James Blain 0:25

Hey there everybody, and welcome back to another exciting episode of the Ground Transportation Podcast. I am super excited about this episode. Not only do I have my co-host Ken Lucci, financial Genius Sales m and a expert, I could, I could probably do a whole podcast on anything Ken could do. Ken, good to have you back.

Ken Lucci 0:43

I'm so happy to be here with you, especially also with, uh, our guests, but looking forward to this one.

James Blain 0:50

Yeah, I am super excited about today we have Tim Delaney, the president of Lancer Insurance, which is division of core specialty. Guys, I gotta tell you, when it comes to insurance, if you haven't heard of Lancer, I'm very sorry you probably don't have insurance. Um, Lancer Hass been doing this forever. I'm lucky enough that at PAX Training we actually partner with them to have some of their training available to our members. Um, I can't say enough about these guys. And Tim, I can't say enough about you and how excited we are to have you on the podcast. Welcome to the podcast buddy.

Tim Delaney 1:20

Thank you very much. Uh, thank you for having me and, uh, very happy to be here. I appreciate everything you guys do for the industry and the messages that you put out there. So, uh,

Ken Lucci 1:32

Well, we try, um, you know, from my perspective, people call have been calling us since 2018 to help them sell their companies. And when we first started it was, I am past the point of retirement, I wanna sell my business. And in the pandemic it was, business has stopped, I need to sell my business. And it seems to me now the number one reason people are calling us is because there's been massive increases in their fleet insurance. But I wanna, first, I wanna dispel a myth. The myth is that the increase in insurance, are because of the insurance carriers. So I, I would like you to address that because. People think that commercial fleet insurance is extremely profitable, but from everything I read about the ins the insurance industry, that's not the case. So I'd like you if you can dispel that myth first.

Tim Delaney 2:26

Yeah, well, it's pretty easy to dispel because, you know, the commercial auto segment of property casualty insurance, hasn't been profitable for the last 14 years. We're we're going on.

James Blain 2:37

Say, say that again, Tim. 'cause I think they need to hear it, right? Everybody, everybody wants to know what boat you bought this year. Right? But I, I think what you just said is really important because people don't realize it. Say it again.

Tim Delaney 2:48

Well, so, uh, the commercial auto part of the property casualty insurance world has not been profitable for 14 years. and particularly to the, the segment of ground transportation. Um. That that holds true. You know, there are certain niche segments within that, but everybody's subject to the same trends. Right. And the easiest one to point out to people who aren't in the insurance industry or transportation industry is, attorney advertising, right? How much more of that is, is there today than there was a long time ago? So that, you know, that's kind of something you can pick out visually, but what's behind that is there's way more attorney involvement in claims than they used to be 20 years ago. Those attorneys, uh, are way better funded. They have a way better, uh, playbook. and that's a big part that there, and by funded, there's actually even third parties that, that will fund their litigation for a piece of the action. and that's really only the, the, surface level of what's happening if you dive deeper, Simple things like, uh, a small, a small accident that, uh, you know, dents, a bumper 20 years ago was, you know, a couple hundred dollars to fix the bumper. The, these days, you know, there's cameras and software and electronics, right? So that's kind of a natural in inflation that is built into the system. Then, medical costs, right, which tend to outstrip, uh, general inflation as well, you know, kind of, uh, has driven the costs up on the liability side when there, when there are injuries. And then add on top of that the lawyers, Not only getting better at using, uh, those medical costs and the medical system to inflate the cost of claims, they've just gotten even better at using the legal system with things like time limit demands and, threat of juries who are way more willing to give away large sums of money today, uh, than, than they traditionally have been in the past. So all of those ingredients go into, say the cost of claims are going up. And for insurance companies, you know, um, you know, I think to you guy, your guys' point, a lot of people overestimate. Our position in the chain, right? We don't necessarily set rates, right? I mean, we take pools of homogenous risk. We, we figure out what the claims costs and we reflect that back onto the industries that we're serving, right? So the increased claims costs are external to the insurance industry. We, we are just kind of reporting the news. And if I had to sum it up for, for ground transportation operators, in a big way, the legal industry is, is, you know, it'd be extreme to say robbing your money, but that's kind of what they're doing. I mean, they're driving these costs up.

Ken Lucci 5:34

And specifically in states that, that don't have caps, and I'm just gonna say it in, in blue states, where there's no tort reform, no hope of to tort reform. And isn't it true that for every dollar you take in the commercial, uh, on commercial fleet, a dollar for is paid out?

Tim Delaney 5:53

Uh, well if you go by the macro numbers as of, uh, year end 24 and even at six months 25, it's more like a dollar 12 goes out. Um, so, you know, we measure combined ratio is, is, is the word we use in insurance. So a hundred per a hundred percent combined ratios break even. Anything below that is margin. Anything above that. And commercial auto has been running, you know, up around between 1 0 8 and one 12 now for 13 years in a row with, you know, one exception 20 the COVID year, which you know, isn't really valid yet.

James Blain 6:27

different, different

Ken Lucci 6:28

so, so, you know, the other, the other, the other misnomer I think that's out there and, you know, the blame of the insurance agent, the insurance carrier, which is totally misplaced. And the other myth that's out there is that my loss runs aren't bad. I shouldn't have an increase. They don't understand the insurance ecosystem. So can you give us just a brief on, you know, how insurance works, the ecosystem. It's not just your loss runs. your part of a, a, a global ecosystem. Perhaps even touch on reinsurance and what's gone on in reinsurance, uh, as well.

James Blain 7:06

And Tim, I, I want you to add one thing to that as well, if you don't mind, because the other thing that we hear all the time is, well, if we can just get 'em to look at only us, right? If we can just get it down to just like our segment or our industry or our vertical. That's something we've heard a lot lately. So I'd be, I'd also be curious to hear your opinion on how that plays into it.

