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Bill Dorfner: Good morning, everybody. We’re just going to be standing by for a few more minutes. We’re still, trying to work out a technical glitch to get our guest of honor logged in, so if you could just stand by for a few more minutes, we’ll get this webinar going here shortly.

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Bill Dorfner: Well, good morning, everybody. Thank you so much for standing by while we were working out some technical glitches with, with Zoom. I’m happy to see that we have Dr. Alex Leslie on with us. And before we begin talking about the rising cost of commercial auto liability insurance, we just want to remind you that

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Bill Dorfner: INFINITI is a learning management system for the trucking industry, and buses as well.

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Bill Dorfner: We have one of the leading, learning management systems, and we also host two-day boot camps here in Dallas for any safety managers that are on there. If you would like to come down to one of our safety seminars, there is going to be a poll at the end of this webinar this morning, where you’ll be able to

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Bill Dorfner: answer a couple questions and express any interest you might have. But with that, I want to go ahead and turn it over to, Dr. Alex Leslie.

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Bill Dorfner: He is the Senior Research Associate with the American Transportation Research Institute, one of the main authors of the much-talked-about study on insurance in the trucking industry, and holds a BA from the University of Notre Dame and a PhD from Rutgers University.

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Bill Dorfner: And so I hope you all enjoy the information today. I know there’s been a lot of talk about it out there in the world, and seminars, and LinkedIn, and at the TXTA conference I was just at recently. So, with that, I am going to turn it over to, Dr. Alex Leslie.

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Alex Leslie: All right, and then I will share my deck here. Apologies, everyone, for this

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Alex Leslie: delay on my part. You know, it’s funny, we’ve been doing these Zoom things for how long, and yet, and yet you still… I still, I suspect I’m not alone, seem to mess it up.

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Alex Leslie: Continuously, so… Alright, there we go. Is that alright on the screen?

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Alex Leslie: Perfect, okay. We’ve made it. Thanks, Bill, for the introduction. My name is Alex Leslie. Atri is the not-for-profit research arm of the trucking industry. And so we do, you know, not-for-profit work on all kinds of issues facing

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Alex Leslie: The movement of freight.

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Alex Leslie: in the US and Canada, and, you know, this includes, of course, things like insurance, but includes all kinds of other topics as well. And we always like to flag when we present our work that, you know, we have this really wonderful board of directors that helps, sort of.

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Alex Leslie: identify and guide our work. You surely recognize a lot of these companies, if not all of them.

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Alex Leslie: And we also have a lot of logos on this slide, a research advisory committee, and these are folks from across the industry, so it’s motor carriers, it’s shippers, it’s insurers, lawyers, drivers, everyone.

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Alex Leslie: that could possibly have an angle, is represented on our advisory committee. And these are the folks who really, we like to say, do the heavy lifting of figuring out what it is

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Alex Leslie: that we need to research at Atrian.

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Alex Leslie: You know, they selected, a year ago rising insurance costs as one of the biggest issues in the industry that really needed visibility and research. So, again, we like to…

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Alex Leslie: sort of flag them and thank them as well in our presentations, because they are the ones who sort of identify and help guide our research. So this was a report that we published on insurance.

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Alex Leslie: Just… just a couple months ago, so it’s… it’s still pretty hot off the press as far as these things go. We wanted to focus specifically on liability insurance.

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Alex Leslie: You know, and what we’ve seen is that in this period of the last several years, premium costs are rising at a rate that is higher than inflation, right? It’s not just that they’re rising, we’ve had a lot of inflation, of course, during this past sort of 4-5 year period, but…

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Alex Leslie: It’s that costs of insurance are rising at a rate higher than inflation, even while crashes are falling, and while a lot of motor carriers are actually

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Alex Leslie: getting less coverage.

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Alex Leslie: So, again, these are… these trends are going in the wrong directions for us. So, the goal of this research was to really look in to document what is happening with costs.

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Alex Leslie: What are the trends? But then also to understand what are the strategies that fleets are using.

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Alex Leslie: to respond to rising costs. So, my presentation here, I’m going to have sort of two halves, if you will. The first half is going to sort of look at what are those trends, what are we seeing in terms of costs, but also in terms of policy stack.

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Alex Leslie: And then the sort of second half of the presentation is going to look more in terms of what are some of those strategies that fleets are doing, and what is paying off. You know, are there any silver linings? There are a couple silver linings, I’ll say that now, I promise.

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Alex Leslie: Despite the fact that, yes, this is otherwise a bit of a pain point for all of us.

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Alex Leslie: Here’s… I guess, this is a… this is good, this is good news. The bad news is that it isn’t impacting our insurance costs in the way that we want it to, but the good news is that crash rates have improved. We gotta tell this story, folks, because certainly the plaintiffs are not gonna tell it for us.

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Alex Leslie: We have seen, since the pandemic, improvements in crash rates that are worth, I think, celebrating. We saw injury crashes drop immediately when the pandemic started, right? We got all those four-wheelers off the road.

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Alex Leslie: Which, which always helps crash rates. And the good news is that even as those quarantine orders and work-from-home statuses, expired, we saw that actually crash rates

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Alex Leslie: maintained that improvement. You can see the injury crash rate on the bottom there. These are always, sort of measured at per 100 million miles, so it’s… it’s hovered at about 24 crashes per 100 million miles of

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Alex Leslie: heavy-duty truck. And again, that’s a pretty significant improvement over, frankly, what we saw for most of the 2010s.

