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The Federal Motor Carrier Safety Administration perhaps should have known that changing truck driver hours-of-service regulations in 2003 for the first time in 60 years would cause some confusion.

"It had been since the '30s the first time the rules changed, so it was an industry shakeup and everybody was interested in it," says Andy Walker, vice president of risk management at United Petroleum Transports Inc., a 500-driver company that hauls petroleum products in the south central and Southwest United States.

"Many say the backlash and future court rulings will force further revisions to hours-of-service rules. Others watch the horizon as the FMCSA initiates a proposal to require electronic on-board recorders and Global Positioning System technology in trucks.

But in the meantime, in 2007, the trucking industry and those responsible for its insurance coverage struggle with what is currently the law--provisions that affect a trucking company's government safety data that is closely scrutinized by insurers.

TEACHING AN OLD DRIVER NEW TRICKS

Ask Walker to explain the changes, and he hesitates. "I'll try to lay it out as best I can," he says. "It's a nightmare. It's a mess."

According to the FMCSA's explanation of the current law, commercial motor-vehicle drivers have a maximum 14-hour on-duty workday, during which the driver is allowed to drive a maximum of 11 hours. Those maximums require the driver be off-duty 10 consecutive hours prior to the start of the shift. The driver also cannot drive after being on duty for 60 hours in seven consecutive days or 70 hours in eight consecutive days; however, the driver can "restart" the clock anytime he has accumulated 34 or more hours off duty.

Confused yet?

Walker says, prior to 2003, drivers were required to take eight hours of break, and the key word "consecutive" didn't exist in the rules. For example, a driver could be on the road for three hours and take a two-hour break. He could get back to driving for seven hours, after which he would only have to rest six hours before he could start trucking again.

Adding the provision for consecutive hours of rest opens up the law to all kinds of interpretation, says Walker. It's difficult to get a consistent answer from the roadside inspectors who review a driver's logs. But the one thing that is certain is it's more difficult for a driver to meet his destination on time, he says. "If a driver could make the location under the old rules, now he's got to stop and take a 10-hour break before he can continue on to his destination," says Walker. "That has a big impact on the supply chain. You're taking almost a 10-hour chunk out of your efficiency in getting from point A to point B."

Doug Chamness, risk manager at Greenbush Logistics, a Southeast regional flatbed hauler of building materials, says his company with its fleet of 275 trucks "absolutely" experienced a rough patch with the hours-of-service changes.

"We're still struggling with it," says Chamness. "If you take in a new guy who doesn't know the old regulations, it's not a big deal. But take some of my guys who have been in the industry for 20 years under the old regulations initiated in 1939. When you throw that guy a curve in 2003, he's going to go through a learning curve. Then just about when they got that figured out, the rules changed again in 2005."

Despite the months of training that many trucking companies instituted prior to the rule changes, and a soft enforcement period of 90 days following each change in regulations, hours-of-service violations appeared to have increased. Insurers interviewed for this story confirmed this fact, though they downplayed it.

"There was a brief learning curve when the first new regulations hit," says Jim York, assistant vice president of technical services for risk engineering at Zurich Services Corp. "We saw some dips, but nothing out of the ordinary. That brief learning curve, it was just a little blip."

The data might have shown a mere "blip" in violations, but brokers noticed the efforts of their clients to thoroughly train employees, and this alone proved the new regulations had a major impact on the daily operations of the trucking industry.

"It was the biggest thing happening in the trucking industry at the time," says Dan Morton, vice president at Hilb Rogal & Hobbs. "The way they did business just completely changed."

PERILS OF SAFETY STATS

The government has provided trucking safety information to the public via telephone for many years and began posting it online in 1997 on the Safety and Fitness Electronic Records Web site. As time goes by, more data becomes available and details are more accessible. Hours-of-service violations play a role in this: the more they accumulate, the more they affect a company's safety rating. Trucking companies have accepted, but aren't thrilled about, the fact that all these details are at any underwriter's fingertips.

"The reason this is all posted is so that insurance companies and carriers can see what the playing field is," says Duane DeBruyne, deputy director of communications at the FMCSA. "We recognize that somebody's safe driving record is going to influence their insurance, just like it does with your regular car, as it should. It's an incentive to be a safe, professional driver. The more information we can make available through this online method will help to drive that."

But brokers and their clients seem to feel that the statistics available on the Web are often inaccurate and misused by insurers.

