Insurance premiums are one of the top five costs for motor carriers, and carriers’ premiums traditionally are the same every month regardless of how many miles they drive. But that doesn’t have to be the case.
Reporting-style insurance is just that: insurance based on what is reported. Premiums are calculated based on actual usage metrics (e.g., mileage or revenue) rather than estimated or static numbers. This ensures that carriers only pay for the coverage they need, which can be cost-effective for businesses with fluctuating activity levels. Carriers are required to submit operational data monthly, quarterly or as specified in the policy. Timely and accurate reporting is critical to maintaining the policy.
There are two major types of reporting-style insurance: mileage reporting and unit reporting. Mileage reporting is based on the miles the motor carrier ran for the month, and unit reporting is based on the tractor units in use each month.
Kevin Dupree, executive vice president of sales at Reliance Partners, sums it up: “At the end of the month, the insurance company sends a report saying this is your mileage and what you owe us. Essentially it’s a dollar amount per mile. That rate is comprised of losses from previous terms and safety scores and other factors. The premium each month will vary depending on any changes to the physical damage values in the month, new driver additions, other changes such as commodities being hauled.”
This insurance model isn’t for everyone, but the key advantage it gives to carriers is flexibility. It’s not a scheduled policy, and if something changes, it gets reported at the end of the month. Insurers know fleets’ equipment fluctuates monthly, whether it’s vehicles out of service, trailers held for storage, seasonal work or holiday periods when drivers are running fewer miles.
“Carriers only pay for the miles they run” under the reporting-style model, Dupree explains. “Although some have a minimum mileage you have to meet, some newer carriers have eliminated this as a selling point.”
The biggest thing insurance companies look for is exposure to risk. When looking at a mileage-based plan, insurers want to know common routes and the related risk level. Motor carriers sometimes are hesitant to provide lane data as they don’t want to be tracked by insurers.
Dupree states: “The biggest thing is when they look at International Fuel Tax Agreements and they see the miles you’re running.”
The reporting style of insurance stands to gain popularity as more insurtechs are getting into the industry, specializing in ease of billing, incentives, discounts, etc. It becomes easier to track miles since most insurers are already connected to a carrier’s telematics. It leaves little room for misreporting and negotiation, which speeds up the billing process.
One downside to this type of policy is that the administrative lift is heavier. Carriers have to calculate and report on what happened for the month versus a more traditional method in which it’s the same amount every month that is paid like any other bill.
Choosing between reporting-style insurance and traditional insurance plans comes down to a carrier’s operational needs, financial strategy and risk tolerance. Reporting-style insurance offers dynamic premiums that align closely with real-time activity, providing flexibility and potential cost savings for businesses with fluctuating operations. On the other hand, traditional insurance provides stability and predictability, making it a better fit for carriers with consistent activity or those that prefer simplified administrative processes.