Market challenges abound, and RLI Transportation
meets them with focus, skill, and commitment
By Elisabeth Boone, CPCU
David A. Dunn, CPCU, (seated) is president of RLI Transportation; John J. Williams, CPCU, is vice president.
A charter bus packed with kids navigating narrow mountain roads en route to a ski resort ... trucks from Mexico loaded with auto parts crossing the U.S. border ... liquid propane tankers threading through rush hour traffic ... not exactly your garden-variety, Main Street kinds of risks.
In the soft market of the 1990s, agents could take risks like these to some of their standard carriers and be welcomed with open arms. Those days are gone, however, and specialty insurers are once more coming to the fore in the challenging market for transportation coverage.
Standing ready to guide agents, brokers, and their clients in the right direction is RLI Transportation, a division of RLI Insurance Company of Peoria, Illinois. Formed in late 1997, and based in Atlanta, RLI Transportation is a full-service provider of insurance products and services for the trucking and public auto industry. With underwriting specialists whose combined experience exceeds 75 years, RLI Transportation understands the needs of motor carriers and is able to offer creative solutions that blend quality coverage with solid loss control efforts.
The president of RLI Transportation is Dave Dunn, a leading expert in transportation insurance whose 20-plus years of experience include management positions with Baldwin & Lyons, Progressive, National Interstate Insurance, and AIG. What motivated him to join RLI? "First, it's a quality company," he responds. "They specialize in identifying niches in the insurance industry that require specialized expertise; that allows them to stand out from the crowd of other carriers. They develop diversified profit centers around the people who understand their niche markets. They believe in acquiring top talent and giving these experts a free hand in building their profit center."
Limits and coverages
RLI Transportation, Dunn says, is a self-contained operation that handles all functions from its Atlanta headquarters: marketing, underwriting, claims, loss control, accounting, and processing. Coverages are available in all states except Massachusetts. RLI offers primary limits up to $5 million; higher limits are available.
In the trucking arena, RLI entertains a wide variety of risks:
* Auto haulers
* Cryogenics
* Dry bulk
* Dry van
* Flatbed
* General commodities
* Hazardous materials (excluding hazardous waste)
* Heavy equipment/machinery
* Household goods
* Less-than-truckload
* Truckload
* Liquid tank
* Local-intermediate
* Long-haul
* Mail/parcel
* Refrigerated
In public transportation, RLI insures charter bus, limousine, school bus, and transit bus exposures.
Types of coverage available are auto liability, excess/umbrella, general liability, garage liability, non-trucking use, cargo, and physical damage.
Agents and brokers: partners in growth
Although it works primarily with agents and brokers who have experience in one or more segments of the transportation industry, RLI also deals with producers who may be less knowledgeable. "Our focus is the retail agent or broker, and our biggest successes come from developing relationships with producers who can help us grow and help us find the right accounts," Dunn says.
John Williams (seated, left) and David Dunn (seated, right) meet with Daniel N. Meyer, claims manager.
For both experienced retail producers and agents who may have only an occasional need for transportation coverage, Dunn says, RLI Transportation offers a number of advantages that set it apart from competitors.
"We have an experienced team of transportation insurance specialists who come from both underwriting and claims backgrounds. This allows the agent to have a very high comfort level with us," Dunn says. "Also, all we do is transportation, so the agent doesn't have to explain to the underwriter what a truck or bus does and what the exposures are." What's more, he adds, "We are A rated by Best's, and ratings carry a lot of weight with people in the transportation business. We offer a wide range of coverages, deductibles, and self-insured retentions, and we provide excellent policy service."
Capacity and pricing
Although some carriers have withdrawn from the transportation market in recent years, a number of players remain active, Dunn observes. "There's still plenty of good competition for the quality risks," he notes. What's more, he says, "There's still plenty of capacity in the marketplace. Even after the disasters of September 11, roughly $20 billion of new capacity has come into the market. So there's no shortage of capacity; the question is, where is it being allocated? Most of the transportation insurance specialists were not greatly affected by September 11--only to the extent their reinsurers were affected. So the good news is, there's a lot of capacity; the bad news for insureds is that from prior years when the market was soft, the market obviously is firming up and prices are going up."
As rates have risen, Dunn says, he's observed an increase in risk sharing on the part of many transportation companies. "Where a firm might have had a $5,000 deductible, to contain costs they may go up to $25,000," he says. "We're seeing more insureds take on additional risk to manage their costs, and we support that."