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Alex Leslie: On the top of that figure, you can see fatal crashes as well. There wasn’t an immediate drop because immediately during the pandemic, everyone was driving so much faster because the roads were clear, so the…

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Alex Leslie: When crashes did happen, they tended to be more severe, but we’ve even taken, you know, an improvement in fatal crashes as well since that initial

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Alex Leslie: post-pandemic period. So, this is good news.

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Alex Leslie: Now, the… The bad news is that this hasn’t really

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Alex Leslie: really helped our premiums. In fact, our premiums on a per-mile basis have continued to rise at pretty steep levels. There’s a lot going on in this figure.

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Alex Leslie: I’ll try to sort of sketch it out for you briefly here. We’ve broken this down into 6 different fleet size groups, because size makes such a big difference.

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Alex Leslie: When it comes to premium costs.

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Alex Leslie: And then for each of these size groups, we’ve included the premium cost itself is that kind of dark red. And then that lighter, almost… I don’t know if we want to call it, like, a tomato soup or a salmon?

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Alex Leslie: is… that’s the liability losses. So again, that’s your out-of-pocket costs, that’s, you know, deductibles, self-insurance.

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Alex Leslie: We’d like to combine those together to really make us think about the total cost of risk.

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Alex Leslie: Which is really how we want to think about this, right? Premiums are a key part of that cost, but our out-of-pocket costs are also,

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Alex Leslie: Especially for larger fleets, a significant portion as well.

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Alex Leslie: So when we look at those combined costs, we can see, you know, that’s the total that’s printed above.

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Alex Leslie: But even just looking at premiums by themselves, you can see on the right side there, I’ve sort of summarized the percentage increases are significant across most of these fleet sizes, several of them going up by 40% or more, which, again, tells us the squeeze of the environment.

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Alex Leslie: That we are in right now for insurance costs.

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Alex Leslie: This is perhaps another bit of good news, but I think important context regardless. We talk a lot about big crashes, and you know, these big high dollar number crashes, they happen, they are real. This isn’t to say that they aren’t happening.

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Alex Leslie: But it is to kind of put into context.

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Alex Leslie: crashes that penetrate 5 million in coverage are still relatively rare. You can see, if you look at the very bottom line there, this summarizes the data we collected. We’ve got it for each year, but then the bottom line just has the overall. So, in our data, we saw 22 crashes penetrate 5 million in coverage.

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Alex Leslie: That’s out of over 11,000 crashes in the data submitted for this research.

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Alex Leslie: And so that’s about 0.2%, so 2 in every 1,000 crashes.

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Alex Leslie: Again, in one sense, that is a rare event.

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Alex Leslie: Which is good.

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Alex Leslie: But…

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Alex Leslie: you know, the flip side of that is, if you run long enough, if you run enough trucks, you are going to have one of these crashes, right? Two in a thousand, that’s 1 in 500 crashes, right? That… this is something that comes for us all eventually, if we stick around long enough. And, of course, we all want to stick around long enough, so…

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Alex Leslie: Again, these are rare, but we have to always think about them as possible.

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Alex Leslie: Now… Excess coverage is its own sort of unique piece of this equation.

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Alex Leslie: If you’re a small fleet, you’re maybe only running with $1 million in liability coverage, or 2, or maybe only 5.

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Alex Leslie: But these larger fleets, you know, again, and when I say large, I’m really not even speaking super large, right? Like, any fleet that believes it has assets

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Alex Leslie: protecting. In excess of $5 million.

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Alex Leslie: is a fleet that should be considering excess coverage. Now, many fleets don’t. You know, it’s a choice that’s unique to every fleet. I’ll talk more about that in a second.

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Alex Leslie: But…

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Alex Leslie: Any fleet that is looking at protecting those assets is going to be in an excess coverage market.

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Alex Leslie: And what we’ve seen is that coverage for these excess layers over 5 million has, in some cases, been rising at an even faster rate than primary coverage layers.

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Alex Leslie: So you can see here, on the kind of right side of this figure, we have the different layers of coverage, and they mostly go from top down as they get higher and higher. So at the very top of your screen, you see $5 to $10 million coverage layer.

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Alex Leslie: In 2024, that cost about 1.6 cents per mile.

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Alex Leslie: And it had increased by over a third in just this 4-year period, just from 2021 to 2024.

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Alex Leslie: The next coverage layer, sort of down, you can see, is the 10 to 15 million. Again, that’s… it’s only, quote-unquote, about 1 cent per mile. But that has increased by 45%.

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Alex Leslie: just since 2021.

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Alex Leslie: And again, one more down, $15 to $20 million coverage layer. Again, it’s… that’s less than 1 cent per mile, but it has increased at a rate over 33%.

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Alex Leslie: Just in these last couple years.

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Alex Leslie: So, you may say, well, That is… not a large dollar amount.

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Alex Leslie: And I would say to you, what we’re seeing here, this percentage of increase, tells us something significant.

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Alex Leslie: First of all, any fleet who’s

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Alex Leslie: working coverage in this area, you know, this all adds up. But second of all, it tells us that litigation has become increasingly expensive, because that’s what drives these crash costs up.

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Alex Leslie: Over the $5 million threshold.

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Alex Leslie: Litigation going higher and higher.

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Alex Leslie: drives up excess coverage costs higher and higher. That also is what’s going to force more motor carriers to start getting excess coverage in the first place, right? So, you may not be there now, but as litigation drives these costs up, it may force your fleet to enter into this excess market, and that’s when you’re going to start feeling this.

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Alex Leslie: If you aren’t already. So, it’s not only a cost issue, but it is a warning sign, I think, for how the insurance market, rather the risk environment.

