NEMT fleet insurance: what changes in rating, deductibles, and driver rules as you pass five vans

Does passing five vans change your insurance rate?

Not by itself. IRMI, the insurance reference publisher, defines a fleet as five or more autos under a business auto policy and anything smaller as nonfleet. It adds that the split is made for statistical coding and has no effect on the rating factors. So the fifth van changes how the policy is coded for statistics, not the factors that set its rate.

What moves the price is everything that grows with the fleet. Virginia’s insurance regulator lists the inputs to a commercial auto premium as the type of vehicles, the territory, expected mileage, how the vehicles are used, and loss experience. More vans raise most of those at once, and they give the insurer more of your own claims history to read. The general price factors and the limits you must carry are in NEMT insurance cost, and first-time buying is in getting NEMT insurance. This guide covers what shifts as a company grows from a few vans into a fleet.

How your own claims start to set the price

Your loss record moves the price through factors applied on top of the insurer’s manual rate. California’s insurance department puts the basic formula as rate times exposure, then lists the adjustments insurers layer on: experience modifications, schedule rating, and judgment rating among them. It adds that a better claims record allows a bigger modification to lower the premium.

Three terms show up in that conversation:

• Experience rating. Outside workers’ comp, IRMI explains, it compares your actual losses with those of risks in the same industry and turns the difference into a factor applied to your premium.
• Schedule rating. Debits and credits to manual rates for the characteristics of your own account. Whether your safety practices earn a credit depends on the insurer’s plan.
• Loss ratio. Incurred losses divided by earned premium. Incurred means paid plus reserved, so an open claim counts at its reserve until it closes.

An example, with invented figures: an eight-van company pays $64,000 a year for its auto coverage. Its insurer has paid $20,000 on two closed claims and holds a $28,000 reserve on an open one. The loss ratio is $48,000 divided by $64,000, or 75 percent. If the open claim later closes at $8,000, the same year falls to 44 percent. That is why loss runs with stale reserves are worth questioning before a renewal goes to market, and why the renewal plan asks for a short note on each claim.

Higher deductibles and self-insured retentions

A bigger company can usually carry more of its own small losses, and the deductible is a part of the price it chooses itself. California’s guide notes that raising the deductible lowers the rate, and warns against picking one so large it puts the company at risk. Two details decide what a bigger deductible really costs a fleet.

The first is that physical damage deductibles apply van by van. ISO’s business auto form reduces what the insurer pays for each covered auto by the deductible on the declarations. As an example, a hailstorm that damages six vans parked in your lot means six deductibles, not one. The comprehensive deductible does not apply to loss caused by fire or lightning.

The second is the choice between a liability deductible and a self-insured retention. IRMI explains the difference with a $100,000 claim:

1. $25,000 deductible. The insurer pays the whole $100,000 in defense and damages, then bills you $25,000.
2. $25,000 self-insured retention. You pay the first $25,000 of defense and damages yourself, and the insurer pays the remaining $75,000.

The totals match, but the timing does not. Under a retention, you fund defense and settlement until the retention is used up, so the cash has to be there when the claim arrives. Under a deductible, the insurer handles the claim from the first dollar and collects from you later.

Which covered auto symbol fits a growing fleet?

The covered auto symbol decides whether a van you buy mid-year is covered the day you get it. Under the ISO business auto form, symbols 1 through 6 extend coverage to autos of the described type that you acquire during the policy period. Symbol 7 covers only the vans listed on the declarations. Under symbol 7, a van bought mid-term gets that coverage in two cases only: every van you already own carries it, or the new one takes the place of a van that did. Either way, you must ask for the coverage within 30 days of buying the van.

Broker contracts can make the choice for you. WellTrans’s Indiana agreement requires the certificate to list “Any Auto,” or else symbols 2, 8, and 9 as a set, so a policy written on symbol 7 alone falls short. Louisiana’s Medicaid transportation rule is broader. It accepts any autos, owned autos with hired and non-owned, or scheduled autos with hired and non-owned. The scheduled auto entry explains each symbol; check the symbol on your declarations against every contract before you add the next van.

Adding and removing vans during the policy year

Tell your agent the day a van is bought or sold, even when the symbol covers it automatically. The premium, the certificates, and each broker’s vehicle list all depend on the schedule.

• The premium follows the real fleet. The standard auto form bases the deposit premium on the exposures you reported at the start and computes the final premium once the insurer knows the actual ones. Virginia’s guide notes that a business auto audit can check which vehicles you own or operate and how they are used. Vans added during the year show up in the premium audit.
• Sold vans keep costing money until they come off. Symbol 7 covers the vans described on the declarations with a premium charge shown for each, so a van you sold can stay on the bill until the insurer takes it off.
• The fleet class stays put. Massachusetts’ residual market manual keeps a public auto policy’s fleet or non-fleet class through mid-term changes in the number of vehicles unless the insured asks for a change, and then the policy is cancelled and rewritten.

The rest of a new van’s paperwork, from title and plates to the broker’s inspection, is in adding a vehicle to a NEMT fleet.

Driver checks as the roster grows

More vans means more drivers, and insurers check each one. IRMI calls the motor vehicle record one of the primary tools used in underwriting auto insurance. RLI’s NEMT program, for example, asks for current driving records for all drivers along with the vehicle schedule and four years of loss runs.

Some passenger policies go further and cover only drivers named on the declarations. In a 1996 Maryland case, a cab company insuring 157 cabs had a driver who never appeared on its driver list, and the court left it with only the state minimum limit after she crashed. How driver lists and named driver exclusions work is in the exclusions guide.

A growing company needs a routine for this:

1. Send each new driver’s record to your agent before their first trip, and file the written approval.
2. Hold one roster that matches the insurer’s list, and remove drivers from both on the day they leave.
3. Recheck records during the year, not only at hire. Continuous MVR monitoring covers the state alert programs.

The age, experience, and violation limits underwriters set are covered in getting NEMT drivers approved by your insurer.

What insurers offer fleets for safety

Bigger accounts get more help from the insurer’s loss control staff. California’s guide says most commercial insurers have their own loss prevention departments and that loss control services are usually built into higher-risk, higher-premium accounts.

RLI’s NEMT program shows what a program can include:

• A dedicated loss control expert and a library of driver safety training videos
• One weekday of onsite driver training
• Discounts on camera and telematics hardware and subscriptions from several vendors
• Quarterly claim reviews on larger accounts

The same program requires a loss control inspection or a digital risk review as part of underwriting, so the help arrives with a review of how you run. What a written program should contain is in the fleet safety program guide, and what tracking devices record is in NEMT telematics.

Keeping fleet records straight in HealthRide

As the fleet grows, HealthRide keeps the dates insurers and brokers ask about in one place: each van’s registration and insurance, and each driver’s license and certifications. Reminders arrive before any of them lapse, and dispatch gets a warning before a trip goes to a van or driver whose credential has expired. Each driver checks the van right in the app at the start of every shift. See fleet management for the details.