Price increases in 2001 were substantial, Dunn says, adding, "We're still seeing some increases this year. The biggest increases are for coverage in excess of $1 million, and those are market driven; the reinsurers are the primary ones taking the losses above $1 million, and they're the ones that have been raising the rates in those layers. We've seen increases of 200% to 300%, because loss experience in those layers has been very unprofitable for reinsurers," Dunn comments.
Asked whether he thinks RLI Transportation's reinsurance contracts are solid, Dunn replies: "Yes. The reinsurers are looking for people who have expertise in the business and for companies that want to be partners in producing an underwriting profit. Like the reinsurers, we believe we have to be in this market in bad times as well as good, and we hope that because of our knowledge and experience, the better customers will stay with us in the tough times. To us, the ability to retain accounts is key. It's very expensive to write an account for one year and then lose it. We do our best to keep business once we've put it on the books."
Current events
To a considerable extent, as the economy goes, so goes the transportation business. That's true for both trucking firms and public transportation companies, and Dunn notes that the latter have been particularly hard hit by the reduction in travel since September 11.
Since passage of the North American Free Trade Agreement (NAFTA) in 1994, trucks bearing manufactured goods have been crossing the border from Mexico to the United States in increasing numbers. A key concern for transportation insurers is the gap in government-mandated safety standards between this country and Mexico. "Sometime before the end of this year, I think Mexican trucking operations will be allowed to freely enter the U.S. market," Dunn says. "As a transportation underwriter, we're going to look very closely at anyone who wants to come into the United States to be sure they do meet the same standards, from hiring and training to maintenance and compliance with Department of Transportation regulations. There's been a lot of debate on this issue, but I think the government has decided the direction it's going to go."
A leading expert in transportation insurance, Dave Dunn has more than 20 years of management experience with several large insurers. He joined RLI because of the company's focus as well as the "top talent" who are hired to build the various profit centers.
Hiring standards also are a vital concern for trucking operations that transport hazardous materials, known for short as hazmat. "Hazmat transportation is a tough class of business," Dunn remarks. "Trucking firms and their customers are very concerned about the hiring criteria for drivers who haul hazardous materials." In the wake of September 11, he notes, the FBI has been looking closely at some firms and reviewing their hiring and safety procedures. "Anytime there's a disaster like that, there's always concern about what could happen next, and there's been increased talk about requiring more detailed background checks on drivers," Dunn comments.
Finding good drivers is always a challenge, Dunn observes. "There continues to be a driver shortage, even though the downturn in the economy has meant less business for trucking firms," he says. "The trucking industry has really been hit hard because the increased costs of fuel and insurance, combined with the loss of business, has made it hard for these firms to cover their margins." The trucking industry wants safe drivers, he points out, and during a recession it may be easier to enforce the highest standards. "Trucking companies are experiencing a constriction in business, and ideally this will result in better drivers in the seats of trucks," he says.
A move in the right direction, Dunn says, was the introduction of the commercial driver's license, or CDL. "I think the CDL has been a big aid to the trucking industry because the trucker now has only one license, whereas in the past he or she could hold multiple licenses in different states and accumulate a lot of traffic violations," he remarks.
What's ahead?
Like any specialized class of business, transportation insurance presents both challenges and opportunities. "I think the biggest challenge for any company that insures transportation risks is to produce an underwriting profit," Dunn says. "I think rate increases will give us a better opportunity to do that so we can continue to remain a viable force in the marketplace. Another challenge is to get to know our customers through their agents so we can all work as partners to get through the tough times we're having in this business."
Dunn and John Williams, RLI Transportation's vice president of marketing, strive to be available to meet with insureds at an agent or broker's request. "We like to know our customers," Dunn says. "A key to underwriting profitability is to carefully scrutinize insureds' financials, loss experience, and operations and go with the companies that are committed to stability and safety so that 'together' we can make a profit.
"For RLI, key drivers are people and partnerships," he continues. "For our long-term success, we need to have the right people in place in our organization, and we need to build and maintain solid relationships with our agents and insureds. If we all work together to get through these tough times, then together we can all be successful." *
For more information:
RLI Transportation
John Williams, CPCU, Vice President
Phone: (888) 754-4221, ext. 1020
E-mail: john_williams@rlicorp.com