Due to the hardening market, insurance companies have been cracking down on their underwriting. Businesses today face stricter guidelines and rate increases. Commercial vehicles have not escaped this trend, and business owners are struggling to keep increased costs at a minimum while still maintaining the same standards and coverage. It is getting difficult as cost increases.

Cost is rising due to various factors, such as the loss history of a particular risk or class of business. Sand and gravel carriers have always been more expensive to insure than, say, a small contractor. A specific region could have been hit with more claims than another due to a freezing winter causing more slippery roads and trucks in ditches. However, another cause of increased rates is simply the drivers of the vehicles.

Insurance companies are tightening their underwriting to exclude drivers more likely to be involved in a claim. Companies are excluding drivers, non-renewing current policies, and simply declining new commercial fleet policies with a history of bad driving.

It Can Happen to You

While you read this article, you may be thinking, "Why would this happen to me? I've been with my carrier for more than five years and have never submitted an auto claim!" That simply doesn't matter. Insurance companies view good accounts negatively when a red flag shoots up next to a driver.

A driver will be marked if he has had a speeding ticket for over 15 mph, a chargeable accident, and a suspension. Not to mention DUI, crossing the median, and erratic driving. Even if a violation does not occur during working hours, the companies still note it, and they go back three to five years.

Max Bowyer of Universal Plumbing, currently has 11 commercial vehicles. Last fall, he ran into a problem when hiring a new employee.

"The guy had all the work experience I needed and seemed to lead a steady life," Bowyer said. "I had him added to my auto policy, and two weeks later, we were being non-renewed! I had never had an auto claim before, and I paid a lot of money in premiums, so I just couldn't understand it. My agent explained it was because my new employee had a driving record of two at-fault accidents and a suspension."

What happened to Max is common. Employers are used to looking into work history and experience on the job; they don't even consider the applicant's driving record. What is an employer to do?

Find Out Before Hiring

Find out before you hire new employees. This is just as critical as having reliable references. Request MVRs to be run directly from your agent's office or from the insurance company. If they cannot get the reports, have your employee contact the Department of Motor Vehicles within your state. The fee for this is normally minimal and can save you a lot of hassle in the long run.

A lot of times, even the best of guys could have had problems with their driving record. Someone could have a ticket for speeding 19 mph over the limit, but they could have been driving on the highway and following traffic. Someone else could have slid on ice and hit the car in front of them at a stoplight, causing an at-fault accident. Neither of these violations is shocking; they are simply bad luck.

When it's the case of one bad violation or a few minor ones (lights not working, seatbelt, minor speed 1-10 mph, etc.), I would suggest going to your insurance agent and letting them know to find out if the driver is acceptable. If your other drivers are clean, it will probably be acceptable. But if all of your drivers make up of "exceptions," be ready for a negative reply.

For major violations, realize that although the company will add him on at your request, they will not let it go unnoticed. Be prepared for a significant rate increase or even to find another carrier.

In Max's case, he let the new employee go. The insurance company rescinded the non-renewal, and he continued with his day-to-day operations. "I don't have time to waste messing around with the insurance company," he said. They'll either be a good driver or not work for me. I don't want my company to suffer because of someone I don't even have a tie to."

What About Current Drivers?

The next thought should be, "What happens if it's someone who is a current driver?" Your best electrician gets a DUI over the weekend, and you know the insurance company won't like it. You can't let him go; he is too valuable an employee. Now what?

No matter what happens, you will lose some money on this deal. One way to handle this is to stay with your current company until they find out and non-renew you. It won't be long coming. Then, you can purchase insurance through another company, one that is a little less "strict" with its guidelines.

Be prepared to pay for their leniency. Moving to a non-standard carrier will increase rates by at least 30%. That is a very expensive move because someone had too much fun one night and didn't bother calling a taxi.

Some insurance companies now offer workshops to their commercial auto clients, where employees will go to keep up to date with company guidelines and safety requirements. Normally, these courses cost little to the employer yet account for much with the insurance company. Workers will hear information on state laws, claim history, and tips on preventing accidents. You should contact your local agent to find out if your insurance company offers such a program.

A more economical route to take is to hire an apprentice driver for the worker. Have the worker excluded from the policy (meaning he would not be able to drive any of the vehicles, under any circumstance), and hire someone to drive him around from job to job.

Yes, you are paying more for this additional employee. But, as he sticks to your worker, he also learns the trade. One day your worker will have this off of his record, and then you'll have two full-fledged employees getting the work done.

A delicate situation arises when it's the owner, or member of the owner's family, whose driving record comes into question. Some insurance companies will let the owner slide by if it's not too bad; others won't. Your best bet on that is to speak to your agent, and try to work something out.

Each insurance company has various views and handles various situations and scenarios differently.

"This is such a tough line of business and a loss leader," said Barbara Callen, commercial underwriter for Zurich Small Business Insurance. "I would...ask that the offending driver be excluded. If that doesn't work, we'll refuse to write the auto portion. We can't take chances."

No Surprises

Even good guys can make mistakes. The idea is to weed out the hopeless cases and leave only the necessary "bad drivers" around.

If every single employee has something on his driving record, it is safe to assume that you have had some auto claims within the last five years. The insurance companies do not want claims that could have possibly been prevented from happening, by simple underwriting procedures. The insurance company wants to save money in losses, and you the employer want to save money on premiums.

Review your drivers and make careful decisions on who gets hired and who doesn't. Even a really good guy can be a bad driver, and you don't want your business to be penalized for that.

Screen new employees carefully, and make your standards clear to your current employees. That way, no one will be surprised at renewal time.