With insurance being a perpetually hot-button subject in the chauffeured ground transportation space, we reached out to Lancer Insurance Senior Vice President of Passenger Transportation Tim H. Delaney to discuss the current state of the insurance world in early 2023.
Tim H. Delaney
Chauffeur Driven: How are things going since Lancer’s recent merger with Core Specialty?
Tim H. Delaney: Things have gone great since we completed the merger at the end of 2021. Part of what made the deal so attractive to us was the model proposed, which was to keep Lancer operating as a division under the balance sheet of Core Specialty. Obviously, we’ve been able to keep our brand intact.
Really from a day-to-day standpoint, nothing’s changed. What we do at Lancer—the services we offer, and the staff we have on board—nothing’s changed. In the bigger picture, the merger has given us the opportunity to expand what we offer the passenger transportation industry. We already have a comp product that we are starting to roll out, and who knows what else we can bring down the road.
CD: How does it feel to return to shows and conferences after the pandemic?
TD: It’s important for us to be able to engage our customers and brokers in person, being able to talk to them face to face has a big impact. Truthfully, the luxury ground transportation industry is not very large; when you break it down, it’s a lot of the same people you develop relationships with over the years. Being able to get in front of them again and continue to grow those relationships—as well as meet new people—you can’t put a price on that.
We like that the Lancer castle is visible from anywhere on the show floor, and that’s really emblematic of who we are. Lancer has been here for the industry for more than 35 years and we will continue to be.
Lancer has always been a family business, and even though we’re part of a larger entity now, our culture hasn’t changed. When we attend trade shows and events, it’s not just from the perspective of trying to sell anybody anything and get new business; we bring underwriters and claims people and try to put a face to a name.
CD: What does the insurance marketplace look like in 2023?
TD: All transportation insurance gets lumped into part of the property casualty world called “commercial auto.” And commercial auto, uniquely, has been subject to rates going up—and when I say that I mean costs of claims going up—for almost 13 years. There are a million reasons for that. What gets talked about the most is the liability side. Within that you have increased medical costs; attorneys who have decided to specialize in commercial transportation cases; new medical science such as traumatic brain injury that gets brought into cases; and most recently, general inflation, where it costs more for parts and to install those parts. Lastly, you have what’s called social inflation, which refers to the fact that jury verdicts have been increasing. All of that goes into the system, which drives up costs; all the insurance industry does is reflect that back on the ground transportation industry.
As such, I would expect this industry to be pushing 8- or 10-point rate increases on clean accounts. Generally, rates will be increasing for the foreseeable future.
CD: With rates steadily rising, is there anything that operators can do to save themselves money on insurance?
TD: We always say that the cheapest claim is the one that’s never happened. So, what you can do is manage your business down to every detail. That includes the process of hiring, vetting, and training chauffeurs; the process of managing them when they leave the yard for a trip; and use of technology. Over the past 10 years, the technology side has developed very quickly. It’s gone from basic accident cameras to full fleet management systems that monitor driver distraction and a million other things. You’re going to start to see that the early adopters of technology, the ones who worked themselves up the learning curve, are going to distinguish themselves from those that aren’t using the tech. Over the long term, the loss costs of those companies will be a lot lower, and the industry will be able to insure them for less. It all boils down to a management issue, where you do everything possible to avoid those claims.
CD: What is the role of fleet technology in the insurance industry?
TD: The role of technology has been important for a long time and has reached the point of being essential! Like I said, over time, management teams that have learned to use technology as a tool for safety and efficiency are going to distinguish themselves. From an insurance standpoint, we’re probably not far from the point where if you don’t at least have a camera in the car, you won’t be able to get insurance at all, because of liability issues.
It’s a minor investment. As the liability environment has gotten worse, in order to survive, you need a camera. Not only is it protecting your company, but it’s protecting your passengers and chauffeurs—it’s a complete no-brainer.
Sometimes, you’ll get somebody that says “it can work against you.” Well, in some cases that might be true, but the difference is when you have a video and it shows adverse liability, at least you know what you have. Meaning, the insured and the insurance company can agree and settle something upfront instead of going to court for years. So, even then a camera can save you money during the claims process.
CD: How important is chauffeur training when it comes to insurance?
TD: It is of the utmost importance. We always say, there are no good or bad drivers. The world isn’t that simple. It’s eating away at the margins when people are distracted, or making a U-turn, or confronting situations that don’t happen every day. Those are the training points that differentiate success, by not having claims over the long term. Someone who does the bare minimum of training is likely to have a misunderstanding of what chauffeurs face on a daily basis, whether it’s passenger requests, traffic, road construction, etc.
We were one of the first to introduce driver training topics, but now there are many ways that operators can avail themselves with thorough training programs.
Another saying we have is “we bet jockeys, not horses.” Many limousine operators will say they move people from A to B. I say, “no you don’t ... you hire drivers.” It’s the chauffeurs’ business to move people from A to B.
CD: What is the future of stretch limousines following the Schoharie crash and subsequent report?
TD: Obviously, it wasn’t a glowing review of stretch limousines, but really that New York report focused on super stretches. Your traditional stretch limousine, which comes from a manufacturer—of which, there really aren’t many anymore—wasn’t necessarily the focus. The review of the Schoharie crash was very critical of after-market manufacturing of those vehicles. That accident happened for a lot of reasons that are not typical within the luxury ground transportation industry.
Stretch limousines, however, are not a material part of our world. They were popular in places like the Las Vegas strip. They were hard to insure, but I think that crash and the recent report from the Limo Task Force will make it too difficult for them to exist in the future, let alone insure.
CD: The next generation of ground transportation is electric vehicles. Are you insuring EVs?
TD: The question revolves, of course, around what’s it going to cost. It’s not like you can pull into your country autobody shop and get electric car parts. So, that translates into higher costs to insure. Ultimately, production and manufacturing of EVs are in their infancy. There’s a lag behind that in terms of repairing them. There’s going to be a lag there with determining the cost to insure them. We don’t have anything to say as to whether they’re good, bad, or indifferent ... they’re very cool. Right now, it’s a wait and see. Are we going to insure them? Yes. It’s not a material part of our book of business, but as it grows, one thing we’ll be watching closely is what the loss cost of those vehicles are compared to traditional vehicles. And do we need to charge significantly more? Even before EVs ... some years ago, when you’d have an accident, it cost $300 to fix the bumper. Now it’s three grand because the bumper has four cameras in it. The EV is the next generation of that. They have more technology than even the most high-end combustion cars. Our suspicion is that it will cost more to fix them, which means they’ll have a higher insurance rate.
CD: What can the industry expect from Lancer in the coming year?
TD: Because of the tough environment liability-wise, it’s important to be with a carrier that has best-in-class claims handling, which is what we sell. We look at this industry as having a high level of expertise, so we always invested more in our claims people and loss control than most companies have a tolerance for. [CD0223]