Tim Delaney 7:27

Sure. So, um, let me chip away at that one piece at a time. So insurance in general, right, is you try and find, you know, some group of homogenous risk and you've spread the claims, you know, that certain portions of that pool out over the entire pool and, uh, you know, everybody gets to pay a smaller amount, to cover potential claims that they would have, right? That's insurance 1 0 1. Um, so. The concept of somebody saying, well, just my loss runs aren't that, you know, aren't bad. I haven't had any claims, so why, why do I deserve a rate increase? You know, there is a pooling aspect to it, right? And it's particularly pronounced in commercial auto, in personal lines, like the, you know, what we buy for, for our, the, the cars we drive on a day-to-day basis. The limits are a lot lower. Right. So, you know, those, those will be, you know, quite sensitive to, to your particular risk. If you don't have claims, it'll, it can probably, you know, stay, uh, pretty even over time or, or at least the pooling effect, meaning, you know, when, when, uh, the entire environment of claims changes, the, the amount that it affects each policy is, can be spread pretty far and wide. 'cause it's also a big pool. The problem in commercial auto is limits are large. Right. Generally a million dollars or, or $5 million on buses. And, and back to, you know, what we covered already, where the problem right now is, is litigation. Abuse or, you know, growth in costs, how, however you want to describe it. That problem exists across, you know, the big limit world, right? The, uh, you know, um, the stronger the attorneys are and, and, um, you know, the more tools that they have and the more they can inflate costs, uh, any one claim can get up to as high as $5 million, which obviously, you know, as an insurance company, not everybody can pay you back that much money when they have that. If you're, if you're a, you know, a three unit operator, it's not like you can pay the insurance company back, you know, even over time. so you know, what that means is for an insurance company to expose their limits, whether it's a million or 5 million limit, you know, they, they need to have a certain comfort that they're collecting enough money across the pool of everything they write in the eventuality, you know, that a certain segment of them have a claim and everybody's subject to that. Right. Um. it, it's, uh, hard to explain. When somebody has lost runs, they, they haven't had a claim where they say, well, I'm paying for everybody else's sins. And you know, to an extent. That's true. but I would say for any insurance company, you know, there's still a lot of individual underwriting baked into any, any pricing, right? Even across, uh, the same market. there is a portion of it that's dependent on their opinion of your operations, on the claims that you've had on the type of work that you do, the driver profiles and everything that goes into the underwriting. But at the end of the day, large claims are very unpredictable. Anyone can have them. Because it could, it, it doesn't even necessarily have to be your fault, to have a claim that your company can be found responsible for. So if you want to, if, if you want to have an insurance company cover you for those types of limits, they have to bake in, you know, a certain amount for those excess claims, which is where all the problems we'll probably talk about throughout this podcast exist. The cost of claims are going up dramatically and insurance companies for going on 14 years of not collecting enough money to pay for them.

Ken Lucci 11:11

during that time, your cost to reinsure, because you don't, you don't, you don't bear the burden of the of All the risk you have there is reinsurance as well, correct?

Tim Delaney 11:23

Um, you know, it's, differs by carrier. We tend to not buy, a lot of reinsurance. and the reason for that is, um. You know, if you talk about, I don't know how deep we want to go into the insurance world, but you know, the, the a a book wide purchase, you know, treaty reinsurance means it covers everything that you write. Facultative insurance is when you buy it for one risk, right? So on a treaty basis, um, to, to buy reinsurance is very tough in a volatile line that has big limits like commercial auto, say in the, in the bus business, because of the 5 million limit and it's a pretty small industry. Results can be volatile over time. You can make money over time if you, if you, you know, have the gumption to stay in the business and not get nervous when you do have the claims. Um, but it can be volatile and, and when the claims go up, um, you, you have to really have confidence in your underwriting and claims handling. But in, in terms of buying reinsurance, you know, a reinsurer who's looking at that book of business and that volatility is probably gonna price you to your worst year. Right, so,

Ken Lucci 12:31

Why? Why wouldn't that?

Tim Delaney 12:33

what

James Blain 12:33

and, and take a step back for us, Tim, 'cause we've talked about it before on the podcast, but can you give us just a Bri, like, if I don't know what reinsurance is, and I'm listening now, can you kind of tell us a, a real quick, just to kind of bring them up to speed on what it is, why you need it, or why you would use it?

Tim Delaney 12:49

It is a, it's a great point. And, um, it's, it's insurance for insurance companies, right? So if you build up, uh, you sell, uh, you, you sell insurance to a hundred different companies of any sort, you know, your potential exposure can be pretty high. So depending on how much capital you have as a financial institution, you may, choose to increase your ability to, to write business by bringing in a partner to share the risk. So, so you're basically bringing in their balance sheet, to match up with your balance sheet, uh, to expand your ability to, to offer, uh, insurance. Um, but so, when they, when that reinsurer. Uh, marks you to the worst year. you know, that means that you're gonna be paying them for your worst year in your good years, right? And so you, so you're giving away a lot of your profit. Now there's a, you know, reinsurance is a long discussion and there's a lot of, a lot of reasons to buy them and a lot of ways to buy it. Um, but at Lanter Insurance Company, we were always kind of in for a penny in for a patent. If we think we know this stuff and we're gonna get as involved, uh, with loss control and underwriting and claims and all the touching that we do, you know, we want to be fully aligned and have full confidence in the fact that, that we know what we're doing and put our money where our mouth is.

Ken Lucci 14:07

How long have you been writing in the space?

Tim Delaney 14:11

Um, well, the bus business started in 85. Delivery business started in the mid nineties.

Ken Lucci 14:17

Yep.

Tim Delaney 14:18

you know, and that even will be loosely defined because we, we, we started in the New York area. Um. Really in what, you know, what we would call the black car space. Um, and, and then, you know, uh, through, through that experience, kind of learned that there was this luxury niche, you know, the word that, that we would use now, um, that, you know, tend to be owned by guys that really care about the service they're providing. you know, it is a high level of service. It comes with training. There was a higher level of, of vetting on the drivers, you know, and all the types of things that work into a good risk. And we, you know, towards the end of the nineties, settled into that niche, which ended up, you know, growing, uh, being a great pick because, uh, it was a, it was a good business and has grown and changed many times. but we've been able to stick with the industry and, and still like the outlook.

