I last wrote an article on The State of Tow Insurance for 2017, and things have only gotten worse. As expected, Insurance Carriers continue a downward trend to what is considered a “hard market.” A hard market is what happens when there are only a few insurance carriers willing to offer insurance coverage (like tow).
Over the last two years we have continued to lose tow carriers and have not seen any new carriers enter the market during this time.
Equally concerning are the tow premiums that are being charged (if you are lucky) by the few remaining Insurance Carriers. We continue to see double digit price increases each year, with several cases of increases of 40% or more.
I’ve seen an increase in tougher standards on: driver MVR standards, requirements on the size of tow fleets, the type of tow operations allowed, the location or zip code in which you operate, and of course your prior loss history.
Also hitting tow companies are the tougher underwriting restrictions and standards in which tow insurance carriers are enforcing tow qualify for their best rates.
I’ve seen an increase in stricter standards on: driver MVR standards, regulations on the size of tow fleets, the type of tow operations allowed, the location or zip code in which you operate, and of course your prior loss history.
Before you run for the hills, know that there is good news on the horizon.
Insurance companies by design run in business cycles. When an insurance carrier wants a bigger footprint in a particular insurance market they lower their prices. This is considered a soft insurance market. There is competition from insurance carriers and the insured has many companies to choose from.
When the profitability of the company starts declining because of lower premiums, the carrier will eventually raise the rates to achieve profitability, hoping to maintain most of their customers.
A hard market is what happens when there are only a few insurance carriers willing to offer insurance coverage.
Insurance pricing cycles on average last five to seven years, with tow carriers often experiencing longer cycles. It is estimated that the hard market for the tow industry is in it’s sixth year. In this case, it is expected that we will hit rock bottom and begin to level out starting in the fall of 2019, meaning more competition for tow insurance providers and better rates for the insured.
As a Tow Operator the best thing you can do is to start your quotation process 120 days prior to your renewal, and work with an agent or agency whom specializes in Tow Insurance. This approach will bring you quotes from the 3 to 4 carriers available to Tow Operators currently.
–D. Silverman
dan@autorisk.org