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Alex Leslie: Is shifting around us as a whole.

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Alex Leslie: I thought I would say a little bit more about coverage levels and what’s happening in this space.

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Alex Leslie: You know.

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Alex Leslie: Coverage is one of the biggest questions that fleets ask insurers, and they ask me too, you know, well, what is the right amount of coverage for me? I have, you know, 20 trucks, or 40 trucks, or, you know, 150 trucks.

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Alex Leslie: Or 500 trucks. And there’s not really a good answer to that question, because it really does depend on

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Alex Leslie: your fleet, Your priorities, how much exposure to risk you have, you know, again.

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Alex Leslie: If you are caught in litigation that, that, you know, goes nuclear.

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Alex Leslie: This is the case where you could have a plaintiff say, no, we’re gonna go for everything, we’re gonna go after everything you have.

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Alex Leslie: And if that plaintiff wins, then…

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Alex Leslie: And yeah, that’s everything, right? Certainly for private… privately owned fleets, that’s a big concern, because it’s… that’s your whole livelihood. But, you know, for any fleet, that is a concern. On the flip side, a lot of plaintiffs come in, and they’re looking for a settlement.

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Alex Leslie: And they’re gonna figure out what your coverage is, and they’re gonna demand that right off the bat. And so some fleets might say, well, look.

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Alex Leslie: If I have $20 million in coverage, that just means the plaintiff is gonna ask for $20 million every single time I get into a lawsuit. So I’m gonna cut back, I’m gonna go for 15 instead.

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Alex Leslie: So, there is truth to both sides of this equation, and ultimately that’s… it’s a tough decision that, you know, every fleet has to make.

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Alex Leslie: for themselves

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Alex Leslie: I can tell you more about the trend, though, that we’ve seen, and that is that in the past 4 years, the majority of fleets maintained the same coverage level that they had.

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Alex Leslie: We’ve sort of understood this to be part of the fact that, you know, we had the pandemic, there’s a lot of uncertainty in the market, there was a brief period where, again, crashes went down so much that a lot of fleets were looking at, okay, well, you know, maybe let’s not cut back.

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Alex Leslie: on coverage.

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Alex Leslie: Whereas in the 2010s, we had seen a lot of fleets actually reducing those coverage levels.

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Alex Leslie: So it’s partly a sign of the times, but the other factor I think that’s interesting here is that during these four past years, even as fleets

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Alex Leslie: were maintaining the same coverage level, they were actually increasing their exposure. They were driving more mileage.

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Alex Leslie: Right?

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Alex Leslie: And, so what that tells me is that, again, fleets were not decreasing their coverage, but they were essentially spreading it out more, so they were not choosing to purchase more coverage. You can kind of think of this like.

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Alex Leslie: You know, like in your household, you might not be cutting, you know, as costs go up, as inflation goes up. You might not be cutting back on the amount of something that you buy, but you’re stretching it farther, maybe.

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Alex Leslie: And that would be the… that would be the analogy to what we saw with coverage limits.

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Alex Leslie: We also have some data on what fleets do with deductibles versus self-insurance. We’ve seen fleets turning towards self-insurance.

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Alex Leslie: Over the past decade, again, as, the cost of coverage has gone up,

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Alex Leslie: Where we really see that breakdown is by fleet size, so for your smaller fleets, anyone kind of under 50 trucks, we saw overwhelmingly they were going with a traditional deductible policy.

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Alex Leslie: The fleet size of, sort of, 50 to 500 trucks, that’s where we saw an even split, and that’s what you can see in this table.

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Alex Leslie: And we saw about 40% fleets went with a deductible, about 40% self-insured, and then another 20% had a sort of a first dollar coverage. So, coverage that, you know, began without any deductible.

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Alex Leslie: And what was interesting to us is that the sort of split here, half and half, between traditional deductible and self-insurance wasn’t really based on the size. So it wasn’t that all the largest fleets in this group were going self-insurance and the smallest ones were going deductible.

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Alex Leslie: It was actually spread pretty evenly throughout that group, so what that tells us is that even fleets that are on the smaller end.

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Alex Leslie: You know, fleets of maybe 80 trucks.

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Alex Leslie: Who, 10 years ago, would not have been in the self-insurance game.

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Alex Leslie: Are now

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Alex Leslie: looking at self-insurance. So, that has been, I think, one interesting trend that we’ve… that we’ve seen.

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Alex Leslie: So, I’ve got one slide that’ll briefly summarize up a few things, and then I’ll pause and I think have some sort of midpoint questions here before I launch into the second half.

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Alex Leslie: If that’s alright, if that works for our Zoom setup. Can’t assume anything at this point when you have as much struggle as I apparently have.

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Alex Leslie: You might say, well, why is this happening, Alex? And we do have some research that sheds light on that fact. Again, despite better safety and coverage consistency.

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Alex Leslie: Premium costs are rising. So why is that? You know, on the one hand, litigation has become increasingly difficult.

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Alex Leslie: Lawsuits against trucking have gone up by over 3.5% each year on average.

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Alex Leslie: And then the size of those lawsuits has gone up as well. So, what we use is we measure the costliest half of lawsuits.

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Alex Leslie: We do that because, you know.

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Alex Leslie: we’re not saying that no one should be made whole after an accident, right? After a terrible crash, you know.

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Alex Leslie: We do want victims to… to be made whole.

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Alex Leslie: So it’s not that every lawsuit is a problem. The problem is the expensive, the blown-out-of-proportion, the, you know, egregious lawsuits. So those are the ones that we focused on

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Alex Leslie: And those have risen by, again, over 5.5% each year on average.