James Blain 15:14

yeah, so earlier, you know, we mentioned kind of this idea of the risk categories and commercial auto and everything there. Now I, I'm lucky enough, I already know the answer to this question, but, you know, we hear a lot about this big segment, right? Like, we're being lumped in with everybody. We're paying for everything that everybody across is doing. You know, you guys don't fall in into a category of a insurer that's insuring everything under the sun, right? If I call Lancer right now and I'm like, Hey, I got a 17-year-old daughter that needs insurance, right? Once that guy is, is done explaining to me why you don't do it, it's gonna be okay. But what, tell us a bit about what does it look like in terms of the categories you've picked, the ones you work in, and talk to us about this, this issue that we're seeing where people are saying, kinda like we talked about earlier, well, I'm paying for the sins, everybody else. What does that really look like in terms of those risk categories? And where does a lancer live kind of within that space of commercial auto?

Tim Delaney 16:10

Sure. That's a great question. Um, you know, I, it's one that I've heard a lot of times, uh, you know, for over a decade. And, you know, the quick answer is, uh, nobody's lumped in, with everybody else. All, all of the issues, uh, that are going on in, in litigation and the medical world and, and everything else, it does apply to all commercial auto. but I think sometimes that misinterpret or that misunderstanding is probably born out of how the message was delivered, whether it was at a conference or by the broker or anything. Um, but all insurance companies have to, at least in commercial auto, have to file. forms and rates with every insurance department in every state, right? Member insurance is not federally regulated. It's regulated by the states. and when you do that, you have to do that with different class codes down to vehicle type. you know, so there's, it's not like you, you take a, a trucking filing and underwrite a, a taxi or a limo with it, right? You have to follow very, in my opinion, probably overly specific filings that you have in every one of those jurisdictions. So there's no way, uh, that you can lump everybody in. But I think the, the sentiment is born, uh, out of how the message is delivered, which, you know, isn't completely wrong in that all of these, uh, bad trends, right? With uh. You know, be it legal, medical, uh, or, or anything else. It does apply to all of auto, uh, the plaintiff's bar has, has figured out, um, that auto cases are very easily replicable. Um, you know, um, maybe we'll get to a point where we'll go deeper into the list of why. Um, but you know, for, for all the people that you and I serve, um, it's particularly pronounced because they're bigger target 'cause they have higher limits even than trucks generally.

James Blain 18:03

Well, and, and talk about that for a second, Tim. 'cause I, I think that's something that gets lost as well because I, anybody that doesn't know this on the podcast, right, if you are registered, I can go look up your limit and I know your limit right now as Joe Blow on the street. So can you talk about how easy, how that kind of sets them apart from some of the others?

Tim Delaney 18:24

Well, it's, you know, it sets you apart from everybody else on the road, right? Because they might have, you know, in some states you can have 15, 30 limits on a private passenger vehicle. so if an attorney gets their hands on a case where there's even a million limit, that's, you know, more exciting than a lot of stuff that comes through his door. Um, so, you know, at Lanter we, we have, we do have a, a smattering of a lot of different things. I mean, our biggest businesses are passenger transportation. Um, but we do have smaller businesses of, you know, some, some local and intermediate trucking in certain areas, and we have. Uh, a little bit of long haul trucking. And one thing I can tell you is, um, the trucking world is multiples, uh, many, many multiples of the size of the passenger transportation market. And the trends, uh, that we're seeing, across that book across the country, are even, way worse right now. And I think that's because the plaintiff's bar, I mean you can Google it, they have seminars and instruction booklets and everything about how to teach new attorneys how to go out and target trucking companies. Right. And some of the things that are counterintuitive that, that also applies to passenger transportation where. You know, the F-M-C-S-A website with all the safer scores and, and, and public transparency on inspections. You know, all that is great. It's, you know, we always looked at, we look at it as helpful to our underwriting. but plaintiff's attorneys have gotten good at using that stuff to make everybody look bad. It's like, you know, you had six inspections and three of them had violations. Right. And it, it kind of adds, you know, they make things sound in context, you know, worse than those of us in the industry, know that, that they are. And it all comes down to how it would play in front of a, a jury, right. And, um, gives them more ammo to drive up, you know, settlement of cases. And certainly for the small percentage that gets tried, bigger verdicts.

Ken Lucci 20:24

You know, part, part of my frustration, when I talk to clients is they think that, you know, frankly it's across the board, the new operators. 'cause there's practically no barrier to entry in the space. They don't take. Safety, seriously. They think, well, I had didn't have an issue getting insurance the first year. and then it's the, it's the older operators that, well, I've been doing this for 30 years the same way. know, I think the reality is that we're in a permanent hard insurance market. Am I right or wrong about that?

Tim Delaney 21:02

Yep. Well, you know, the fact that rates have been going up in passenger transportation for 14 years is, is, uh, you know, I don't know of another instance in the history of insurance where something continued that long. you know, usually insurance goes in cycles, which, you know, isn't, necess isn't necessarily tort reform or everything driven. It also has to do with interest rates and, and the other ways, uh, insurance companies make money. But, you know, this has been, it's, it's not a cyclical hard market. It's, it's been a hard market because fundamental change in the cost of the claims.

James Blain 21:36

Yeah.

Ken Lucci 21:37

That's, that is, you just said a mouthful. It's it's fundamental cost in fundamental changes. Permanent changes in the cost of claims.

Tim Delaney 21:47

Mm-hmm.

Ken Lucci 21:48

So and my whole point is people are saying, well, it's gonna have to go back. It's it, no, it's not. Because the cost of to fix an elect, uh, uh, electric vehicle is almost double what a combustion engine is. All of the electronics in the vehicles now, you hit a mouthful. Back in the day I can remember, it cost me 250 bucks to replace a chrome, a chrome bumper on 1987 Cadillac Fleetwood, I rem, uh, Cadillac, uh, Deville. I remember it like it was yesterday. I mean, you, you couldn't replace the, the bumper the, uh, the plastic housing now for that, or even around the license pipe. So, you know, when I talk to older operators, I say, you know, your very issue is that your mentality is, I'm gonna do it the same way I did it yesterday or the day before.

