's plenty of capacity, there's plenty of players out there, there's people that are entering the marketplace. You know, all that being said, we're still in an increasing rate environment, there's a lot of competition on the new bid side, there are instances out there where you'll you'll find a really good account that will see a year over year decrease. For the most part, like Stuart just mentioned, it's more along the lines of the account that was getting, you know, 15% increase that ends up moving covered somewhere else ends up with a two or 3% increase.

Dan Wentz: 8:41

So what about some of these issues, you guys have mentioned, telematics a lot of bunch stir, do you want to kind of go into that a little bit and expand on that exactly what that is and what that means?

Stewart Brown: 8:54

Sure. telematics, specifically, meaning things, you know, with the adaptation of the electronic driver logs, a lot of that got integrated with GPS systems, that monitors location, and speed and all those kinds of things. So that would be the the non video capabilities of motor carrier operations, being able to monitor what their trucks and drivers are doing. Now add to that we would have the cloud based cameras, which are a lot of times paired with the telematics and that some are inward facing and outward facing and some are outward facing only. And as Pete said, that's it's definitely more of a thing in the fleet side of things, especially in operations that are asset based where they own the trucks and they are hiring drivers. And it's a way for them to you know, monitor their workforce, monitor their trucks, see how they're performing, where they're driving, where they're going. And then of course, in the event of an accident, importantly, you know, what are the events that led up to the accident what happened during the accident and what's happened post accident with cameras and the telematics being able to monitor things like brake pressure or rapid braking and you know, or is it with the cameras, of course, the actual video evidence of what's happening.

Dan Wentz: 10:14

And Stewart the the pandemics been mentioned a couple times as well. COVID and all that. I mean, it's it's slowly going away right now, but Did it have that big of an effects and really, I guess slowed down transportation enough that, you know that that insurance now is a little bit less expensive, or I guess the carriers were getting Well, we're having less losses last year because less people were on the road.

Stewart Brown: 10:39

Sure, there was that aspect. And SP kind of alluded to a little bit, you know, right when, when everything got shut down, everybody was unsure of what was going to happen once they realized that, let's just say things like groceries and then later on in the pandemic, in the last six months, you know, Home Improvement goods, such as you know, building materials and things like that became not only backup to normal rate levels, but in fact, in some of these cases, increased freight levels for the costcos. And Home Depot's and in grocery stores of the world, we went from, you know, insurance companies having to you know, give back money on trucks that were either turned in or shut down or part and trying to help out insurance to stay in business to all of a sudden you seem insured's, not only adding all those vehicles back onto the schedule, but increasing some of their freight and things like that. So, you know, from the pandemic standpoint, there's been pluses and negatives, the negative of courses in the services such as the public auto sector, some of the other transportation sectors that aren't involved in for hire over the road trucking. There were also some things such as you know, sand and gravel haulers that were servicing contracts contracting operations, either on the homebuilding side, or even some of the public work sides, just, you know, road crews. You know, a lot of that was shut down for many, many months before, they just determined what they could do as far as getting employees back on the on the job site. So there were certain segments that were severely impacted. Others were just intermittently impacted early on and absence bounce back. Totally fine. And in fact, in some cases, even higher.

Dan Wentz: 12:19

And Pete, what about driver shortages? Does that play into to writing this type of insurance?

Pete Feeney: 12:25

Driver shortage has been a huge issue for the industry for years now. And I think one of the things we saw with the pandemic was simply that, you know, a lot of drivers that were on the older side, ultimately chose to retire and to step out of the workforce. And so that caused an issue that's still having some reverberations. Now, you know, the reality is, it's hard to train drivers while driving schools were shut down through the pandemic, and they're just starting to open up again. So there's definitely a huge need for additional drivers in the industry. And I think that's going to continue to be an issue was foreseeable future.

Dan Wentz: 13:05

So those are some of the big issues. What about clients, you know, our agents and our insurance, they're trying to position themselves for the best deal possible in a challenging rate environment that's hopefully improving? What can they be doing right now to best position themselves?

Stewart Brown: 13:24

Yeah, I think right now, the the best things are, first of all, working with your agent, this is for the motor carrier, of course, to be working with their agent work with an agent that knows what they're doing in the industry, prepare a very detailed submission, get all the information, that's, that's necessary and more information, the better. And then, of course, partnering with somebody like CRC, who knows the marketplace knows the markets to access can figure out if they fit better with, you know, a more preferred market, or perhaps a more distress based market based on the characteristics of the risk, and then work with the agents on how to get them from, you know, a, let's say, either unattractive, or moderately attractive account to a preferred account and get into the better markets, the better they can make their account, look, the certainly more competition they're going to have for their business, which would result in improved rates for that. If you

Dan Wentz: 14:21

What about our agents? What should they be doing? What should they be talking to their clients about? And what can they be doing, from their viewpoint to improve things?

Pete Feeney: 14:30

Yeah, I mean, I think they, you know, need to continue to talk to their agents about the rate environment, it's still an increasing rate environment, as Stewart just said, you know, safety is really the name of the game right now, if you look at the motor carrier of the insurance companies, that right motor carriers, you know, they've spent a great deal of time capital, developing their data, their analytics, their risk selection tools, they want to ensure accounts that are proactive from a loss control standpoint. So those accounts that are putting the time the effort the money back into their operations, and that's where the agents can really help out their insurance. You know, those accounts are going to be the accounts that are really competed for, and so agents should be talking to their accounts about that. And I think most are, this is no surprise we've been in an increasing rate environment for a while. By now, and I think those agents need to be working with with a wholesaler as the breadth of experience in the transportation market, but we do here at CRC.

Dan Wentz: 15:32

Okay, well, let's talk about that a little bit. How does the CRC producer best help? Like why? Why does working with someone at CRC why what advantages do we have?

Stewart Brown: 15:42

Well, we have a number of advantages, we have not only the access to the wholesale access to preferred markets, there aren't many markets out there that wholesalers can access that we don't have access to. And that has a lot to do with, with how we can help because you can, in some ways, get some one stop shopping coming here, which is great. The team overall has many decades of transportation experience. Many of us this is pretty much what we've done in our whole careers. On the insurance side is is based in the transportation segment it's a it's a big segment but somewhat small world. There's a pool of underwriters that we work with that many have been in the industry a long time as well not always in the same place and you know, we've been able to maintain relationships with them as they've switched locations and insurance companies that they work for. So relationships with their underwriters is certainly a positive aspect as well. And then of course our our internal data analytics we have the ability to look at our entire book of business and and sell that to an insurance company as a positive we can give them data on or book data on our writings in the different locations and territories types of businesses and they can also cross reference that with their own data with regard to losses and things such as that to make better decisions on what kinds of accounts that they want to more aggressively go after

Dan Wentz: 17:13

yeah that's great and no forget about already system Don't forget about you know, you mentioned the the producers coast to coast that can help you all transportation rested or super experienced while the transportation practice group right you guys are all constantly sharing information and and having discussions like this about what the markets are doing and what the latest trends are, which I think is super helpful too. Thank you both very much for joining us today. We really do appreciate it. And we'll check back in with you again soon. You know hopefully next time we talk it's going to be an even better situation as far as the the markets go and and what's going on out there in the world of transportation. So thanks a lot guys and talk to you next time.