Controlling Auto Insurance Costs for Plumbers and HVAC Contractors

Author, Matt Gorham, Account Executive, Rancho Mesa Insurance Services, Inc.

Like most businesses, vehicles are an essential part of a plumbing or HVAC contractor’s operations. Whether the focus of their business is service and repair, tenant improvements, installation, or new construction, company leaders depend on trucks, vans, and cars to get their people, equipment, and materials safely to the jobsite.

Unfortunately, the cost to insure those vehicles has increased dramatically over recent years and there appears to be no imminent sign that trend will change.

According to AM Best, the U.S. commercial auto insurance segment sustained a $5 billion net loss in 2023. While it is still too early to know how the auto segment performed in 2024, early indications from the first half of the year showed further deterioration, marking the 12th straight year of net underwriting losses for auto insurers.

There are multiple reasons for the increase in auto losses. Distracted driving is contributing to an increase in the frequency of automobile accidents, while social inflation and third party litigation funding are amplifying the severity of associated losses. As all of these causes will continue to negatively affect the auto insurance marketplace broadly, avoiding auto accidents becomes increasingly more important for individual companies in controlling auto insurance costs.

While there are many factors that can lead to an auto accident, businesses can benefit from focusing on those within their control. Implementing or enhancing a fleet safety program with clear, actionable policies will better equip drivers to avoid accidents. Consider how your fleet safety program handles the following:

• Driver selection, qualification, and performance management. Establish clear written guidelines on who is eligible to drive and how their driving performance is evaluated. This may include policies such as requiring an applicant to provide their motor vehicle record as part of the interview or hiring process, participation in the Employer DMV Pull Notice program, incentives for safe driving, and responses to unsafe driving practices, near misses, tickets, or at fault accidents.

• Safety rules, vehicle use, and operating procedures. Define how and when drivers are allowed to operate vehicles. This should include policies that address use of cell phones and hands-free devices, impaired driving, personal use of company vehicles, company use of personal vehicles, passengers, seatbelt use, and speeding, among others.

• Driver training. Provide ongoing training for employees to understand their responsibilities as drivers and the risks that are present on the road. This could include in-person or video trainings that discuss topics like defensive driving, distracted driving, safe following distance, and driving in inclement weather. Having potential drivers successfully complete an in-person driving test in a controlled environment before getting on the road, as well as annual driving tests can also help reduce the likelihood of an accident.

  Learning management systems like Rancho Mesa’s proprietary SafetyOne™ platform can offer effective and convenient online trainings to ensure your drivers are knowledgeable and well equipped to drive for your company.

• Vehicle maintenance and inspection. Schedule and document routine maintenance tasks like oil changes, tire rotations, and brake inspections to help keep vehicles running smoothly. Implementing a daily vehicle inspection for items like active turn signals, working headlights and brake lights, and tire pressure reinforces the importance of safety to your drivers, while also proactively minimizing the risk of a dangerous maintenance issue that could lead to an accident.

Providing an easy way for your drivers to document and report their daily vehicle inspections and maintenance issues can increase the likelihood of compliance. Try one of our QR code-enabled Driver Vehicle Inspection Report (DVIR) to see just how simple it can be to document and report mechanical or safety issues with your fleet.

In addition to a robust fleet safety program, there are other tools and strategies that can be leveraged to provide savings in a challenging insurance marketplace, without sacrificing coverage.

To discuss these tools and strategies or for a complimentary review of your current fleet safety program and insurance program, contact me at (619) 486-6554 or mgorham@ranchomesa.com.

Optimizing Landscapers’ Commercial Auto Insurance

Author, Drew Garcia, Vice President of the Landscape Group, Rancho Mesa Insurance Services, Inc.

Lawn and landscape professionals across the country have seen the direct impact of a very difficult and challenging commercial auto market. In particular, green industry businesses who specialize in service and maintenance, which require a larger fleet, have felt more of the direct market pressure.

In general, large employers (due to their economies of scale), have always been able to navigate tough market conditions by taking on more upfront risk via large deductibles or self-insured retentions in exchange for an upfront premium savings. These businesses are then able to reinvest those funds back into their businesses to better manage and mitigate risk. Like the large employers, there are options for mid-sized employers to optimize their auto insurance.   

Rancho Mesa’s focus on the middle market segment of the green industry (which has a rough annualized property and casualty premium between $200,000 and $1,500,000) has led our team to critically take on this challenge and come up with solutions.