James Blain 22:37

No.

Ken Lucci 22:37

Talk to us about, and I wanna get real. If you had a brother-in-law that had his personal income and wealth tied up in this space that owned a fleet, what would you tell him for best advice?

James Blain 22:50

And you like this brother-in-law, Tim. you really like this. You really like this. You really like him.

Tim Delaney 22:56

in case they watch this, I'm very lucky with brother-in-laws. Um, yeah, love them all. Um, but what, you know, what I would say to them is, you know, you gotta, you, you have to go all out on. Safety and I, and, and I don't mean that just in, in checking boxes and saying you have to, I'm like, you gotta have cameras, you gotta have telematics, you gotta have driver training. Like a lot of the messages that you guys put out and be like a portion of that. Of course, it's in the interest of true safety and preventing accidents. Right? That's, that's, that's obviously paramount, but. One thing I see even in people who buy who, who work pretty hard at that, you have to have a little bit of the mindset to say, all of this is also in the interest of making me defensible for when I have a claim. Right. So, and that, and that, you know, is kind of the backup stuff. Like, you know, documenting processes and documenting training and having follow ups. You know, you have to really go to the nth degree so that if something really bad does happen, you know, you have be like, there is no way, there's nothing else that we could have done, you know, to prevent this. Right. but anyway.

Ken Lucci 24:15

Look, look, you, you, we hit upon it. James and I were having a conversation contrary to popular belief, we do talk outside this, this podcast 'cause it is a full-time job.

James Blain 24:25

Lots of yelling.

Ken Lucci 24:26

You know, the, the analogy I use is I'm, I'm turning 60 and I go in for a health exam and the doctor says, you know, you, you've gained a little weight and, and by the way, you're pre-diabetic. And by the way, your blood pressure is up a little bit, which are all true, by the way, because of the clients that I have. Anyone? No, that's not a kidding. And they say to me, you know, you, you need a, a health regimen. So my answer is I go out and buy an apple, uh, a an apple watch. And on my next, on my next visit, I say, you see I have an Apple watch. But the doctor says, well, your, your stats are still bad. You haven't changed anything that you're doing. So that analogy is what I hear people say, well, I have telematics. Well, I have cameras. And your message is very straightforward. All in means, all in meaning document all your safety processes, document all of the ways you've changed the behavior of your drivers, and how you've made safety a culture. Okay. It's you hit the nail on the head. It's not enough to check the box. Okay. Well, I have telematics. Okay. Well, how, what do your drivers score? What? Tell me what yesterday. Tell me yesterday. What, what does the reporting say? Um, you know, how many guys did you have that are doing harsh braking? Huh? What they, they're just not using the telematics to, to change the behavior and to create the culture of safety. I a client's been in, in the business for 30, 40 years. Basically just get kicked out of his captive. Because, because he, so he went through the trouble of a captive. And I, I do want you to touch upon captive because you know, there's there's some messaging out there that scares me. Okay. Because it's not the solution for everybody.

James Blain 26:13

Although it's billed that way often.

Ken Lucci 26:15

oh, it's totally billed that way. You know, there's no easy solution here. And I'm tired of the people who are peddling the fact that this is, there's an easy way to fix this. There is absolutely not. But it start, it starts with changing your behavior as an owner. Where to go from the idea of, well, we haven't had an accident, so we're doing something. Well, guess what? You're overdue. But anyway, so this guy, you know, goes through the process of the, of the, of the captive, you know, puts whatever money aside, and then he literally falls down because he doesn't do the internal, what he should be doing in his company. And he is like, well, I, you know, I thought when I invested in the captive, I'm like, again. It's in. It's like investing in a healthy lifestyle and investing in well, I go to church. Well, do you really read the Bible? I mean, that's what it comes down to. So I think it's changing behavior, and I think it's making safety in every single day part of your business and part of changing the behavior of your drivers, your dispatchers. Everybody. Everybody. You can't be pushing these drivers to stay on the road longer than they should be. That's safe just because you have a trip that you haven't filled. And at the same time, you cannot, you cannot change the behavior of your iOS if you don't hold them to the same standard as your in-house drivers. Talk a little bit about the use of iOS and frankly, that doesn't change the risk of the company that's in business.

Tim Delaney 28:59

No. Um, you know, when we do our underwriting, we, we. Uh, you know, do a lot of work on, on vetting drivers. Um, you know, we, you know, one of the things we, we kind of offer as a value added service is, uh, we've been doing it so long that our DA database of drivers has a lot of stuff in it that a normal MVR wouldn't show you. Um, and drivers tend to pop up all over the place. Um, you know, so, so, you know, when, when a lot of our insureds send stuff in, you know, it, it, it at face value, meet checks, all the boxes, and then we'll, you know, we'll have to let them know that, you know, this person can't be put in a, in an insured driving status with us. Um, you can't always say why, but that's information that we have, you know, that helps. So, uh, as far as iOS, you know, the industry has kind of gone back and forth on this. You know, in a while, um, you know, defining the employment status isn't really my place, but I think one of the, uh, one of the risks that's probably unmeasured and unpriced in, out in the marketplace is how much growth there's been in the amount of business that people farm out to other businesses.

Ken Lucci 30:14

Absolutely, absolutely. But the message has to be if, if you expect a certain level of safety of your in-house drivers, you have to extend that to everybody that you farm to because you're still liable. You are still at risk.

Tim Delaney 30:30

you're big time liable, right? We, it's called the, you know, stacking of limits on, on our end. And, you know, we, we've tried to share, you know, there's, there's legal things to be careful of, but we've tried to share some simple best practices to where anybody, you know, you're gonna do, uh, farm out business to as an affiliate, um, you know, make sure you do a little bit of diligence on, on their safety. Make sure that they have, you know, the same insurance limits that you have, because that's been a problem in certain cases. If you have five and they have one, um, you know, you create a little bit of a vacuum towards your limits legally. Um, you wanna make sure you, you, you. Put some thought into the agreements that you have with all them. Like, if I farm out a, a job to you, you can't farm it out to somebody else, right? Because then that's ano, that's another level. And that's happened too to where everybody in that chain, uh, has had to pay. Um, so, you know, and then, you know, making sure the indemnification agreements are correct. Uh, some other really simple things, like even if you check that they have the same insurance, make sure you check again next year, right? Insurance tends to renew and change. You know, like some, some really, really simple stuff. But, uh, that is definitely an, an exposure that has gone up dramatically over the past 10 years. And really our us the insurance industry hasn't really figured out how to get our arms around that, right? How to price for it.

