How does driver turnover cause trucking operations to close their doors?
From an insurance standpoint high driver turnover equals more claims. Claim activity can make you unprofitable for the insurance carrier causing them to non-renew your policy. Sure, you can look for a new insurance company, but those claims will follow you for three years and upwards of five years with some carriers. When you start looking for new quotes the insurance agent will ask for Loss Runs from your current insurance company to see how many claims your business has had and how much the insurance company paid out to settle those claims. If the frequency of claims is too high or you have a large loss it will either, make insurance too expensive to continue to operate or no insurance company will be willing to offer you a policy.
Insurance companies by law must make a profit in order to stay in business. Insurance companies that specialize in Transportation Insurance are at a higher risk due to the limits of liability insurance required by the U.S. Department of Transportation and state insurance departments.
So why is driver turnover so important?
Insurance companies track every analytic possible to predict the potential amount of losses they will have to pay overtime. This includes how many drivers you replaced in a policy period. They have concluded after decades of tracking these numbers the more driver turnover, the more claims.
Also remember, when you hire an Owner Operator and put their rig on your insurance…what risk is it to them if they have a claim? It doesn’t affect their insurance policy because they are running under your insurance. But if they have a large claim on your policy your insurance rates will rise and you risk becoming uninsurable. Furthermore, while you’re out of business that Owner Operator simply moves on to a different trucking operation.
Finding ways to reduce driver turnover.
The industry has a long history of offering signing bonuses to drivers but failed to look at ways to retain drivers. Some firms are now offering not just a signing bonuses, but yearly retention bonuses and safe driver bonuses. Sure, this is an added cost to the fleet companies, but so is the cost of training drivers.
When looking for new ways to retain your drivers start by offering medical, dental, vision, a retirement plan and other insurance products. The more benefits the driver receives, the less likely they will look for employment elsewhere.
Remember the key to being a successful Trucking Business is keeping your margins high. One of the largest costs that drive high margins is keeping your insurance rates low. Lower insurance rates equal higher margins, and that puts more money in your pocket.
Craig Barbee is CEO of Barbee Jackson Insurance and works with transportation companies across the United States.