As a result of this focus, I recently was invited to present a webinar in conjunction with Wilson360 addressing the contributing factors to the rising costs of commercial auto insurance and some solutions.  I discuss:

• Why commercial auto insurance costs continue to increase

• How to baseline your premium to help track premium fluctuation

• Indicators to track and reduce claim frequency

• Things to consider when optimizing your commercial auto policy

Fortunately, this webinar is now available to everyone. Register to watch the webinar.

View Webinar

Controlling the Rising Cost of Commercial Auto Insurance for Landscape Professionals

To discuss how to optimize your company’s commercial insurance, contact me at (619) 937-0200 or drewgarcia@ranchomesa.com.

Signs of a Continued Hard Property Market in 2023

Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.

The property insurance marketplace continues to be a challenging segment in 2023. With catastrophic events that have occurred over the last several years such as hurricanes, floods, wild fires, and major storms, the property marketplace has taken a huge hit that will take many years to recover. As a result, we expect property pricing to continue increasing for the foreseeable future. There are several real-world examples of the property market hardening.

Insurance carriers are paying much more attention to the geographic diversity in their portfolios. In many cases, insurance companies are pulling out of areas of concern, such as wild fire or flood prone areas. More and more policyholders are receiving non-renewal notices as insurance carriers expand their hazard zones. This also has an adverse effect on those seeking property coverage because it limits the number of insurance carrier options.

Underwriters are also beginning to pay closer attention to the condition of the properties they currently insure or plan to insure. In the commercial property segment, loss control visits are becoming more frequent for buildings of all sizes. Loss control specialists will focus their attention on the state of the buildings, and the status of building updates such as electrical, plumbing, roofing, etc. More specifically, loss control specialists are even analyzing the age and brand of electrical panels. There is one brand of electrical panels called Zinsco that experts recommend replacing immediately due to fire hazard. Therefore, if a building is still equipped with a Zinsco panel, it is likely that these panels will need to be replaced before an insurance company will be comfortable providing terms and pricing.

Another sign of the deteriorating property market includes the recent announcement that California Insurance Commissioner Lara will increase the FAIR Plan coverage limit for commercial buildings from $8.4 million to $20 million. This is a direct result of insurance companies pulling out of areas that are deemed high hazard. This limits the number of insurance companies available to write property policies in these areas and in some cases there are no options at all. Therefore, in the case of a commercial building owner who has exhausted all options, they could fall back on the FAIR plan to secure coverage.

To combat these rapid changes within the property market, it is critical to meet with your broker and review each policy in detail. Discuss those areas that could be impacted, look at increasing values, additional safety measures and controls, make sure your coinsurance percentage is still in line with rising costs. Being proactive and looking closely at how you can perhaps upgrade your building with cost effective loss control measures could be the difference in securing a competitive quote.

To discuss your property coverage, contact me at (619) 937-0174 or via email jhoolihan@ranchomesa.com.

The Importance of a Job Hazard Analysis in the Janitorial Industry

Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.

The janitorial industry faces job hazards on a daily basis. The key to running a successful and safe business is identifying hazards within the workplace well before injuries or liabilities can occur. One way to keep track and address hazards in the workplace is by creating a Job Hazard Analysis (JHA). A JHA can be used to identify individual exposures to each specific jobsite and create a plan or solution to minimize these risks.

For the janitorial industry, there are several common exposures and solutions JHAs should be used to address.

Bloodborne Pathogens

While this exposure is more prevalent in a medical or healthcare setting, it is important to train employees on OSHA’s bloodborne pathogen standards.  Whether an employee works within a healthcare setting or not, there is always the possibility that they will have to face a situation where blood is present.  Proper education on how to address this exposure can help minimize and prevent the transmission of any infectious disease.

Chemical Hazards

Examples of chemical hazards janitors could face in the workplace include carbon monoxide poisoning, lead poisoning, asbestos, and mold to name a few.  Identifying these hazards in advance and putting a plan in place to avoid these exposures will lead to fewer injuries.

Cleaning Chemicals

Within the JHA, identifying which chemicals are going to be used is critical to job safety. Training employees on the proper use of these chemicals can avoid mistakes made such as improper dilution, improper mixing of products causing a chemical reaction, and improper ventilation.

Slip & Falls

Slip and fall injuries are very common in the janitorial industry for both employees and the general public. A properly used JHA can help identify high hazard areas within the jobsite and put together a plan to help minimize and avoid future injuries. Examples of areas of concern include high traffic areas, areas with slippery surfaces, areas where water tends to settle (i.e., bathroom floors, kitchens, etc.), and entrances to buildings. Once these areas are identified, it’s critical to address the issue by using caution cones, cleaning during off hours when possible, using floor mats whenever possible, and regularly monitoring these areas if a clean-up is necessary.

