Details of a trucking company’s financial bottom line and safety records are critical to their success when self-insuring their fleets.
The trucking business, like many others around the country, has been hampered by high fuel prices and a deteriorating economy. Even fuel surcharges aren’t enough to offset the rising expense of diesel for those motor carriers wanting to cut expenditures. Obtaining certification from the Federal Motor Carrier and Safety Administration to self-insure a fleet could be one method for a struggling trucking firm to save money on insurance premiums.
By self-insuring, a trucking firm can save money on standard insurance by avoiding the collateral requirements that come with a high-deductible policy. They’ll also have more control over how claims are handled, which will help them keep expenses down. It’s also worth noting that, while some industry professionals consider self-insurance to be a realistic alternative, it’s not for everyone.
According to some transportation brokers, midsize trucking companies with fleets of 500 to 1,500 trucks may have a difficult time demonstrating that they are financially capable of self-insuring the first $1 million in liability limits, which is the FMCSA’s usual requirement. And motor carriers with fewer than 500 units, which make up the majority of the trucking industry in the United States, rarely consider self-insurance.
“It’s not unexpected that the larger motor carriers can put together a better package to meet the standards,” said Jeff Toole, a transportation attorney with Scopelitis, Garvin, Light, Hanson & Feary L.P. in Indianapolis. “Larger carriers have more resources and risk management systems to draw from. As a result, the criterion for gaining approval is self-filtering in some ways.”
To be approved for self-insurance, a motor carrier must provide a “true and accurate statement of its financial condition and other evidence that establishes to the satisfaction of the FMCSA the ability of the motor carrier to satisfy the obligation for bodily injury liability, property damage liability, or cargo liability,” according to FMCSA guidelines. In addition, the motor carrier must give statistics on claims and losses, as well as information on risk management programs and safety records.
Liability limits for conventional items are typically $1 million and $5 million for hazardous materials. Excess insurance can be obtained to cover the gap between the self-insured limit and the self-insured limit.
According to Mr. Toole, the approval procedure can take as little as 90 days or as long as nearly two years. Because the application will be scrutinized closely, the key, he said, is to submit the material in an organized and accurate manner.
Mr. Toole explained, “You need to be able to show your tangible net worth.” “The FMCSA is quite interested in that, for obvious reasons: the FMCSA does not want to be concerned about a company’s ability to pay claims.”
After years of working with a high-deductible program, Stan McDaniel, director of risk management for Arkansas Best Corp., a trucking company with more than 4,000 trucks, said the decision to become a self-insured motor carrier in 1992 was a way to simplify the company’s insurance program and provide more flexibility.
Mr. McDaniel, who is headquartered in Arkansas Best’s corporate offices in Fort Smith, Ark., said, “After years of putting up annual letters of credit, we determined that there was a way that we could avoid that collateral.”
The main reason motor carriers choose to self-insure is to avoid the collateral requirements of private insurers, according to Al Howze, director of broking for Aon Corp.’s trucking business in Little Rock, Ark.
“Letters of credit deplete a company’s credit line, and as those letters of credit accumulate over time, those companies understand there’s a lot of collateral out there,” Mr. Howze explained.
Despite amassing large amounts of collateral, he claims that some trucking companies cannot afford to self-insure. The FMCSA reported that there were 692,997 active interstate truck and bus businesses eligible for self-insurance certification in 2006.
“In terms of motor carriers that participate in the scheme, the list is short,” Mr. Howze added. “The top 100 to 150 corporations are most likely on the list. The top-tier trucking companies, the largest carriers, are frequently approved for self-insurance.”
While middle-tier motor carriers may not have the robust balance sheets they did a few years ago that would allow them to self-insure, a soft insurance market is still a bright light for them, according to Kevin McCarron, senior vp of Willis of Michigan Inc.’s transportation practice.
“Right now, the only thing motor carriers can be thankful for is a quiet insurance market,” Mr. McCarron said from his Novi, Mich. office. “A hard market would normally allow a motor carrier to engage in some sort of self-insurance, but a hard market may sadly force some midmarket transportation organizations out of business,” says the report.
Are trucking companies self-insured?
Following an accident with another vehicle, you typically work with an insurance company to achieve a settlement that includes the expenses of repairing your vehicle as well as any medical expenditures you may have received as a result of the accident. Except in circumstances when the semi-truck is owned by a corporation that insures itself, the procedure is the same for incidents involving commercial vehicles.
Insurance Requirements for Trucking Companies
Insurance is a significant element of the expense of running a trucking company. The Federal Motor Carrier Safety Administration (FMCSA) is the federal agency in charge of overseeing commercial trucks and buses. Trucking businesses must maintain a certain amount of “financial responsibility,” or insurance, according to their standards, to ensure that they can cover costs of damage to their trucks, the freight put on their trucks, and injuries experienced by truck drivers or other vehicles. This necessitates the purchase of liability insurance, which covers both bodily harm and property damage. The amount required is determined on the size and type of load carried by a truck. Consider the following scenario:
- Vehicles transporting 10,001 pounds or more of non-hazardous commodities must have a minimum liability limit of $750,000.