Ken Lucci 31:56

Right. And well, and the reality is the guys that are out there now that are, I do affiliate work. I, I, I farm out work. I provide transportation all over the world. You know, your reality is you might as well just put your house on the line because if you are not doing the vetting of these people, and it, I, it makes me laugh, Y you know, James will tell you that I have a real problem with Facebook, right?

James Blain 32:21

Oh,

Ken Lucci 32:21

first of all, half my owners hang out there all day and they tell me they don't have time to go out and generate proactive revenue, and everything is low price. And the second thing is they look for their affiliates on Facebook by saying, I have a, I have a ride tomorrow morning at six o'clock in the morning at Richmond. Who do we have? I mean, are you outta your mind? Why don't you just put your, why don't you just put your house up?

James Blain 32:44

Well, but it, it goes deeper than that too, Ken. Right? Because I talked to someone who farmed something out to an affiliate. Then the affiliate farmed it up to an io. Then the IO crashed the car and it came all the way back up the chain, and they had no idea, right? They thought that their affiliate was handled. They thought their affiliate was good. Well, turns out the iOS insurance wasn't that great. Well, now all of a sudden, right back up the chain,

Ken Lucci 33:07

You know it's funny, those, the lawyers have a way of finding out who's got the best insurance.

Tim Delaney 33:13

they are gonna find it out and they're gonna get it all on the table. And, uh, yeah, not to go too deep into insurance policies, but there are issues in those scenarios, you know, where, uh, a policy form could be symbol seven only, you know, which. Which slows down the flow between them all,

James Blain 33:31

what is, what is symbol seven? Only translate that into English for the

Tim Delaney 33:34

So that's, uh, named vehicles only, right? Where, uh, if you have 7, 8, 9, 8 and nine, symbol eight and nine would be, uh, hired non-owned autos, which is where the affiliate work co, you know, comes in. So, um, so yeah, there's a lot of issues there. You know, the, the employment status of it, which was kind of an old issue, you know, that everybody worked themselves through and went back and forth a bit. That's one thing. Um, I think the, the insurance risk that sits out there today is just what we hit on, on the affiliate stuff. And there's a, a long way to evolve, uh, for the insurance industry and the all the operators to get their arms around that risk, because Ken's right in a, in a real bad circumstance. Your house, you know, if you are the owner of a company, you are all the assets of the company and the personal assets of the owner, uh, can come into play. And we have seen that

Ken Lucci 34:28

Well, and the corporate veil can be p pierced for negligence and there we will find it negligent. That you didn't vet this. How did you, how, what was your relationship with this affiliate? Oh, I found him on Facebook 12 hours before the freaking trip. Uh, I'm not supposed to, Tim, I'm not, I'm not supposed to swear anymore on the

James Blain 34:46

if, if if it was 12 hours before the trip that they might count that as due diligence. 'cause I've seen 'em as close as five minutes and it kills me. Right. It kills me. I mean we, we've, it's funny because on our level, we've even gone as far, we've built a directory. You can literally go to the PS website and look up everybody using pax. Right? You can, and it's just as quick as Facebook. I promise. It loads just as fast. Right. You know, there's so many tools that are out there and available that don't get used. And one of the things that, that, Tim, I'd like you to talk about, 'cause I know you guys do a great job of it. What about kind of the other side of the spectrum? I see a lot of operators that work to really do the right thing, but then when it comes time for renewal, they're not really putting that forward. They're not really saying, Hey, here's our training program. Here's this, here's that. How much of a difference does it really make? For these companies that are actually out there trying to do it all right. Is that something where there's a way that they're able to kind of put that foot forward and show that to underwriting? I know it's a, a again, you guys are, are tied to state law and you don't do discounts generally, but how does, how does someone that's getting it right, doing it right? How do you actually put that to work, so to speak?

Tim Delaney 37:08

Um, so there's a couple things there. I mean, uh, the answer is yes. Putting all those things together and getting them to your underwriter is extremely important, right? You should always be putting forth everything you're doing to keep, uh, claims low. And, uh, the cost of the claims that you do have low, um, a part of that job, uh, certainly falls on the, on your broker, right? Um, they're supposed to do a certain amount of diligence and, and, and have a sense of what underwriters want to see and get them that information. Um, and then how it goes to work on our side. Um, you know, you said like you don't give discounts. You know, there are, you know, discount's probably not the right word, but there's a lot of things that we look at that all go into the soup and affect the price. Um, you know, so, you know, I always say, uh, over the past, you know, probably 10 years when you talk about cameras and some of the different fleet management systems, a lot of times some people want it a, a satisfying answer. Like, well, if I have this system, you know, how much does my premium go down?

James Blain 38:15

Oh. That's my whole life, Tim. Right? I hear that all the time. I'm gonna buy packs tomorrow. How big a discount do I get? And it's like, okay, are you gonna use it? Are you gonna apply it? This is not a, you bought it, so they give you a gift.