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Alex Leslie: At the same time, medical care inflation has consistently been going up at a rate higher than inflation in general.

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Alex Leslie: You know, that hits the pocketbook.

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Alex Leslie: the costs of each crash are rising, and, you know, the insurers themselves are… they’ve really struggled in this space, in the commercial auto space. I can say more about why if anyone is interested in that, but it has been consistently unprofitable.

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Alex Leslie: for insurers, to insure in the commercial auto space. And so they’ve essentially been playing catch-up for the last 15 years on, you know, losing money.

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Alex Leslie: And when insurers lose money, it means that they leave the market, and so we also then have less insurance capacity, which means that the cost goes up even more.

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Alex Leslie: So, that’s sort of been the perfect storm that has led to these rising costs. Again, despite the fact that the old playbook was, okay, let’s just reduce our coverage a bit, let’s maybe increase our deductible, that old playbook has not really worked

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Alex Leslie: Again, in these past few years.

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Alex Leslie: So, yes, with that said, let me pause here and ask if there are any questions thus far on this kind of first half of my presentation, where, again, I’ve sort of focused on…

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Alex Leslie: What the state of the problem is, and the sort of benchmark trends that we’ve seen in coverage in the past couple years.

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Bill Dorfner: Alex, thank you so much for this information so far. I have opened up the chat, so if anybody has any questions they want to go ahead and put in there, it’s interesting to see, you know, how verdicts and how, you know, the litigation has really affected the trucking industry, and we talk about that in our boot camps as well. You know, there was a day where, you know, an athlete getting a million dollars or a $3 million

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Bill Dorfner: contract was unheard of, it was absurd, and now it’s almost like the league minimum, and it seems that juries are becoming, increasingly desensitized to these large verdicts, and when you see that out there, and you see those commercials, then when they get called to a jury, they’re like, well, that’s not a big thing, it happens all the time, and it just gets bigger and bigger.

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Bill Dorfner: So, it’s interesting to see that actually in the research of how, you know, those numbers are increasing.

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Alex Leslie: Yeah.

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Alex Leslie: And I… I’ll… I’ll share my contact and…

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Alex Leslie: website information at the end, but I will say some of the data points on this page, and some of the ones that you’ve

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Alex Leslie: some of the topics that you’ve just mentioned, Bill, we did put out a report just on litigation in the trucking industry in December of last year, so also very recent.

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Alex Leslie: And,

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Alex Leslie: like you say, I think the desensitization is a really big factor. One of the… one of the data points that we found in that research was

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Alex Leslie: That, you know, when a trucking defendant goes into court, you’ve got a couple options, right? You can either,

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Alex Leslie: admit or stipulate to negligence, and say, okay, let’s just say that, you know, we are at fault, and let’s just move to the question of

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Alex Leslie: The dollar amount, the payout.

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Alex Leslie: you might go to court and deny it and say, you know, no, we were not negligent, you know, maybe it was a third-party driver, maybe it was a, you know, an act of God, as they say in court, which is like weather or roadway or something like that.

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Alex Leslie: Or the third choice you might have is, you might actually make a sort of counterclaim, and say, actually, we were not negligent, and in fact, the plaintiff was negligent. The plaintiff swerved at the last minute, and that caused the truck driver to enter into the crash, or, you know, something like that.

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Alex Leslie: And what we found is that when a defendant makes a counterclaim, right, when there is evidence that the plaintiff was negligent, actually that had no statistically identifiable impact on the final award.

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Alex Leslie: in… in these… in these trial cases. And… and that really, to me, goes to show the fact that

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Alex Leslie: juries are desensitized, and they have bias against the trucking industry. Like, that…

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Alex Leslie: That is what we are going up against.

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Alex Leslie: in the courtroom. And that’s, again, that’s not case-by-case, that is the background context.

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Alex Leslie: before you bring any case into court. So, again, that’s…

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Alex Leslie: That’s challenging. That’s challenging, it’s challenging, obviously, if you’re in the courtroom, but everything in the world of

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Alex Leslie: Risk cost trickles down from the courtroom.

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Alex Leslie: If the courtroom cases go up, that means the settlements go up. If the settlements are going up, that means that the, you know,

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Alex Leslie: the claims management costs are going up. Everything else down the line follows the trends of the courtroom. So, yeah.

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Bill Dorfner: That’s, that’s fascinating information about how, even when you can prove, you know, negligence on the other party, and it is right in line with, you know, some of the plaintiff’s attorneys that I’ve spoken with, who will tell you that they don’t even really care about the incident itself, because chances are the jury is like, hey, I could have made that mistake too. They’re more interested in going backwards to

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Bill Dorfner: until they find some sort of gap in your safety management system, be it training, your driver qualifications, your driver monitoring, out of service. They’re going to go backwards and backwards until they find something, and it sounds like that is what

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Bill Dorfner: the, the juries are actually, deciding off of, and not the incident that was actually on the roadway, even if you have, like, camera footage that shows otherwise. Absolutely. We do have, yeah, we do have a question in here. It says, has any motor carrier beaten the plaintiff to the punch and sued them first?

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Alex Leslie: Oh, gosh, I’m not… I’m not familiar of…

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Alex Leslie: You know, I’m not familiar of that happening. I don’t know that that would happen, just because…

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Alex Leslie: When you… when you sue a…

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Alex Leslie: I’m not a legal expert, so I don’t know a lot of these, but again, the reason why we have these lawsuits is because

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Alex Leslie: it’s a commercial lawsuit, right? It is a… it is because a trucking company has… has money and has assets, right? You know.