- Vehicles transporting 10,001 pounds or more of oil, hazardous waste, or other potentially hazardous materials must have a minimum liability limit of one million dollars.
- Vehicles transporting hazardous items weighing 10,001 pounds or more must have a minimum liability limit of $5,000,000.
- Vehicles transporting less than 10,000 pounds of very hazardous waste or radioactive materials must have a minimum limit of $5,000,000.
These are the bare minimums required to comply with FMCSA. Other insurance charges may apply, based on state legislation or the unique restrictions of the shippers and brokers who deal with these businesses.
Why a Trucking Company Chooses to Self-Insure
The FMCSA allows trucking companies to self-insure in order to save money. The trucking company can pay for its own general liability insurance rather than purchasing it from an insurance agency. This option is appropriate for larger firms with more resources; these organizations can choose a high deductible, which allows them to pay less for insurance. They wouldn’t have to give any collateral or letters of credit to an insurance firm, which would save them even more money.
However, not all companies’ cost-cutting measures are honorable. These enterprises can hire novice drivers and pay them less because they are not obligated to an insurance carrier. Employees with years of expertise and a clean driving record, demonstrating their ability to safely drive huge rigs on the road, are generally preferred by trucking businesses who insure through a third party.
Trucking businesses that are self-insured have more control over the claims they pay out, which is another way they can save money. Drivers engaged in a collision with one of these companies’ employees may find it difficult to get a settlement, or their case may drag on for months.
Legal Options after a Truck Accident
When a truck accident occurs and the trucker is at fault, you must determine whether you are dealing with a self-insured trucking company. If this is the case, you should seek the advice of an experienced truck accident lawyer to assist you with your claim. Because the trucking business most likely elected to self-insure in order to save money, they may try to settle your case for a considerably lower sum than you asked. However, you have the right to seek the full amount of damages to pay your medical and hospital bills, medicines, missed earnings, and any other medical equipment you needed to help you recover.
If you and the trucking business can’t come to an agreement, you can file a personal injury claim. Indeed, if the corporation is taking too long to process your claim, you may want to consider filing a personal injury lawsuit. Personal injury claims in Ohio have a two-year statute of limitations. It’s likely that the trucking firm is well aware of the law and is attempting to prolong your case until you’ve passed the statute of limitations and are unable to pursue legal action. If that were the case, you’d have little choice but to collaborate with them, and you might end up agreeing to a figure that is unjust to you.
Let Kisling, Nestico & Redick Help
You interact with insurance companies in a typical accident. However, a collision caused by a self-insured trucking company’s vehicle is out of the ordinary. Instead of using a third party, you are compelled to communicate directly with the other party engaged in this case. When you’re up against a major corporation with a lot of resources, it can be intimidating, especially if you’re still recovering from your accident-related injuries.
Is CR England self-insured?
C.R. England’s self-insurance reserves are currently valued at $250,000, he stated. 26 trucking and bus businesses have created self-insurance plans since 1986.
BMC-34
A BMC-34 is a cargo liability insurance endorsement that ensures a minimum level of coverage for cargo losses for which you are responsible. Carriers are not required to file copies of this form with FMCSA, as they are with the MCS-90.
BMC-91 and BMC-91X Filings
The Federal Motor Carrier Safety Administration (FMCSA) receives a BMC-91 filing (FMCSA). The FMCSA will be assured that you have enough liability insurance to handle the increased risk of transporting goods or people over state borders if you file the BMC-91 form.
When your insurance is offered by numerous firms rather than just one, you must file a BMC-91X form.
Form MCS-90
If you are obliged to file a federal filing, an MCS-90 endorsement must be connected to your liability and cargo liability insurance policies. The MCS-90 endorsement ensures that members of the public are adequately protected in the event of an accident for which you are legally liable.
The Federal Motor Carrier Safety Administration has not received the MCS-90 (FMCSA). The FMCSA receives the BMC-91 or BMC-91X filing as proof that the MCS-90 endorsement has been issued.
Filings for Unified Carrier Registration Since September 2007, the Uniform Carrier Registration Plan (UCR Plan) has replaced the Single State Registration System (SSR). It allows for-hire and private motor carriers, brokers, freight forwarders, and leasing organizations to submit their financial responsibility information and a registration fee payment to a single state, simplifying the payment of several state fees.
Motor carriers performing interstate operations must register in a base state under the UCR Plan. Your base state is the one where the majority of your cars will be deployed in the coming year.
