Grow Too Fast & Lose Insurance Options

Trucking is all about growth. Don't let insurance blow up your plans. Grow your fleet at a pace your business and your insurance company can support.

Growing your trucking company is a good thing. More trucks usually mean more freight, more customers, and more money coming in. As a business owner, you look at that and see success.

Insurance companies don't always see it the same way.

When an underwriter reviews your business, they are counting more than just trucks. They are trying to decide if your company can safely handle the growth. Going from one truck to five all at once or even over the course of a year isn't just adding equipment. It changes almost every part of your operation, and it can limit the number of insurance companies willing to write your policy.

One Truck Is Not the Same as Five

Let's look at it another way.

A trucking company with 100 trucks that adds five more only grew by 5 percent. A company with one truck that grows to five increased its fleet by 400 percent.

That's what insurance companies call explosive growth.

From your point of view, you bought four more trucks. From an underwriter's point of view, you created a completely different business in less than a year.

You now have five trucks to maintain instead of one. You have five drivers to manage. There are more loads to schedule, more inspections to keep up with, and more opportunities for something to go wrong.

As your fleet grows, your insurance needs grow too. Underwriters want to see that you're prepared for the next stage of your business, including workers' compensation when it's required. It can be one of the more expensive coverages you add, but it's part of growing a trucking company.

Even if you use 1099 owner operators, underwriters will still want to know how you're handling occupational injury coverage and whether those drivers are properly insured. Every truck you add brings more responsibility, and adding several at once increases the risk much faster than most people realize.

Insurance Companies Have Seen This Pattern

Insurance companies didn't create these guidelines because they don't want trucking companies to succeed. They created them because they have years of claims and DOT data that tell the same story. It’s risky.

When a trucking company grows very quickly, we almost always see an increase in DOT violations, claims, or both. That doesn't mean every fast-growing company will have problems, but it happens often enough that underwriters take it seriously.

It isn't hard to understand why. The owner who used to know everything happening with one truck is suddenly responsible for five. New drivers need training, regular safety meetings and written policies in place. Maintenance schedules become harder to manage. Dispatch gets busier.

Small problems that were easy to catch before can now slip through the cracks. Things get missed that you don’t even know you are missing until the DOT inspection officer tells you. (too late).

Insurance companies know most owners aren't trying to run an unsafe operation. They also know that rapid growth puts pressure on every part of the business. Their job is to decide if the company has grown at a pace that can still be managed safely.

What Underwriters Are Really Asking

This isn't just our opinion. These are the questions we receive from underwriters when a trucking company grows quickly.

Recently, we submitted an account that had one truck less than a year earlier. The company had grown to five trucks, and multiple insurance companies declined the account because of unit growth concerns.

Another underwriter kept reviewing the submission but came back with a list of questions before they would even consider offering a quote.

They wanted to know:

• Does the company have plans for more growth?
• What is driving the growth?  New contracts, dedicated lanes, etc.
• How is the owner managing all of the new drivers and equipment?
• Are any of the new drivers owner operators?
• If they are owner operators, how will they be managed?
• Where are the new trucks based?
• Is all garaging of equipment (including owner operators) in the domiciled state of the trucking company it runs under?
• Can we review the company's loss runs and IFTAs before making a decision?
• Do they have a safety director and written policies for hiring, vehicle maintenance and safety in place?

Notice what they didn't ask. They didn't ask how much revenue the company was making. They didn't ask how many new customers they had signed. They wanted to know how the business was managing the growth.

That tells you exactly how underwriters think.

Owner Operators Count

Many motor carriers believe leased on owner operators don't count because they don't own the trucks.

Insurance companies don't see it that way.

If those trucks are running under your authority, they become part of your operation. They create liability under your DOT number, and they increase your overall exposure. Whether you own the title or not doesn't change that. They are still employees if you tell them where to go, what to do and when to be there regardless of how they get paid.

Signing several owner operators in a short period can raise the same concerns as buying several company trucks. The operation still grew and that is what underwriters are measuring.

Fewer Insurance Companies Will Quote

Explosive growth doesn't always lead to a decline, but it usually leads to more questions, fewer options, significant renewal increases and growth limitations for the upcoming term.

Some insurance companies have internal growth guidelines that limit how much expansion they are comfortable with during a policy term. Others require additional underwriting approval before allowing more trucks to be added. Some simply decide the operation has changed too much since the last time they reviewed it.

The result is fewer insurance companies willing to compete for your business.

Less competition usually means higher premiums, fewer coverage choices, and a much more difficult renewal.

Growth Needs a Plan

We aren't saying you shouldn't grow. Every successful trucking company started with one truck.

The goal is to make sure your business grows at the same pace as your operation. Good hiring practices, strong maintenance programs, driver oversight, and safety procedures (all in writing) all help show insurance companies that your company is ready for the next step.

Buying trucks is the easy part. Building a business that can safely manage those trucks is what insurance companies are really looking at.

If you're planning to add several trucks or bring on multiple owner operators, have that conversation with your insurance agent first. Your agent should be a big part of all your growth plans and advise you accurately to what/how the insurance markets would view it. Make an educated decision now before it backfires later.  It is much easier to plan for growth than it is to explain explosive growth after the fact.

 

 

 

 

 

The information in this article is for educational purposes only and reflects our experience in the trucking insurance industry. Every trucking company is different, and insurance eligibility, pricing, and underwriting decisions vary by carrier, state, and individual risk factors. This article is not legal or insurance advice. Before making decisions about growing your fleet, adding drivers, or changing your operations, speak with your insurance agent to understand how those changes may affect your coverage and available insurance markets.