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Alex Leslie: Individuals and passenger vehicles, we… we don’t really have that much

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Alex Leslie: you know, money, comparatively speaking, right? I mean, you know, every now and then maybe somebody on the road, but, you know, a trucking company that’s gonna sue me isn’t gonna get much out of me. They’re probably gonna have more costs to get it out of me than what, you know…

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Alex Leslie: And so, that doesn’t usually… you know, certainly trucking companies will get money from the insurance claim process, but I’m not really aware of them, you know, bringing suits against

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Alex Leslie: Individual, private vehicle drivers.

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Bill Dorfner: Yeah, and I can try to speak to that a little bit as well. I’ve been a safety director at a trucking company, and seeing those incidents where you’re like, man, we should go after them right away. And also having worked with the plaintiffs and the defense, you know, counsels, there is something to be said.

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Bill Dorfner: And again, also not a legal expert, there is something to be said about not poking the bear.

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Bill Dorfner: Yeah. And, you know, in that situation, if you are getting… gonna end up getting sued, then I suppose you could do a counterclaim, but, you know, that’s gonna be a strategic situation between you and your legal counsel.

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Bill Dorfner: But I kind of look at it the same way I looked at it with, you know, not data queuing every single violation you get, you know? You don’t necessarily want to poke the bear in certain situations. If they’re not going to sue you, might be a good idea not to bring them into it in the first place.

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Alex Leslie: Well, and your earlier point is so salient here as well, Bill, and that is that

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Alex Leslie: When these cases are decided, At least the biggest ones, certainly.

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Alex Leslie: it’s not… Because, usually, of what actually happened on the road.

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Alex Leslie: It’s what happened 5 months ago when you hired a driver, because you maybe didn’t document something just right, or you didn’t take that extra check, or you didn’t, you know.

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Alex Leslie: Or it’s what happened 3 months ago when you recorded too many, you know, speeding

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Alex Leslie: Coachable incidents in your telematics system, or your driver coaching system, you know, and…

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Alex Leslie: they weren’t actually incidents, but you left them on the record, and now the plaintiff points back to that, right? It’s the stuff…

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Alex Leslie: It’s the unsexy stuff of crossing your T’s and dotting your I’s and being consistent.

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Alex Leslie: Consistent with your policy application, consistency with your training and coaching, consistency with your reviewing of documents, right? I mean, again, this is the kind of stuff that the big cases

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Alex Leslie: usually come down to this kind of thing, right? It’s…

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Alex Leslie: It’s… in the courtroom so often, right, it’s not the he said, she said over whether an improper merge

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Alex Leslie: was technically improper on the part of the truck driver or the passenger vehicle. It’s, you know, 4 months ago.

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Alex Leslie: did the procedure get followed for the annual check-in, or again, whatever it is that your policy is, so…

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Bill Dorfner: It’s so important to remember that trucking is such a heavily regulated industry, and, you know, in trucking, you’re required to keep track of so many different things, and that person driving the four-wheeler is required to keep track of nothing.

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Bill Dorfner: So if you are gonna go after them, it can only really be for that incident. There’s nothing else, to make them prove where

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Bill Dorfner: When they’re coming after the trucking company, again, these attorneys will go back years and years and years until they find where there was some sort of lapse in their system.

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Alex Leslie: Yeah.

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Alex Leslie: And I think it’s, you know, you could deregulate… you could throw out trucking reg… every single trucking regulation you wanted to tomorrow, right? And…

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Alex Leslie: The plaintiffs would still

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Alex Leslie: come… come after you for these things, right? So, I… I often sort of, you know, with the regulations we do have.

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Alex Leslie: plaintiffs are continually saying, yes, but there’s actually a higher standard, right? So, you know, that’s the other kind of catch there, right? That, it’s about internal consistency even more than following the regulations that exist in a kind of…

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Alex Leslie: unfortunate way, right? Bye.

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Alex Leslie: Yeah, I think I will jump into the second half here, it sounds like.

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Alex Leslie: And, great discussion, though.

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Alex Leslie: I’ve got a couple slides here. I want to give you a caveat from the start. There’s going to be a couple slides here that… there’s a lot of stuff going on, right? They’re complex slides.

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Alex Leslie: I know they’re complex,

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Alex Leslie: We’re gonna walk through them gradually, and I promise that the complexity is worth it here, so, if you bear with me.

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Alex Leslie: The headline here tells you the key takeaway.

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Alex Leslie: Risk cost improves.

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Alex Leslie: with share of primary risk retained. So the more risk that fleets retained of their own.

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Alex Leslie: The lower their total cost of risk was.

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Alex Leslie: That is a big silver lining. It says that if you are betting on yourself, and you…

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Alex Leslie: You know, actually walk the walk.

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Alex Leslie: There are real savings to be made here.

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Alex Leslie: So, this figure shows The kind of salmon color is the cost of premiums per mile.

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Alex Leslie: The darker red color is your liability losses per mile. So again, that is your out-of-pocket costs, whether that’s a deductible, whether that’s, you know, self-insurance, payments, etc.

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Alex Leslie: And then on the top of that bar, you can see that’s the total cost of risk. That’s the sum of those two things.

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Alex Leslie: Now, each of those columns, each of those bars, represents the average cost for fleets

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Alex Leslie: retaining a certain percentage of their risk. So on the far left, you’ve got fleets retaining 0%. So those are the first dollar coverage fleets. They have no deductible, they have no self-insurance, their insurance kicks in at that first dollar.

