Welcome to the NEMT Risk Advisor Blog

Thank you for taking the time to visit my site specifically designed for educating non-emergency transportation business owners on risks that affect your company. Whether you operate several hundred units and have been servicing your community for years or are just getting started with a few units, I'm here to help advise you on further developing your company's risk management program which will, in turn, lower your overall costs of insurance over both the short and long term. Please don't hesitate to contact me with any questions, comments, or feedback. Thanks!


Josh Brownlee
jbrownlee45@gmail.com

Tuesday, October 9, 2012

Get An 18 Month Policy For Less Down Than A 12 Month Policy

Hello to everyone in the non-emergency medical transportation industry.  I apologize that it has been over a year since my last blog update but I have been so busy helping transportation providers solve their commercial insurance problems that time has not allowed for it.  I have so many industry updates to share I do not know where to start but I will begin with a NEMT insurance market update.

NEWS FLASH:  The market is hardening, and quickly!!!

Commercial Auto Insurers Losing Money


 In the last month alone, I have seen:

 -A conditional renewal letter from an extremely large, national insurance carrier stating premium would be increasing 30-40% "due to a general rate increase".

-A letter from an agency that focuses on the NEMT industry to a current client of theirs stating the incumbent carrier is increasing the price from $3,633 per vehicle to $10,161 per vehicle.  They go on to say the renewal quote is the best they can obtain and suggest they "try on your own to obtain a better quote".

-Numerous non-renewals letters coast to coast


The commercial property and casualty insurance market is very cyclical.  This means that there are periods that the market is very hard (increased pricing, less aggressive in regards to class of business, less risk tolerance for insurance carriers) and very soft (reduced pricing, extremely aggressive underwriting).  Over nearly the last decade, the insurance market conditions have been extremely soft and standard carriers have been writing classes of business and particular industries in which are normally written through the excess and surplus markets.  Historically, the transportation industry has led the way in the form of being the "canary in the coal mine" evidencing the market turning from soft to hard.  There are many reasons for this but a major one is the risk for high severity loss.  For example, if a three unit non-emergency medical transportation company pays a total of $10,000 on their auto liability and has an at-fault accident where a client they are transporting is severely injured, that policy could pay out hundreds of thousands of dollars.

With the increased tightening of margins for the NEMT industry shrinking due to macro factors such as medicaid funding, increased gas prices, and the like, drivers and companies are rushing to get as many trips completed as possible completed a day.  This results in less of a focus on safe practices which lead to a higher number of incidents.  Higher frequency always leads to increased severity.  Sooner or later, one of those accidents will be significant in regards to liability facing the company.  If an insurance company writes the policy described above and that company has a $500,000 loss, to get back to being profitable, the carrier would need to underwrite 99 other policies exactly like that one and not incur even one more claim.  Insurance companies need for their policies to generate no more than a 50% loss ratio in order for them to be profitable on the account.  The other 40-45% or so of premium goes towards paying underwriter salaries, claims adjusters, rent, the light bill, taxes, and other costs of doing business.  This leaves 5-10% for the company to generate a profit.  So for every aforementioned $500,000, insurance companies need to generate $1,000,000 in premium.  Otherwise, they will be unprofitable in that class of business which they will then cease to underwriter or demand large increases in premium at renewal.  This is now occurring in the NEMT sector.

Like I mentioned above, the market is changing and quickly!  Sovereign Risk Solutions saw the tide begin to turn earlier this year and began discussing the ability to write longer term, 18 month policies in order to lock in rates before the market further hardens in the coming weeks, months, and years.  I am proud to say that we were able to accomplish this AND we negotiated the down payment on these 18 month policies to be a mere 10%, which is the same down payment amount (it is actually cheaper due to the additional insured cost being the same) as the 15% down payment option that is currently available on 12 month policies.  To that end, we also have a program in place, if your company qualifies, that allows for ZERO down payment.  Due to Form E filing requirements, this puts insurance companies and finance companies in credit negative positions but due to the outstanding relationships we have built with day to day interactions, we were able to push this through on our clients behalf.

The 18 month policy with a 10% down payment is only one of the many value added services we have been working on behind the scenes.  Much, much more is just over the horizon and I look forward to sharing them with you as things are finalized in due time.  Should you have any questions or want to discuss your current insurance program and how we can help you improve your bottom line, please don't hesitate to reach out to me via email: jbrownlee@sovrisk.com or phone: 678-996-3418.