Will I Save Money on Insurance?
The propane business has changed in the past 20 years. In the past a bobtail driver left the yard he wasn’t seen again until his truck was empty or he had finished his route. Now technology provides the owner with a GPS device that allows the owner to lower fuel bills, increase productivity, reduce overtime and billing errors, and stop unauthorized vehicle use. All are cost savings to the company. The question is will it save money on insurance?
The long and short of it is No and Yes. The insurance industry will not immediately lower your insurance premiums if you put GPS units in your truck fleet. There are no credits available in commercial insurance for a company having GPS in their trucks. However, when the insurance company underwriter is reviewing your account and is looking to see if your company is “one of the best”, the installation of GPS units is one of the many risk management tools that influence the final pricing.
Underwriters have several mechanisms that they use to price an account. The loss ratio is a big consideration when applying scheduled credits, but the information on the supplemental applications plays a big part when it comes to discretionary credits. The addition of GPS to the truck fleet shows management’s commitment to a safety culture and will undoubtedly bring favorable pricing consideration.
The immediate reduction in insurance costs comes about with the ability of management to monitor the speed, reduce the number of units on the road, prioritize routes, and greater utilization of time management with drivers. The ability to monitor a vehicles speed will pinpoint unsafe drivers. If the drivers know that management is watching them, that fact should help them to pay closer attention to their driving. GPS can help to prevent accidents and reduce the number of units over the road. Those factors lower the loss ratio, which ultimately saves money on insurance over the long term.
There are other immediate benefits that reduce insurance costs. Recently, one of our fuel distributors had a situation where a transport loaded 9,500 gallons of gasoline at the terminal. When the driver arrived at his destination, he was short 1,675 gallons and could not explain the shortage. The price of the fuel was around $4.00 per gallon and the loss of product would have cost the distributor $6,700. The company had recently installed a GPS monitoring system on the trucks. A replay of the day’s activity for the truck showed an unauthorized 20 minute stop at a construction company. The owner used Google Earth Map to get the exact location, called the state police and made a visit to the contractor, who promptly paid the invoice in lieu of going to jail. The driver was terminated. The GPS reduced Employee Dishonesty exposures that once again kept the overall company loss ratio in a favorable position.
Regarding Workers’ Compensation, we have seen that the implementation of GPS units has increased individual and fleet productivity by reducing inefficiencies and redundant routes. This has a direct reflection on your workers’ compensation premium by reducing payroll.
If you invest in a GPS system for your company you will not receive an endorsement for adding the units. What you will get is favorable underwriting, applied scheduled credits, reduction in workers’ compensation payroll, long term risk management of your loss ratio, and increased marketability to insurance companies.
My advice to those propane marketers who are considering a GPS monitoring system is to check the various companies offering their product and find one that meets your company’s needs. The GPS system will save you money on insurance in the long run.
by Frank B. Thompson, CPCU
President PT Risk Management