"An underwriter is definitely looking at this," says Morton. "I think that they kind of overuse it. They have to understand that it's data collected by roadside inspections as a truck goes through a scale house, or in the case of an accident, a police officer who is at the scene of an accident completed some form. It may or may not be as accurate as you would like. It's certainly not consistent."

Chamness says when the Web conveys damaging, inaccurate information for the general public, customers and insurers to see, the red tape involved with removing the data is overwhelming, rendering the trucking companies helpless.

"It's a government Web site, so you can't believe everything you see," he says. "There's erroneous information out there on my company, but getting it removed is mind numbing. It will be off there by itself before you can force it off, because that data drops off after it's 30 months old. If they had a roadside inspection on there that wasn't my truck or if they had an accident on there that wasn't my truck, I can write letters until I'm blue in the face, I can call Washington every day--it's not coming off."

Fortunately for the trucking companies, the statistics available on the Web are not the sole factor in determining insurance coverage, not by a long shot. Insurers, especially big ones in the trucking sector like Zurich, are quick to point out that they understand the limitations of such data.

"It provides a good snapshot overview of a carrier," says York. "But if we're looking at a trucking company up close and getting into evaluating the risk, we go much deeper."

UNDERWRITERS UNDERSTAND

The insurance companies, it turns out, were largely understanding of a slight increase in violations during the hours-of-service learning curve, indicating the trucking industry's initial fears were probably unfounded.

"When it first came out, I thought every client's going to get declined," Morton recalls. "I thought it was common sense that, if you change the rule, there's going to be more violations and those violations will lead to people not wanting to underwrite them.

"But I don't think that really happened," he adds.

Chamness says it's the risk manager's job to have all his T's crossed and I's dotted--the better to defend himself to an underwriter against little blips on their radar like hours-of-service violations.

"When you can present your account as a risk that is very low pain for him, but a reasonable amount of premium due to the size of your business, then he gets interested," says Chamness.

"If your account sucks, you're at their mercy. If you've had a lot of losses or you don't have proper controls or you don't demonstrate that you know what's going on and that you're in compliance with the regulations--now you're a pretty scary risk for an underwriter and a sure thing for a claims guy. They're going to price accordingly. They have to," he says.

Writing insurance for a trucking company is far more complex than checking safety stats on a government Web site and assigning a premium. At first peek, Zurich considers four broad areas of a potential trucking client: driver qualification, development and training; vehicle inspection, repair and maintenance; incident management; and fatigue management. That last criterion is what is most directly affected by a company's control of hours-of-service restrictions.

York says Zurich orders a carrier profile for the company, a full history of all their safety data from a variety of sources.

"Of course, there's the data that is posted on the SAFER Web site," he says, "but that's only those inspections that are so severe that they have caused a vehicle or driver to be placed out-of-service--only about 10 percent of the data."

The next step is to look at the company's performance on all inspections and incorporate a software model that uses the carrier's profile and roadside inspection history to rank its performance among its peers. In smaller companies, which comprise the majority of the 680,000 trucking firms that are authorized by the FMCSA to operate in the United States, especially a smaller company that hauls hazardous material like Walker's United Petroleum, the insurance company will also evaluate every driver's motor-vehicle record, using another computerized model to determine what percentage of drivers fall within an acceptable range.

"All of that feeds into the underwriting systems along with our risk analysis report that says, 'Here are their hiring standards, their training standards, their exposures and their crash histories,' " says York. "The underwriters arrive at a price by essentially compiling all the data together and determining if this company is an industry leader, representative of the industry average or well below average."

Walker says he believes that while hours-of-service data are considered by insurers, there are more critical safety indicators to factor into the underwriting process.

"They're more concerned with your accidents and the severity of your accidents, obviously," says Walker. "Hours-of-service do play a role in that because drivers that have a tendency to believe that the rules don't apply to them are also the drivers that think, 'I won't have a wreck' or, 'I'm going to live forever' or, 'I can take this turn at such-and-such speed' or, 'I can follow closely.' It's just one more indicator of aggressive tendencies."

The insurance companies are good at keeping especially unsafe trucking carriers in line, says Walker. After the hours-of-service rule changes, insurers made it impossible for trucking companies that actively sought to go outside the law to get coverage.

When those companies go out of business, not only are the roads safer, but the legitimate trucking carriers are at an advantage.

"That's a real benefit that the insurance industry brought to trucking--it made those of us who want to do things the right way more competitively capable," he says.

ERIN FOGG is associate editor of Risk & Insurance®.

April 1, 2007

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