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Alex Leslie: Next you have fleets retaining from 0 to 1%. So, for example, that would be something like if you’ve got 1 million in coverage.

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Alex Leslie: And your deductible is, $10,000, right? That would be 1%.

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Alex Leslie: You’re retaining 1% of that risk.

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Alex Leslie: The next one is from 1% to 5%, so again, on a $1 million coverage, that would be up to, like, $50,000, right? And then 5% to 10%, 10 to 30%, and then so on, right?

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Alex Leslie: So with each step.

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Alex Leslie: what a fleet is doing, right, you’re retaining more risk. You are having more skin in the game. As a result, your premiums go down, right, because you’re buying less coverage,

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Alex Leslie: But, as a result, your own direct losses are increasing, generally.

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Alex Leslie: But what you can see here is that as fleets retained more of their own risk.

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Alex Leslie: Their premiums went down by a larger amount, Then their losses increased.

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Alex Leslie: And so that’s why the total cost of risk goes down. Again, from 15.4 cents per mile to 12.4 to 8.5 cents per

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Alex Leslie: Per mile, just looking at that group from…

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Alex Leslie: You know, 1% to 5% to 10%.

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Alex Leslie: That’s a great opportunity. Now, not… of course, not every fleet can just jump up to 10% retention immediately, right? You need to be able to have capital on hand to do that. You need to be able to have a certain amount of liquidity. You need to have confidence.

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Alex Leslie: And have invested in…

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Alex Leslie: Your processes, your procedures, your safety technology, your coaching, to be able to actually experience that, right?

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Alex Leslie: Because if you haven’t done that, then, you know, you’re going to be at a greater risk.

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Alex Leslie: But, this is a silver lining. This is a real opportunity for, again, fleets betting on themselves.

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Alex Leslie: You can see fleets, when they move above that 10% threshold.

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Alex Leslie: it’s not as clear, right? The savings aren’t as pronounced, right? You can still see they go down a bit, right?

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Alex Leslie: 8.5, you know, at that 5-10% level. They jump up a little bit at the 10 to 30, but then back down again at that 30% to 50% retention level.

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Alex Leslie: That’s partly because, again, the more you retain your own risk, the more variable those costs are. So year to year, those are going to fluctuate more. But even so, again, still some savings, even at that highest level, so…

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Alex Leslie: This is a big… again, this is a big silver lining for the industry, and a big opportunity.

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Alex Leslie: for fleets, to really incentivize themselves, I think, to, again, improve safety, can, can actually result in reducing costs in this… in this pathway.

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Alex Leslie: So, this next slide is somewhat similar, but takes a slightly different angle at it. So, the previous slide here, this one that’s currently on the screen, this is comparing fleets, you know, based on where they stood at that risk retention

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Alex Leslie: percentage.

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Alex Leslie: This next slide, we took a slightly different approach, and we said, okay, let’s look at the same fleet, year over year. If a fleet reduces or changes their coverage level, what happens in the second year, right?

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Alex Leslie: So the previous slide was a comparison across fleets. This one is now looking at what happens to the same fleet when they change.

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Alex Leslie: Before and after.

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Alex Leslie: So…

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Alex Leslie: The first line of that table is the no-change group. That’s the baseline group. So those are fleets who kept the same policy, didn’t change their coverage, didn’t change their deductible or self-insurance. Kept everything the same.

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Alex Leslie: you can see that that was the majority of fleets did that, right? So, again, about 70% of fleets, you know, from one year to the next did not change their policy in this study.

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Alex Leslie: Now, those fleets, when they changed, nothing.

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Alex Leslie: Their premiums went up each year on an average of a little over 4%, right?

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Alex Leslie: Now, their liability losses per mile actually also went up in this study, so by about 8%.

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Alex Leslie: And then they’re combined, that total cost of risk, the premiums plus liability losses.

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Alex Leslie: went up by a little under 5%. So again, that’s when you do nothing. That’s what we saw.

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Alex Leslie: Now, you might say, well, that… the percentages don’t add up, they’re not… they shouldn’t add up, right? Because usually the premium costs are, in fact, much higher than your liability losses. So, an 8% increase in your liability losses is…

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Alex Leslie: a smaller raw change than your change in premiums, so… The total cost of risk takes them both into account.

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Alex Leslie: Now, fleets that decreased their total purchased coverage, so maybe they reduced their coverage limits, maybe they increased their deductible, either way, they reduced their total purchased coverage, or they retained more of their own risk.

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Alex Leslie: Those fleets saw their premiums decrease by about 7%, 7.2%.

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Alex Leslie: they saw their liability losses increase by about 10%. Again, so that makes sense, right? They were purchasing less coverage, so their premiums went down, but they were retaining more risk, so their own losses went up a bit.

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Alex Leslie: The result, however.

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Alex Leslie: was that their combined, or their total cost of risk, actually improved by about 2.5%. That’s that green number on the right side there. Green means good. If you’re getting lost in the numbers, green means good. Trust that one.

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Alex Leslie: So again, fleets that… that reduced their total purchase coverage.

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Alex Leslie: saw that their total cost of risk improved, from one year to the next, again, by 2.4%.

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Alex Leslie: again, that’s significant. That is good news for us folks. That is a silver lining. It doesn’t mean automatically, it doesn’t mean you should go out tomorrow and just slash all your coverage without thinking of anything. Don’t do that. Don’t say that I told you to do that. But what it does say is that, again, if you bet on yourself, and you put in the work.

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Alex Leslie: you will be able to actually reap rewards from that. And this is what it looks like, so…

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Alex Leslie: Again, this is comparing the same fleet, what they did one year to the next. So, it’s similar to the last slide, but gives you a different angle about it, and really reinforces this takeaway, again, of betting on… betting on yourself.