Tim Delaney 38:26

Y Yeah. The, yeah, the long answer is, well, we have to see what, what you do with it, and then the effect it has over time. But even, even the short answer, even if I was to say, Hey, um, we're going to, you know, that counts as 5%, you know, against your premium. What if that's in an environment where rates are going up by an average of 8%, right. Your rate has still gone up. And, and from a, you know, a buyer's standpoint, that's a very unsatisfying thing to say, well, I didn't, where's my five points be like, well, it was five points off the eight that it was going up. so, you know, so that's always a, a positioning challenge that we have as in the insurance industry. but the answer to your question is it does all go into the mix. And at Lancer, you know, most, most of the insureds we have in pasture transportation, we go out and physically, uh, visit them and inspect them and, and look all that. And that's a big, part of our underwriting. And, you know, big forms, a big part of

Ken Lucci 39:18

Well, you, your value add is better than anybody's in the space. I mean, you know, your guys who are available. You are, you're proactive. And without naming any names, I know of a company that, that you've insured for years that actually did get a reduction because they launched a massive safety program two years ago. It's, it's absolutely on fruit for them. Um, they record all their safety, meetings with their staffing. They document the hell out of everything. They manage the telematics to the point of bringing the drivers in and giving them a corrective form. This is what I'd like to see you change. So they're totally managing it. It's to me and I, it to me it's like almost like VIP medicine where if you just go to your doctor once a year, you're really not really managing your health. But if you're in a VIP health program and you're seeing him quarterly and you're doing testing and he's giving you advice and you're actually following it, I think you can massively affect. the, future of the business, if you do go up, in in price, you're not gonna go up. Tremendous. You're not gonna go up as much as the next guy. so in it, back to that brother-in-law, I mean, do you think the space is still a good space?

James Blain 40:33

or are you telling him to get out?

Tim Delaney 40:36

I mean, it's a tough business, right? No question. you know, put it this way, we don't do anything other than insure transportation here at Lance, so I'm probably biased, right? We're, we're into the end. you know, what I would say I worry about in, uh, let's focus on, on passenger transportation is. Uh, you know, I, like I said, we don't control the costs. We're just in charge of kind of pooling them and reflecting them back into the risk pool. but it has been a long time, 14 years, and some of the, you know, the pricing, over the years when I speak with our insureds, you know, they're not lying when they say, you know, this is, this is, this is very hard for us, right? This is creating a huge challenge for the business. So, what I worry about is, uh, insurance being one part, uh, you know, fuel is always a thing, but, um, the driver shortage, right? Where I think that put puts upward pressure on wages for drivers, um, all, all the different costs that are going up for them. At what point do we start to hit, you know, on that price elasticity of demand curve, right? Like, at what point do we start to break demand

Ken Lucci 41:48

Oh, we're there. We're

James Blain 41:48

Oh, we're

Ken Lucci 41:49

certain, we're there in certain segments, Uh, we are absolutely there in sedans and SUVs because we lack efficiency and we lack technology. So in other words, if you could get your sed if the sedan fleets in the industry were connected and we knew that in I'm empty in LaGuardia and I'm empty for the next three hours I'm available. The other piece of the puzzle is it. It is, it is. But the good news is there are areas where the elasticity is still, there's plenty of room, but it's being ruined by people that don't know their financials and they bid things low ball to get the money off the table. I'll give you one example. is a corporate shuttle program with a defense contractor we helped up in, in, uh, Massachusetts where the operator was kicked off because the corporation checked his DOT and his DOT was suspended. And and when we, when they went out to bid, they were shocked at how expensive it was to get really solid operators. And I said, well, look what's important to you. You know, you could, you're putting 40 of your employees on this shuttle bus. Do you want a low ball number or do you want the best provider in the market that's got the best lines, the best insurance, et cetera? You're gonna have to pay for it. So there is some elasticity left in and it's in the larger equipment,

Tim Delaney 43:10

Yeah. And I, I think that that movement up the curve, you know, is a, is a slow progression, right? I mean, like certain, you know, like if you're, you know, uh, a group from upstate New York, let's say, who wants to charter a bus to bring a bunch of people down to a Broadway show in Manhattan, I'm making up the, the prices. But like, when that was 2000, you know, for that trip everybody's in be like at 3000, you know, maybe it's, you know, starts to break down a little bit and at 5,000 they're not gonna do it. They're gonna take the train, they're gonna do something else. And I feel like we're, we're biting away at the margins of some of that stuff. Um, and that's, anyway, that's what I, what I

James Blain 43:49

Well, but I think, I think one of the big things and, and being involved with, you know, the chauffer transportation, uh, show for Transportation association in Jersey, say that two times fast and Mike Rose and all the people over there. You know, I think one of the other big things that we're dealing with is that we have a lot of gypsy operations. That are not carrying the right limits, that are not doing what they're supposed to do, that are willing to take those trips at a much lower cost because they're not having to pay for these things to operate correctly. And I think part of what happens there is that kind of starts pulling on and tugging on the bottom of the market and you start getting an issue. So I think, I think what we found, and Ken, I think you'd agree, I think we also kind of seem to be in, in a storm, so to speak, where you've got all of these different elements that have all come together. We have kind of your gypsy operators, you've got kind of what's happened with the claims going up, all of it. Yeah. You've got Uber. So I think one of the, one of the things that I would ask is, you know, like most storms, hopefully it'll pass, but sometimes they linger. Is this something to where we see this passing soon? You know, and, and I, I know this is the the tough question because everybody wants to give the fun answer, but you know, they've been going up for 14 years. As an operator, if you're talking to that brother-in-law, and again, you like this brother-in-law, um, are you warning him of, Hey, I think it's gonna keep moving. You better be ready, you better start planning for that to keep moving. Or do you see kind of an edge of a storm or, or do you have kind of hope that at some point that'll slow down,

Tim Delaney 45:27

Well, I don't think I, I look at the environment as something that's gonna pass, right? It's something, you know, that's definitely evolving. So, you know, the question is, is there still money to be made? And I think, um, I. Uh, you know, a lot of guys that, that you serve, uh, have proven yes, right? There's still parts of the marketplace, whether it's corporate work or shuttles, to where that high level of service is needed. And, and, and the, you know, the price is, the price is right and they can, they can still make money. Um, and I think in order to, to continue that success, they have to buttress that, you know, or support that with all the things that we said with the drivers and technology and, and, you know, um, you know, all the things that Ken has told everybody about, you know, watching every penny, uh, is another key part of the equation. so yeah, I think, you know, the, the answer would almost be different for a lot of companies and, and markets. But in the big picture, what we're talking about are the luxury transportation providers who I think have no doubt proven, their staying power through what was most, the most, you know, insane. period of COVID, right? Like if you, if we can all survive that, we can survive anything. Right? And, you know, you know the thing that, the thing that you would put out on the horizon, right? Which I hate talking about, but you, you know, you have to, is like, all right, but, but eventually all the cars are gonna be driving themselves, right? And, and that's going on what, you know, probably 10, 12 years of talk about it, and we're still saying 10, 12 years, I, I don't, you know, I don't, I don't see any reason I would leave a business now because of that. Right. I still think, there's a lot

James Blain 47:07

No. and even, even then, businesses will evolve, right? I don't see our industry going anywhere. Even with self-driving.

