Some towing and recovery operators who have been in the business for 15 to 20 years will remember what a “hard market” means when buying insurance. The last “hard market was in the mid-1980’s and it was the “hardest” market anyone had ever seen. It wasn’t a matter of how much insurance cost. It was whether you could find it at all. The current “hardening market” does not appear to be as severe as the crisis of the 80’s but it will definitely be more expensive to insure your operation. For some of you, it will be much more expensive.

Over the last ten years, it has been a “buyer’s market” in obtaining insurance for your operation. Agents were everywhere willing to quote your tow trucks. Insurance companies abound that wanted to insure towing and recovery. This abundance of available coverage had the effect of driving down prices. Many of you benefited. The truth is that having so many insurance companies competing for business drove the price of insurance down below what was an adequate premium. For example, if you use $1.00 as being an adequate price, then it was not unusual to see insurance companies charging 60 cents or even 50 cents for what should have been a 90 cents or $1.00 rate. It’s sort of like what you charge for towing a car. If you have been towing for a local dealership and charging $55-$60 to tow in a car, you charge them that amount because you know how much it cost you to buy and maintain a truck, to pay a driver, to buy the insurance and to make a little profit. If there suddenly appears a lot of new people with tow trucks and they start scratching around for business, it won’t be long before somebody shows up a the dealership offering to tow the same cars for $40 or less. You then have the choice of following them down in price (and losing money) or waiting them out. You can’t operate very long towing cars at a loss! The same is true about insuring tow trucks.

Now the chickens have come home to roost. Those insurance companies who thought they could do it at 25% to 50% less than what experience had shown was necessary to charge for insuring the towing and recovery industry have lost their shirts! Now they are getting out of the market. Decreased supply equals increased price. If you are one of those folks who benefited in the market and in buying your insurance at a “discount” price, you will now see the price go up. Additionally, if you were buying your insurance a “discount” price (a price that was actually too low for the exposure) and you had “normal” losses, you may find that the low price you paid has now caused you to have an “abnormal” loss ratio. Insurance companies look at loss ratios. It doesn’t really matter to them that your loss ratio (premium paid/losses paid out) is higher than it should be simply because your previous insurance carrier’s price for your insurance premium was too low. It is sort of like a two edged sword. You benefited from the low price but now you may be penalized because of that very same low price.

We have been able to keep good stable insurance markets for over eighteen years. We have two insurance companies now offering to insure the towing and recovery industry but they are requiring “proper premiums” for the risk. In other words, the “buyer’s market” is over.

If you are going to get a good price with good coverages, be prepared to work harder at it than you have in the past. Please gather your loss runs from your present carriers and those having insured you over the past three or four years. You may have to fire those drivers with marginal driving records. You may have to provide more information and spend more time talking to an insurance agent than you would like. Check out the agent and check out the company. Ask around. Talk to other tow truck operators. Remember, if the agent has been insuring the towing and recovery industry for a long time, it is a pretty good sign they know what they are doing.