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The truth about insurance premiums

November 1, 2003 By    

At my last association presentation, one of the attendees had the following double question: “What’s going on with insurance premiums, and what can we do about it?”

Great questions.

First of all, I would urge everyone to get a copy of the National Propane Gas Association’s Insurance Task Force white paper. You can access this information by going to www.npga.org or request a copy from your association executive director.

Secondly, I would recommend you find the March 2003 issue of LP Gas Magazine (online at www.lpgasmagazine.com) or go to www.thesafetyleader.com, click on Wisdom Shared, then Articles, then articles in LP Gas Magazine. Scroll down to the March 1, 2003, article titled “Insurance Alternatives Under Study.”

I hate to give you homework, but I feel this information is important for you to absorb and understand as a base from which to evaluate your insurance situation.
That said, here are the highlights:

  • From the mid-1980s until 2000 insurance premiums gradually fell to a level where insurance companies were not making money.
  • When 9/11 happened, insurance companies were put under even great strain from claims, and their cost of product – called re-insurance – skyrocketed.
  • Plaintiff’s attorneys have become aggressive in pursuing negligence allegations regarding customer communication, service work documentation and employee training. This makes it imperative that you adhere to codes, guidelines, loss control recommendations and employee training that qualifies their workmanship.
  • Defending a baseless allegation can cost $50,000 to $100,000.
  • Insurance premiums are finally achieving rates that are similar to those in 1985.
  • While some insurance carriers have pulled out of certain states or the market altogether, many new programs have come available in the past few months.
  • From mom-and-pops to large independent operations, the size, scope and loss history of your company can determine which insurance company fits your situation.
  • Certain states have a “blame the money” court system, and fewer insurance companies want to do business there until tort reform is both legislated and put into practice.
  • To understand your true costs in relation to your exposure, take your business, auto, general liability and workers’ compensation premiums and add them up. Now divide that number by your total number of gallons. When you understand your cost per gallon, it will be easy to relate to percentage against required margins and necessary pricing to offset this specific cost.
  • I see premiums leveling off in 2004. I believe competition will be created in the free market system and keep future pricing in control.
  • Right now your company must teach, train and sell safety like the devil is chasing you … because he is, and he looks like a plaintiff attorney.As a propane marketer, you are in a great business. You have a great product, and I believe development of future demands and uses will facilitate great opportunities for growth.
    That said, I believe you must own the dog, so to speak, when it comes to your own customer communications, service work documentation and comprehensive employee training.You store, transport and distribute a hazardous material and are under the jurisdiction guidelines of DOT, NFPA and OSHA. You spend an average of $10,000 to train a driver who daily gets into a $100,000 truck carrying a $1 million insurance limit. The drivers and your service employees have another $1 million limit in their toolbox, plus your umbrella.

    When you look at it this way, there is no such thing as cheap insurance. But those costs can only be controlled through the practice of being safe.

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