Ken Lucci 47:13

Well, you have to evolve, right? I mean, there's still guys that build covered wagons and buggy whips, but many of them, that's how most of the automotive companies started, is they used to be horse drawn carriage companies. But at the end of the day, the disruption is also gonna come shake out to opportunity. To me, the most important thing is you have to be financially viable to survive any of this. You have to know your numbers, whether you're a $250,000 operator or a $25 million operator, you have to brace for the storm, you know, uh, uh, owned water from property before. And at the end of the day, the values are still there, even though the costs are tremendously high, meaning the flood insurance, the wind insurance, you know, so, but at the end of the day, you've gotta be profitable to do it. So my answer when I talk to operators is, you know, some revenues just not, some trips are just not worth doing. You need to know your profit margins and your cost structure, and you need to make a decision not to move that piece of equipment unless you are gonna have a margin, gross margin of x. You know, I I, I have a great operator out in the, out in the, the Midwest whose motor coaches, you know, sit in the wintertime a little bit. I'm like, well, you get a couple of choices. You could, you could certainly move them to southern climates. You know, there, there are people in Arizona looking for 'em all the time. I said, but if you put them out to your same client in January for 40% discount, you don't think they're gonna be looking for that discount in June.

Tim Delaney 48:49

Right.

Ken Lucci 48:50

So, and at the end of the day, you're gonna put out a 56 passenger mini bus motor coach that you said you spent 600 K for. You're gonna put it out for that. And all that has to happen is your driver has to swipe one of those doors and you're talking about a $20,000 loss. You you can't move a piece of equipment for the sake of moving it. You have to move it profitably all the time.

Tim Delaney 49:11

Yep.

Ken Lucci 49:13

So, you know, we've hit, we've, we've touched on a lot. Okay? And number one, we wanted you on here because let's face it, Lancer is the best in the business. You've got the staying power in the business. You also have a tremendous commitment to the industry. So, you know, for all the operators out there, number one, don't blame your insurance carrier or your insurance broker. Now, having said that, there are brokers that work extremely hard for their clients. You need one of those,

James Blain 49:44

Yeah, the, the broker makes a big difference, right? Just because a guy writes your home auto does not mean he has any

Ken Lucci 49:50

right? But your team, your team is incredibly responsive. So you need an incredibly responsive insurance partner. But understand the, the reasoning that the, the commercial insurance is going up is. The tot lack of tort reform, the nuclear verdicts, the cost of repairing equipment. So at the end of the day, if you as an operator are concerned about making a living, I don't think you have a choice but to put on that Apple watch, cut down the cholesterol and and manage your blood pressure. And to me, even a few car operators should have telematics and he should be managing it and they should be documenting the fact that they know what their stats are. Okay? Because to your point, the lawyers are really sophisticated. They're gonna ask you the question whether you have cameras and telematics, isn't it almost worse to have them and not use them because it could be used against you in court.

Tim Delaney 50:53

It is, it is, it's definitely worse. but in the big picture, you know, uh, 15 years ago, or even 20 years ago when, you know, drive cam started and, you know, we made a big push to get those out. and then all the iterations that came since we've, you know, it's, nobody can know every product that's out there, but we try to stay up to date on, you know, what all the different systems do. You know, even seven or eight years ago, It was big for us to see that somebody was willing to invest in that and be worried, you know, be, be worried enough about claims to do that. I, I, I would say, if you don't wanna describe it this way now, you will have to within a couple years, like, if you're not utilizing all of that stuff, from a safety standpoint, at the very least cameras, and potentially telematics to, to manage everybody's behavior, you might not be able to get insurance at a certain point.

Ken Lucci 51:45

I think it's coming down to that, isn't it?

James Blain 51:48

Well, and I think,

Tim Delaney 51:50

So it, it's, it's becoming more of a survival thing than, you know, than like a, a luxury of, of, uh, safety management.

James Blain 51:57

I think the other side of that though, and this is something I see all the time, is I think a lot of people like the idea of, I'm gonna put in telematics and everything's gonna be better. Right. And I think, you know, when we, when we talk to people about their safety programs and we're helping design safety programs, we look at it through a three piece lens. The world that we live in of the training is the only proactive world you have a camera. Telematics can only tell you what is actually happening or happened on the road, and I tell people all the time, you know it's great that you have a video of how that driver crashed. It's horrible. You didn't train him well. So he could have avoided it, right? And so I think at least in our world, we always tell people you've got kind of these, these different areas that you live in. And where we found the most effective companies, and, and Tim, I'm sure you've seen the same thing, the ones that have been most effectively able to manage things are the ones that have that proactive approach of, we're gonna implement a training program, we're gonna do exactly what we need, and then we're gonna use those telematics, those cameras really as our gameplay footage, right? Best teams in the world. What do they do? As soon as the Friday night lights turn off right there to the cameras. Okay. What do we get right? What do we get wrong? How do we adjust our training? How do we change practice next week to fix it?

Ken Lucci 53:17

They they make safety muscle memory. They

James Blain 53:19

They make safety muscle memory. So I guess the, the other thing for me is I think there's so many people, and I'm gonna give you a compliment, Tim, you guys do an incredible job of this because you guys, you know, a lot of people think, oh, well, my insurance company wants to look at my safety program. They're just looking for what I'm getting wrong. Your people, when they come in and they're doing these safety audits, are giving them advice, are helping them put programs in place, are helping 'em do things right? You know, I, I've gotten several emails where it's, Hey, you know, I, you know, we, we met with an operator they'd be interested in doing with this. Um, we'd love to have you help them with X, Y, Z. Here's a warm introduction to where they're taking steps to help that company run better. I think that really kind of sets in my mind the right trend for the industry and that we see operators with this idea of, oh, well if I report anything to the insurance company, if I do anything at all, everything's gonna adjust my rate. But I wanted to compliment you and that your team does a really good job in advocating and working with them. And I'd like to give you a second if you would tell us a little bit about kind of that process and some of the resources and the things you guys do, because it truly is something that sets Lancer apart.