The UCR Plan is now being implemented in 41 of the 50 states, and if your base state is one of them, you must register in that state. Private and exempt carriers that were not obliged to register under the SSR must do so under the UCR Plan in a base state.
The registration fee you pay to your home state will be split among all of the states where you do business.
The UCR Plan has no bearing on a state’s intrastate trucking regulations, including its intrastate trucking motor carrier financial responsibility legislation.
Participating states in the UCR Plan may change over time. To find out if your base state participates in the UCR Plan and to learn more about state truck filings, call 1-888-806-9598.
You’re paying less in premiums every year.
You don’t have to pay an insurance company every year to incur the risk of insuring you if you’re self-insured. This is a significant advantage for you because you’ll save money! And we’re all about cutting costs wherever we can, particularly when it comes to insurance premiums.
You’re financially independent when it comes to your investments.
You’ll have more money to invest if you save money on insurance rates. And it’s much better if they’re good assets (like a mutual fund).
You can raise your deductibles.
Because you’re self-insured, you can raise the deductibles on the insurance you can’t avoid, such as auto, house, and health insurance. Your premium will go down if you boost your deductible because you’re agreeing to pay more out of pocket for a claim.
Provision of Services
In a self-funded plan, you are responsible for all services that would normally be performed by an insurance company in a fully-insured plan. Most organizations now use a TPA to fulfill these obligations, as previously stated.
Even still, conducting the research necessary to choose a TPA is a significant responsibility in and of itself. You must also keep an eye on your TPA to ensure that they are providing all of the required services. Because, in the end, your firm is responsible for your employees’ healthcare.
Increased Risk
At its essence, self-insurance is about risk against return. A self-funded plan should, in principle, be less expensive than a standard fully insured plan. You pay a price for these savings: your company takes on the individual risk of excessive claims.
In addition, as previously stated, the administration of your health insurance plan is ultimately the responsibility of your company. If you don’t administer the program correctly, any failure of a self-funded employer to develop an effective administrative system is a breach of fiduciary duty.
You, the employer, are legally accountable for managing the policy, according to Inc. You must follow tight standards for the security of private claims information in a self-funded plan, which you will now have access to.
Cancellation of Stop-Loss Coverage
The acquisition of stop-loss policy is one way to safeguard your self-insured plan against a large number of claims in a given year. Stop-loss coverage is a type of insurance that reimburses your company for claims that exceed a certain price amount.
These plans safeguard your business from a massive increase in claims. Stop-loss coverage helps you pay for increasing claims if one or more of your employees contract a serious disease.
Stop-loss insurance, on the other hand, is issued on an annual basis with no assurance of renewal. Because of the policy’s issue date, an unanticipated increase in health-care claims could result in considerably higher premiums or the termination of the policy entirely.
The loss of your stop-loss insurance coverage could be disastrous. If your insurance is canceled and no other reinsurer is willing to take it on, your company may be stuck paying huge medical expenditures.
Recession/Weak Economic Cycle/ Claim Fluctuation
Outside influences, like any other investment, have the potential to make a self-funded strategy difficult to maintain. Before your organization can reap the benefits of these programs, you’ll need to put them in place for three to five years.
There are a plethora of occurrences that could have an impact on your insurance in these times. It may be difficult to sustain plan funding in the event of a recession or a bad economic cycle. Similarly, claim changes from year to year, or even month to month, can have a major influence on your company’s cash flow.
Why do companies opt for self-insurance?
Self-main insurance’s goal is to increase a company’s operating profits by lowering claims and premium costs. The Self-Insuring corporation retains costs such as overheads for policy administration, risk assumption, and underwriting profit by adopting the function of an insurer.
Premium taxes and residual market loadings, which might be paid on insurance premiums, are also avoided with self-insurance plans. Although these are typically imposed on any excess, particular, and aggregate coverages, they might be much less because excess premiums are much lower than full coverage premiums.
Is JB Hunt self insured?
Because Hunt, Schneider, and Knight Transportation are self-insured, any modifications would have no impact on them. Any carrier’s insurance is designed to safeguard its assets, therefore larger carriers with millions of dollars in assets will have millions of dollars in insurance coverage.
What is a BOC-3 for trucking?
A significant criterion for transportation businesses when seeking for FMCSA certification is to name a service of process (SOP) agent.
The designation of a process agent is required by federal law in order to receive a certificate of authority to operate from the Federal Motor Carrier Safety Administration (FMCSA), which regulates the trucking sector in the United States. These businesses must file Form BOC-3 with the FMCSA to obtain and maintain this authority.
This article explains what a BOC-3 filing is and how transportation businesses who do business across state lines on a daily basis, such as motor carriers, brokers, and freight forwarders, can appoint a SOP or process agent.
What is a BOC-3 process agent (or FMCSA agent)?