Personal Protective Equipment

While surveying a jobsite to determine which cleaning products and equipment will be used, it’s also important to identify what type of personal protective equipment (PPE) will be needed. Examples include proper eye, face, and hand protection while using certain chemicals and equipment. A well-executed JHA can identify which PPE is appropriate for the jobsite. However, the key is making sure that the employees are all properly trained in the use of the PPE and that implementation is mandatory.

Equipment

A JHA can assist with identifying equipment appropriate for a jobsite. Once the equipment has been chosen, proper training is vital to ensure proper use and maintenance.

Janitor’s face a number of jobsite hazards throughout their work day which is cause for concern. By developing a job hazard analysis, employers can develop techniques and procedures for avoiding hazards and injuries. 

If you would like to discuss the resources Rancho Mesa Insurance has in assisting with developing a JHA, please reach out to me at (619) 937-0174 or jhoolhan@ranchomesa.com. 

Auto Insurance Carriers Struggle With Effects of Inflation

Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.

Inflation continues to plague our nation with no end in sight. With a consumer price index (CPI) reaching as high as 9.1% in July of 2022, the trickledown effect is far reaching. In the second quarter of 2022, the auto insurance marketplace saw a loss ratio of 78.4%. This is quite a spike compared to the average loss ratio of 65% between the years of 2016-2020. Inflation is not the only contributing factor to the challenges within the auto insurance marketplace; we’ll discuss medical inflation, supply chain shortages, and labor shortages.

A continual rise in medical inflation has resulted in the increased cost of treating injured drivers and passengers. Since 2020, healthcare spending has increased by 9.7%. In the first quarter of 2022, the average bodily injury claim was up 24.2% with medical inflation being a significant factor. Because insurance companies are having to pay more due to medical inflation, consumers are seeing increased premiums.    

Also, in the first quarter of 2022, the average collision claim cost reached a record of $5,743. This is a 36.5% increase since the first quarter of 2020. Much of this increase can be attributed to supply chain shortages and disruptions.

COVID-19 shutdowns caused decreasing demand for good and products. There was also an ice storm in February of 2021 that knocked out factories across the South. The Suez Canal was blocked for six days, and there was a semiconductor shortage due to the United States’ reliance on companies overseas.

Now that things have opened up post-pandemic, there are still shortages of available parts and supplies which continues to affect our economy. These supply chain factors have contributed to the average cost of a new car increasing 11.4% and the average used car jumping 7.1%. With the costs of cars increasing and the shortage of available parts, the result is a huge uptick in the cost of repairs and/or replacement of damaged vehicles, as well as the insurance costs.

Labor shortages are another important factor impacting the auto insurance marketplace. Simply put, the shortage has made it difficult to find skilled workers to make vehicle repairs. While the unemployment rate is back to pre-pandemic rates, many people are still testing the waters as they return to their jobs and, in some cases, taking completely different career paths. With the increased demand for workers, employers are offering and paying higher wages, which also leads to higher costs for goods and services, which further increases overall insurance costs.

As auto insurance premiums continue skyrocketing as a result of these inflationary factors, now is the time to focus on improving your business’ auto program. 

For help in developing a Fleet Safety Program that will improve your company’s risk profile and policies and procedures, please feel free to reach out to me at (619) 937-0174 or jhoolihan@ranchomesa.com.

How COVID-19 Might Create a Non-Owned Auto Liability Gap

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

As landscape businesses continue to adapt operating protocol due to COVID-19, they may also be creating new risk. Newly formed “work from home” policies for the office staff and direct reporting to job sites for workers in the field can create more of a non-owned auto liability exposure.   

In the event someone is using their personal vehicle for the benefit of the company and were to be involved in an accident, the liability might fall partially or completely on the employer. A non-owned vehicle is not owned, leased, rented, hired, or borrowed by the company.

In order to ensure you have non-owned auto liability, you would want to confirm that you have symbol 9 under the liability portion of your Commercial Auto Insurance Liability Policy, found in the declarations page. You should confirm that you have non-owned liability coverage with your insurance agent, broker, or carrier.

Your company should establish driver qualification requirements that must be maintained and met for each driver. It is best practices that you run motor vehicle reports annually, at minimum, for all drivers including those with non-owned driving exposure. For those states where it’s available, contact the Department of Motor Vehicles and inquire about a Pull Program where they’ll notify you of any violation on any driver that you have set up in the program. It is also best practices to have those employees who drive non-owned company vehicles for business use to increase their personal auto policy limits at minimum to $100,000 per person, $300,000 per occurrence and $100,000 property damage. If using a combined single limit, $300,000 should be required at minimum.