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Bill Dorfner: And Alex, I’d just love to jump in, because I’ve seen this happen with fleets in the past, too, that, you know, we’ve heard the term, and we’ve heard it said a long time, you know, well, that’s what we have insurance for.

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Bill Dorfner: You know, and it’s not that you’re going out trying to crash into things, but, you know, when you have insurance and you know that somebody else is gonna pay for it, that’s one thing. When you start to retain some of that, some of your own risk.

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Bill Dorfner: I’ve seen, you know, company owners, and I’ve seen fleet managers start taking things a lot more seriously, a lot more personal, and some of those changes that, you know, you’ve been maybe fighting upper management to do, once they start taking on that risk, they’re like, you know what, that actually sounds like a pretty good idea. Yeah. So, you know, I’ve kind of seen that mental change in the past in fleets, and it’s interesting to see how

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Bill Dorfner: The actual numbers shake out when that happens.

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Alex Leslie: Absolutely, and I’m so glad you jumped in there, Bill, because it makes me think of two sort of additional points that are worth mentioning on this topic. One is that,

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Alex Leslie: you know, safety culture is such a big factor here, and safety culture flows down from upper-level management, right? Like, if owners or if, you know, C-suite are not invested.

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Alex Leslie: In safety, then it doesn’t…

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Alex Leslie: It doesn’t take the same priority once you get farther down the totem pole, once you get to the folks who are, you know, doing the work on the road, doing the work, you know, in the dispatch office. So, again, retaining more risk is a way that, yeah, we see, absolutely. It puts your skin in the game, it changes the way.

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Alex Leslie: that people think about it, it changes the whole culture. So, again, the,

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Alex Leslie: you know, it’s… that is a big piece of this, I think.

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Alex Leslie: And you know, again, it’s something that… we did research on this quite a while ago, so it’s no longer super recent, but yeah, showing exactly that, that the culture coming from that top down is what really can make a difference. Gosh, I feel like I had a second thing to say as well.

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Alex Leslie: from what you were saying at the start, Bill, and I’m…

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Alex Leslie: Now I’m blanking on what it was.

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Alex Leslie: Maybe it’ll come to me.

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Alex Leslie: In 5 minutes, when I’m in the middle of something completely different, but…

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Bill Dorfner: About 5 minutes after we finish the webinar.

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Alex Leslie: Oh, no, don’t jinx it, don’t jinx it, we don’t want that.

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Alex Leslie: Yeah.

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Alex Leslie: Gosh.

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Alex Leslie: I’ll jump ahead, and hopefully he’ll come back to me.

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Alex Leslie: alternative risk transfers. So, this is something that…

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Alex Leslie: We are seeing, you know, again.

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Alex Leslie: Larger fleets are starting to look into, what are my other options here?

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Alex Leslie: for… I just remembered what it was. Perfect. Okay, fantastic. Less than 5 minutes. Sorry, everyone, for jumping. I promise it’ll be worth it there.

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Alex Leslie: The… the… When you’re retaining more risk,

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Alex Leslie: There is another part of that attitude shift. You mentioned, Bill, that, you know, there has been this long-running attitude of, well, that’s what we have insurance for.

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Alex Leslie: Right. Insurance will do that if, you know, I’m already paying them to do stuff, so they might as well spend the money themselves, right?

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Alex Leslie: I think that if you look back on a longer view.

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Alex Leslie: We have had that attitude in the trucking industry.

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Alex Leslie: we did have that attitude for, I think, too long. I think there was a degree of maybe complacency, frankly, in the early 2000s and early 2010s, where we really did lean heavily on the insurance policy.

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Alex Leslie: To just sort of clean up the mess.

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Alex Leslie: And again, yeah, we’re paying them to do that, so they should do that, right?

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Alex Leslie: I think that is partly what has gotten us to this point.

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Alex Leslie: Frankly, where insurance companies have been behind the 8-ball in trying to catch up on

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Alex Leslie: Increasing premiums to make that attitude work out.

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Alex Leslie: when I talk to people about this research, a lot of folks will say, well, geez, the insurers must not like this, because you’re saying.

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Alex Leslie: you’re saying that people should buy less insurance, and I’m able to say, actually, no, insurers love this, because an insurer would much, much rather have

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Alex Leslie: you increase the amount of risk you retain, fuel skin in the game, and have a better overall strategy for managing risk. An insurer would love for you to buy less risk if that means that they have to pay out less.

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Alex Leslie: And so, when insurers see this, they are happy with this outcome. They want fleets to act on this information. Because insurers want us to get out of that attitude of, well, that’s what I have insurance for. And again, to really lean on an oversized insurance policy.

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Alex Leslie: Rather than, again.

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Alex Leslie: taking more ownership of this. So, I think that is an attitude change as an industry that is important, too, and again, one that actually insurers want to see as well.

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Bill Dorfner: Yeah, that’s a great call-out, and having just come from the insurance industry, too, I mean, everything is about their loss ratio.

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Bill Dorfner: They would… they would much rather, have you, you know, I’m just gonna throw out some random numbers. They would much rather have, you know, a $600,000, annual policy, and with a loss ratio of 60 or 65%,

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Bill Dorfner: than a $2 million policy, but their loss ratio is at 100 or 105%, and they’re actually losing money. They would much rather make a little bit of money off of your policy

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Bill Dorfner: then end up losing money. So, yeah, that ties right in with… if you’re willing to take on that additional risk and actually put the work in to operate safely, the insurance company, I think.