Ken Lucci 54:32

Yeah.

Tim Delaney 54:33

Well, there's a bunch of stuff there. You know, we have a, a big, uh, team of loss control folks around the country. Um, and we believe, uh, sincerely that when you partner with somebody as an insurance company, right, we're selling you a promise that we're gonna be around to pay those claims. And, and, um. And handle those claims competently. transportation is unique in that, you know, it's, it's highly regulated. It's a type of insurance that gets used a lot, right? And, um, and it's customer facing, which are all, are all tough dynamics compared to a lot of different industries. So, you know, all the value added services that we offer all of those people out in the field. They're doing two things. You know, they are there to gather information, you know, for us, like, do you have cameras? Yes or no? Do you have a safety program? Do you have, you know, there's, um, a lot of simple things. Are you compliant, you know, with government regulations, that's a nice, you know, box to check sometimes. so, so,

Ken Lucci 55:35

You'd think.

Tim Delaney 55:36

right. So there's simple things like that, but there's other parts to it, right? Um, because we get to interact with so many transportation companies and see best practices at, at what works at one versus versus another and everything else, you know, we have a unique ability to share that, right? And spread that amongst our insured base. Uh, all the lessons that we've learned over time. Most of those lessons learned through some pretty heavy scar tissue, by the way. Um, so, you know, why would we, why wouldn't we share that value with everybody that we have when it's, you know, it serves both of our interests in keeping keeping claims down. and then, you know, the last part of it is. you know, insurance is an unsatisfying product to buy, right? It's something you buy that you hope you never use. so, uh, the relationship comes into that in, in a big way, right? Because you might have an insured who, uh, you know, doesn't have any claims for a bunch of years, and then has a big one. And when you, when you have, when you have a bad claim, and your company and your personal assets are at risk, that's a really bad day, you wanna actually have a, a face to put to that, to know who to call and have confidence that when you call, they're gonna show up and, and handle it and protect those assets and your, your firm's reputation and your people, and all that stuff. So we try to build that bridge early on before the claim happens. so that when we do, when, when it does happen, everything, you know, runs seamlessly. And for, for a line of insurance that gets used as much as, as auto and, and for as much of a crisis as some of the big claims can be. you know, we've just found over time. It doesn't work as well anyway, any other way. Right. And the only thing I would add to that, is that, you know, our, our claims handling is, you know, one thing we didn't really, touch on, which is probably the most important thing of anything in terms of survival for the long term. Um, you know, the same way these guys have to, uh, constantly evolve in technology they use and, and managing their fleets and everything. We have to constantly evolve, uh, to combat the plaintiff's bar on all these claims. Right? So, um, that's a long conversation in itself, but that's, that's what we spend a lot of time on and a lot it, it's moving into data analytics and, and AI and all that stuff now, but, that side of the fence is, is evolving just as fast, as all the other things that we're talking about. and, and has to in order, in order to stay in it for the long term.

Ken Lucci 58:02

Listen, which no dose you are, there have been the carriers that have come and gone, and you guys are the, the, the, the, castle in the, in the industry, and So let's just wrap up a couple of things. You know, for if you're an operator out there, this is a must do, not a, not a, not a, not a nice to have. This is a must do. is go all, go all in on safety, make it a part of your culture, as James said. Make it muscle memory. Don't just check off the box with telematics and cameras. Use all of the tools on a daily basis. You know, the last thing I wanted to say is safety cells. If you have a client and you're doing a client presentation and you are able to show all of the five star things you do across the board on safety and duty of care, and you're actually able to show documentation from the telematics system on safe driving and the things that you've improved in your business, that stuff sells to the right client. If you are dealing with a client that all they want is low price and they don't care about the safety of your, of their employees or their guests or their association members, I think you ought to think about not doing business with them. And, and safety is one of the value propositions that 100% sells, and we own it in the space. So, um, I think everybody out there from an operator perspective needs to understand that if you are a safe provider and you are doing all of the right things and using all the tools, the results will bear fruit. And the most, corporate clients that pay the most, or clients in general that appreciate value are gonna take you more seriously than a, than a fly by night operator.

Tim Delaney 59:50

I agree completely. I, you know, I would add, to anybody watching, you have to be very careful not to guarantee safety, right? Because that's not a thing in the world. But, but highlighting all of the preventative steps that you take, are, are, are really what are, what distinguishing you from the lower end of the market and, and, you know, uh, uh, the other options that people have for transportation. So I agree with that completely.

James Blain 1:00:14

Tim, I think we're gonna have to have you back on my friend, because

Ken Lucci 1:00:17

At least once

James Blain 1:00:18

we, we've got at least 10 more topics. We could probably spend another hour on each, so.

Tim Delaney 1:00:24

any time I'm, I'm in. I appreciate you guys having me and I really appreciate. Uh, everything you guys push out into the market message wise, through this avenue and also through the businesses that that you guys have, so

James Blain 1:00:37

Well, we appreciate you just as much, Tim.

Ken Lucci 1:00:40

All we try to do is the same thing you guys do, Tim. It's add value. That's all we try to do. And, and, and, hopefully the, hopefully the operators, you know, that, that have got their wealth tied up and they are, they really take this industry seriously. Will, will listen. So thanks again for, uh, for joining us today.

1:01:00

Thank you for listening to the ground transportation podcast. If you enjoyed this episode, please remember to subscribe to the show on apple, Spotify, YouTube, or wherever you get your podcasts. For more information about PAX training and to contact James, go to PAX training.com. And for more information about driving transactions and to contact Ken, Go to driving transactions.com. We'll see you next time on the ground transportation podcast.