Access our  free written fleet safety program. 

Ensure You’re Not Under Covered and Overpaying for Auto Insurance

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Auto insurance prices are continuously rising. What is the reason for this and what can be done to cut back on the cost? There are many factors that lead to the carriers needing to increase their rates. We are going to discuss exactly what some of the reasons for the increases are; and more importantly, what business owners can do to offset price increase as much as possible while receiving adequate coverage.

Distracted drivers are causing more claims every year. Repairing a vehicle has become more costly as newer models have technology features such as sensors and back-up cameras. People using their cell phones while driving can cause them to have a diminished reaction time, which is leading to more severe high impact accidents. This is pushing medical costs up at a rapid rate, leading to an increase of claims dollars. Implementing a “No Phones While in a Vehicle” policy could reduce claims drastically and keep your employees safe.

There are many ways that carriers can get out of covering a loss, and employees driving their vehicles to and from job sites can really come back to haunt you if they do not have adequate coverage limits. Make sure that you have Hired and Non-Owned Coverage! Hired and Non-Owned is the coverage needed for the carrier to cover losses on vehicles that are not on the company’s policy, such as rented or employee owned vehicles. Employers need to make sure that employees have adequate personal auto insurance limits. The California minimum coverage limits of $15,000/$30,000/$5,000 can get exhausted very quickly in a serious accident, and lawyers are getting very good at finding grey areas to drag the employer in. You should consider reimbursing your employees to offset the increase in premium for them. Some carriers will apply subjective credits to your company auto premium if they know your employees need to have higher limits to drive for you.

One of the biggest gaps that brokers see when they audit policies for prospects is they are using the wrong symbols, thinking they are covered for a claim, and end up not having correct coverage. Most reputable carriers will offer Symbol 1 for your liability insurance and it is imperative that you use Symbol 1 vs. Symbol 7. Symbol 7 only covers vehicles described in the declaration and leaves limited coverage for vehicles acquired after your policy begins.

Rancho Mesa Insurance Services is a National Best Practices Agency 13 years in a row. We strive to make sure that our clients are without gaps in their coverage. Call (619) 934-0164 to ask about Rancho Mesa’s proprietary programs that help maintain clients’ safety and get them the lowest premiums possible. Register here for the free Fleet Safety webinar to learn how to increase vehicle safety, control vehicle accidents, safeguard long-term profitability, and ensure that your fleet safety & accident prevention programs are up-to-date.

Distracted Driving, Not Just an Automobile Insurance Issue, Bad News for Workers Compensation Too

Author, David J Garcia, A.A.I, CRIS, President, Rancho Mesa Insurance Services, Inc.

I’ve written at length on the negative effects distracted driving is having on the automobile insurance industry and its impact on the rise in accidents, claim costs, and increases to your automobile premiums. But, have you considered its effects on your Experience Modification Rate (EMR) and ultimately workers’ compensation cost?

When one of your employees is injured in an automobile accident while working on your behalf, Arising out of Employment (AOE) / Course of Employment(COE) their sustained injury will be covered by your workers’ compensation policy, regardless of fault.

“Regardless of fault?!”

When a third party is deemed at fault and the injuries to your employee(s) have been settled, your workers’ compensation insurance carrier may “subrogate” their costs to the carrier representing the at fault driver. Now, here is the realty – studies have shown that 14.7% (4.1 million) of all California drivers are uninsured, while another large percentage of drivers hold the California minimum limits of $15,000/$30,000. What this means is that even if subrogation is a possibility, the likelihood of a “full” recovery is not probable. Thus, all the costs of the injury to your employee(s) will likely be the sole responsibility of your workers’ compensation carrier and this claim cost negatively affects your EMR and loss ratios for years to come.

What can you do?

You can implement a strong fleet safety program that includes a policy pertaining to distracted driving. When your employee is involved in a motor vehicle accident, adherence to your company’s accident investigation protocol is crucial. Documentation will prove pivotal for your carrier if subrogation becomes a possibility.

For our clients, through RM365 Advantage, we have a number of resources: fleet safety programs that can be customized, fleet safety training topics, fillable and printable accident investigation forms, archived fleet safety workshop videos, and more, in both English and Spanish. You can access this through our RM365 Advantage Risk Management Center or contact our Client Services Coordinator Alyssa Burley at aburley@ranchomesa.com.

