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Truck Insurance Rating Criteria

In the past, understanding your commercial truck insurance rate was relatively simple. There were only a handful of criteria that would predicate your rate, including: experience, driving record, location of business, and loss ratio (calculated by how much you paid in premium and how much was paid in losses). Today, rating is almost impossible to predict, even for a seasoned commercial truck insurance broker. Before we highlight how DOT ratings will affect your insurance renewal, we should take a quick look at the tools the Department of Insurance allows insurance companies to use for commercial trucks. (This article we will focus on California exclusively, although much of this will be similar or the same for other states.)

First, credit is one of the largest indicators of premium on more than half of the carriers in California today. That’s right, your credit score could give you up to a 20% discount or 20% surcharge, which is up to a 40% swing in premium, simply based on how you pay your bills. For many carriers, this is the largest single adjustment to premium. Statistics show that if you have higher credit rating, you are less likely to have claims. Second, years in business and driving experience are also tools that the insurance companies use to determine risk. Businesses that have been operating more than three years generally have the experience necessary to know what risks and pitfalls to avoid on the road.

Third, your loss ratio, which refers to both the frequency of reported incidents, as well as how much the insurance company paid out for claims, is another tool insurance companies use. In today’s challenging market conditions, you may find it difficult to get insurance – even if your loss ratio is good, but you have several incidents that have been reported. Fourth, as you likely already know, your driving record affects your insurance premiums, both on your personal and commercial insurance.

Fifth, your DOT scoring is rated very heavily. Although many carriers have been using the public information collected and reported by DOT inspections on SAFER (Safety and Fitness Electronic Records System) and FMCSA (Federal Motor Carrier Safety Administration) for years, many carriers are more actively utilizing this data. Third-party carriers, such as CAB, take the data available from SAFER and other sites, and then publish it in condensed, easy-to-read reports for insurance carriers. This allows insurance companies to track vehicle inspections more easily, whether those trucks were scheduled at the time of the inspections, and the severity of any violations. From this information, they can generate their ideal profile based on driver habits.

With the new federal mandate on telematics devices in commercial trucks becoming effective next year, the information gleaned will give the insurance carriers more insight into your trucking business operations, as much of this mileage data will be collected and sold to the insurance carriers.

There are many more factors involved in determining rating, and all of them vary depending on the truck insurance carrier. Last year, Progressive Insurance Company implemented DOT ratings nationwide on all for-hire transportation risks. Progressive is the largest commercial insurer in the country, and many other carriers will follow suit. So, prepare yourself and your company for these industry changes, and pay close attention to your DOT ratings and violations, as they are already having a heavy impact on your premium.