If you own or run a transportation company, you must designate a service of process agent, commonly known as a “FMCSA agent,” in each state where you do business.
An SOP agent, also known as a process agent, is a person or company that has been appointed by your company to receive legal documents on behalf of the principal. Each state in which you are permitted to operate requires a process agent to be physically present and available at that address during normal business hours.
The process agent is permitted to receive and forward service of process and other judicial or legal documents on behalf of your company in the state(s) where the agent is designated once designated. The distribution of documentstypically a summons or complaintthat provide notice that litigation has been started against the defendant and the activities that must be taken is known as service of process.
What is a BOC-3 filing?
A BOC-3 file (Designation of Agents for Service of Process) is a federal filing in the United States that appoints a process agent to accept legal documents on behalf of a transportation or logistics firm in each state where the company is licensed to operate. Before a transportation or logistics company can function, it usually needs to file a BOC-3 form.
Only the process agent can file the BOC-3 for motor carriers, and the filing must be done online. If you’re a broker or freight forwarder who doesn’t have any commercial vehicles, you can file the BOC-3 form on paper.
Expect to give the following information when filing your BOC-3 form on the FMCSA website:
- Each state’s SOP agent’s name and street address, provided individually or as a blanket designation. A blanket designation is when the FMCSA names one organization or business to act as the applicant’s process agent in all 50 states and the District of Columbia.
How much does a BOC-3 agent cost?
If you want to hire a professional registered agent, a BOC-3 agent might cost as little as $20 or as much as $100, depending on the breadth of service you choose (many SOP agents offer additional compliance services beyond just BOC-3 filing services).
Fee structures differ as well. Many professional process servers charge an annual fee plus fees for each document they handle, while others charge a one-time BOC-3 filing fee. Address change costs and expenses for expedited BOC-3 filing are examples of additional fees (often requested by companies looking to get their businesses up and running quickly).
How long does it take to file Form BOC-3?
The FMCSA will give operating authority and mail the paperwork to you once the BOC-3 form has been fully completed and filed electronically with them. Operating authority documents are typically sent out in 3-4 business days. If it’s been more than 10 business days from the grant date and you still haven’t received the operating authority document, contact the FMCSA. You can also visit the FMCSA Licensing and Insurance website to see if your operating authority has been issued.
Your BOC-3 may need to be refiled in certain circumstances, such as a name change, authority transfer, or reinstatement of your motor carrier operating authorization.
The benefits of working with a blanket process agent
Companies can either select a process agent for each state or a blanket process agent for all states. Your company’s FMCSA requirements can be consolidated by appointing a blanket agent. In each jurisdiction where you do business, the agent serves as your BOC-3 blanket process agent. It’s easier to keep track of alerts when they come from a single source, and you’ll get fast notices if there are any regulatory changes, which can help you avoid penalties like losing your good standing with the FMCSA.
You must choose a blanket process agent from the FMCSA’s approved list of blanket service process companies if you use one.
Can I act as my own process agent?
Within your base state, you may only act as your own process agent. During regular business hours, you must have a physical address where service of process can be received.
How to select the right process agent?
When choosing a registered agent service provider, search for experts who have received training in process service in the transportation business and can ensure that official documents are handled quickly and securely. There are numerous suppliers to select from, but look for a true partner who goes above and beyond statutory requirements, providing tools and alerts to help you stay on top of essential compliance obligationsall without additional service fees.
It’s also beneficial to have agents available at all hours of the day and night, as well as a discreet address that preserves your privacy and keeps process servers away from your place of business.
Finally, search for extra services like yearly report filings to guarantee that your filings are always precise and timely in the state where they are due.
How do I get a Usdot number?
The first question you must answer is whether or not a USDOT application is required. The majority of carriers do, however there are a few exceptions. Check the check list below to see if you require a USDOT number. Motor carriers must register with the United States Department of Transportation (USDOT):
If none of these apply to your company, you may only need to register with your local government (state office) rather than submitting a USDOT application.
Make Sure You Have the Necessary Information
The USDOT application is simple to fill out, but you’ll need some basic information about your company. Aside from your name, address, and other personal information, you will be needed to complete the following:
Download Proper USDOT Application Form or File Online
There are three separate application forms available from the USDOT. You must complete the appropriate form for your company. The forms are as follows:
- MCS-150C is a kind of MCS (combination USDOT number and Intermodal Equipment Provider application)
If you submit your USDOT application using the Federal Motor Carrier Safety Administration’s online site, the system will automatically select the appropriate form for you.
Fill Out Form and Send It In or File Your Online USDOT Registration
After you’ve completed all of the necessary papers, ship it to the FMCSA at the following address: Attention: FMCSA 1200 New Jersey Avenue SE, Washington, DC 20590 USDOT Number Application