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Bill Dorfner: All day, any day, we’ll take a smaller premium if that loss ratio is going to be profitable.

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Alex Leslie: Absolutely.

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Alex Leslie: I have just a couple brief slides left here. This one’s on alternative risk transfer techniques. This is mostly the provenance of large fleets still. We have seen that fleet size come down a bit, so what we saw was about 750 trucks, was the point now.

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Alex Leslie: Where fleets are beginning to look into some of these other techniques.

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Alex Leslie: Things like quota share, so again, that’s where you’ve got the… the fleet and the insurer are,

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Alex Leslie: are splitting a percentage of the losses in that layer. Multi-year aggregated programs where you lock in, you know, in year one, and it might run for 5 years, and again, if you perform really safely, then,

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Alex Leslie: then, you know, it just… it depends on exactly… you might be locking in a lower price,

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Alex Leslie: But then again, you know, like with any locked-in price, if you could get a better price later, then you’re paying the higher price still, versus, you know… generally, premiums, of course, go up, but swing layers, retrospectively rated layers, those are ones that, based on your performance afterwards, the premium cost

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Alex Leslie: can either go up or down, so…

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Alex Leslie: Essentially, what all of these are, is these are all other ways of retaining more risk, basically, at higher levels. So again, we’re seeing these become a little bit more common, in these… in this, you know, again, past 5-10 years.

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Alex Leslie: One other thing that we looked at was safety technologies correlated with lower losses, and this was, you know, this was an exciting finding for us. This wasn’t really the primary focus of this research.

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Alex Leslie: But what we did find is that when fleets, adopted more safety technology.

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Alex Leslie: Their losses… Or were lower.

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Alex Leslie: Than fleets who did not.

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Alex Leslie: So, what you can see here is that we’ve got, at the top of this chart, forward collision warning, lane departure warning, collision mitigation systems. Those all had a very strong level of significance, and were highly, I should say, fairly strongly correlated with per mile losses.

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Alex Leslie: what does correlation mean? Unfortunately, so that’s just a measure on a scale of 0 to negative 1, essentially. Negative one would mean it’s a perfect correlation. It’s an exact, you know, perfect correlation. You never see that in the real world.

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Alex Leslie: A point… negative .46 is a pretty strong correlation. So, again, this tells us that these… these safety technologies do…

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Alex Leslie: really have impacts on your losses, right? Which is the way that I think you really want to think about safety technologies, not just in terms of does it reduce your number of crashes? Obviously, we would like that.

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Alex Leslie: But… If a crash still happens.

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Alex Leslie: But the safety technology reduces the crash speed from 40 miles an hour to 30 miles an hour.

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Alex Leslie: That is a huge, huge savings in terms of your losses. It is a huge savings in terms of…

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Alex Leslie: the person in the car getting injured, and how severe their injury is, and what they have to live with afterwards. So…

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Alex Leslie: I think sometimes we think a lot about crash counts, and crash counts are important, but again, the losses aspect here is…

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Alex Leslie: Maybe more important, frankly, because if you’re able to reduce the severity of that crash, again, that, that is…

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Alex Leslie: That is saving a ton of money and a ton of hardship, again, for the person in that car.

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Alex Leslie: And so, that ends the sort of second half of two, so it ends the presentation, I guess, as a whole. Now…

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Alex Leslie: I’ve got more time. I know we started a little bit late, so probably people have to run, but I have more time here, so I’m happy to answer any questions. I will say as well that, you know, if you like what you hear, consider using that QR code on the right to sign up for Atrie’s contact list.

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Alex Leslie: I promise we don’t spam you, but you’ll be able to see whenever we publish new research or new calls to participate.

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Alex Leslie: The data that you see on these slides only exists because fleets

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Alex Leslie: submitted that data, so we really do rely on the industry support there. As a not-for-profit research org, I can tell you the good news is that you can download the full version of this report and everything else we do at our website, truckingresearch.org.

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Alex Leslie: Also, though, as a not-for-profit research organization, it does mean that we depend on the financial contributions of the industry, so if you find this information useful and valuable, we encourage you to, again, check out becoming an Atri supporter, on the left there as well.

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Bill Dorfner: Well, Alex, I want to thank you so much for your time today. This is… and for doing this research, this is really interesting stuff, and it’s stuff that we… maybe we’re not looking at hard enough in the trucking industry for so long, which is part of the reason why we’re here.

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Bill Dorfner: But yeah, thank you. It’s absolutely fascinating. I do believe you can, download this full report if you go to Patrick’s website.

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Bill Dorfner: It is fascinating. I’ve looked here, and I’ve got all sorts of highlighted lines and things that I’ve pulled from it, so it’s outstanding. I have launched a poll. It’s just a few quick questions. For those of you who are here, if you just wouldn’t mind filling that out, that would be awesome, and I want to thank everybody in attendance today, and for your patience at the beginning. We’ve had things happen before, and

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Bill Dorfner: We appreciate you sticking around. I don’t see any questions, right now, so, but please, reach out to Alex if you have anything else, and if you have any more questions about INFINITI, about our learning management system, or our, in-person safety manager bootcamps.

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Bill Dorfner: I would love to answer your questions as well. So, thank you all so much for tuning in today. Thank you again, Dr. Leslie, for taking all your time, and we’ll…

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Bill Dorfner: See you again soon.

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Alex Leslie: Yeah, my pleasure, and my apologies again for that delay.

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Bill Dorfner: Great device.

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Alex Leslie: figure.

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Bill Dorfner: No worries. Take care, everybody.