It is no secret that commercial auto insurance rates have been increasing. It is not uncommon to see a commercial auto insurance renewal increase 4-8%. Put into the mix adverse loss experience and you will likely experience a double digit increase.
The Trucking industry has been especially hard hit. As the demand for insurance coverage increases in this robust economy supply/demand, economics come in to play and the increase in auto liability premiums is likely to remain for the immediate future.
But with every cloud there may be a silver lining. These premium increases have brought about a resurgence of Risk Retention Groups (RRG). In no way is this a panacea to increasing premiums but for some Truckers may provide a viable alternative to traditional insurance coverage.
A Risk Retention Group is an insurance company formed pursuant to the federal Risk Retention Act of 1981, which was amended in 1986 to allow insurers underwriting all types of liability risks except workers compensation to avoid cumbersome multi-state licensing laws.
A Risk Retention Group (RRG) is a liability insurance company that is owned by the people it insures. The owner-insured of a Risk Retention Group must share similar business activities. There are a number of options for Trucking companies, from owner operators to those R|PGs that require a minimum fleet size of a 100 power units.
Joining a RRG not only makes you an insured but also an owner of this insurance enterprise. In some cases it requires a surplus contribution, which can be considered an equity investment into the insurance company. Most RRGs require a surplus contribution. Many plans will allow a payment plan for this contribution in addition to the premium payment.
The desired outcome of the RRG is to bring together a homogeneous group of insureds that have a vested interest in reducing claims severity and frequency through the engagement of loss control and industry best practices. The RRG is very active in encouraging risk management techniques that will assist the insured/owner in improving its loss record. In most cases these efforts will reduce the overall cost of insurance.
Please feel free to contact me for more information regarding these alternative methods of protecting your business.