If you are not a current client of Rancho Mesa, we encourage you to reach out to your broker for assistance or email Alyssa Burley to get additional information or to ask any questions.

Uninsured and Underinsured Motorists Coverage - Are Your Limits Adequate? - Be Careful!

Author, David J. Garcia, A.A.I., CRIS, Rancho Mesa Insurance Services, Inc.

Earlier in the year, we published the article "Commercial Auto Premiums Are Rising - What’s Driving the Increases?," which addresses how insurance companies are all experiencing adverse loss experience within their commercial automobile books of business. The result of these mounting losses is causing a dramatic rise in commercial Auto premiums for most policyholders.

As a result of this trend, we are seeing many carriers and brokers reducing coverage limits and terms on certain lines of automobile coverage. This represents a major concern for any business owner that has any size fleet of vehicles. Reducing limits and/or modifying terms of coverage simply transfers more claim exposure directly to the business owner. And, unfortunately, in many cases, business owners are unaware of the change or ill informed. 

One specific line of coverage that we are seeing this occur, and creates great concern, is uninsured/underinsured motorist coverage. The number of uninsured motorists nationwide is alarming and here in California there are between 3.6 million and 4.1 million uninsured drivers, or 14.7 percent of all drivers. Additionally, the minimum limit of insurance in California is only $15,000. So, while many motorists may have insurance, they are woefully “underinsured.”   These factors pose potential catastrophic exposures to any business. To illustrate this point, we will briefly define these coverage’s and then look further into how these lower limits of coverage terms may impact the health of your business.

Uninsured Motorists Coverage

Uninsured Motorist Coverage (UM) helps pay your, your employees and your passenger’s medical expenses, lost wages and related property damages if you're in an accident caused by a driver who doesn't have liability insurance.

Underinsured Motorist Coverage

Underinsured Motorist Coverage (UIM) helps pay your, your employees and your passenger’s  medical expenses, lost wages, and related property damages, if any of you are hurt in a car accident caused by someone with liability insurance, but whose coverage limits are lower than those you choose for this coverage, and aren't high enough to pay the damages.

Best practices suggests anything less than $1,000,000 limit for uninsured/underinsured coverage is inadequate and puts the business at extreme financial risk. Let me explain by sharing just two, of many real-world, examples of how this could occur. The following examples assume the accident is the fault of an uninsured or underinsured driver:

Example 1. If one of your employees is involved in an automobile accident by either an uninsured or underinsured motorist and it involved the use of a vehicle for business purposes, the resulting medical and indemnity costs would be covered under your company’s workers' compensation policy. Two negative consequences to your overall insurance program develop as a result of this incident. First, your workers' compensation claims experience (loss ratio and EMR) will be negatively impacted. Second, since the “at fault” driver is either uninsured or underinsured, subrogation (or the recovery of the claim dollars from the responsible party) is ruled out as a viable option to your workers' compensation carrier. 

Therefore, the auto loss described above would not only negatively affect your auto insurance experience but also your workers' compensation experience, as well. By having a minimum of $1,000,000 UM/UIM limits, you would have allowed you workers' compensation carrier to subrogate the costs of the claim to the auto carrier and thereby reduce the impact to your workers' compensation loss ratio and EMR

Example 2. Let’s assume you have a non-employee in the vehicle and they are involved in an accident involving an uninsured/underinsured motorist and they are injured. Since this is a non-employee, their injuries would not be eligible for coverage under your workers' compensation policy and rest solely on your automobile insurance limits and coverages. Thus, these injuries, once the uninsured/underinsured limit of your automobile policy is exhausted, would become the responsibility of the business. By having a minimum of $1,000,000 UM/UIM limits, you would fill the gap created by the uninsured/underinsured motorist's lack of coverage and protect your business from this catastrophic loss.

These examples have only touched on the medical and indemnity portion of the loss. Consider there may be property damage involved as well, which only further increases the potential of out of pocket expenses a business might be responsible for paying. Additionally, keep in mind that any excess liability policy you may have in place does not cover uninsured/underinsured motorist claims.

In summary we recommend that you review your coverage limits and terms for adequacy concerning these critical coverages. At a minimum, you should have a limit of no less than a $1,000,000 for these coverages. The premium savings by lowering this limit or modifying its coverage terms is insignificant to the catastrophic loss you are exposing your business to. Do not allow one terrible incident to take your business from you when the cost to transfer this risk is marginal.

If you have any questions or need help in accessing your exposures, please call our Rancho Mesa Team. We offer full policy audits as part of our RM365 Advantage Program that helps you to identify any gaps in coverage and provide you with Best Practices risk management recommendations.