Facility Association

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TRKINSURE

Well-Known Member
May 26, 2017
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Hi folks,

There's been some trend in many trucking operations binding with Nordic (aka The Facility Association) over the past couple of months. This is primarily due to the changes in the OAP 1 auto policy (in Ontario) which allows the consumer to opt out of DCPD (Direct Compensation Property Damage) via the OPCF 49. This change happened January 1, 2024.

DCPD responds to Not at Fault Accidents in Ontario and a couple other provinces (conditions apply)...

The cost for DCPD coverage through Facility can range from $15,000 - $30,000 after you factor in; List Price New of the vehicle, Accident/Out of Province/US Surcharges. This is what made Facility Association cost prohibited and would result in almost every carrier defaulting on their insurance premiums.

Now that you can OPT OUT of this coverage - the total BASE premium for a trucking company - without DCPD/Collision or Comprehensive, is approximately $6,031. ($2M Third Party Liability, Standard Accident Benefits, Uninsured Automobile & OPCF 44R Family Protection)

Carriers that are going the route of Facility Association will still need some sort of coverage on their own equipment (tractors/trailers) as well as cargo & CGL policies. There are several players in this space that offer Automobile Physical Damage, Motor Truck Cargo & CGL Policies - while I'm not going to go into detail regarding the pros/cons on these various players, I will help give you a cost breakdown:

Auto Physical Damage - rate is between 4% and 6% of the Actual Cash Value of the vehicles. ie; $150,000 tractor X 4% = $6,000

Motor Truck Cargo - depending on commodities, limits, how many trucks you operate and deductibles. Pricing between $1,800/unit - $3,500/unit.

CGL - typically is a FLAT rate of between $3,000 (for single o/o's) up to $7,500 for fleets.

So adding up costs:
Auto Liability $6,031
APD $6,000
MTC $3,500
CGL $3,000
Total $18,531

That pricing reflects pretty close to standard market rates (Intact, Northbridge, Old Republic, Aviva, Echelon, AIG, Economical, etc...).

I'm not advocating for people to jump ship to Facility Association, rather, I'm trying to illustrate an issue to the insurance companies so we can try and solve this issue. Under the Facility Association there is zero loss prevention that takes place and zero driver approvals (though there are restrictions on the APD & MTC forms).... Insurers put those rules in place to help protect themselves and the carriers they insure.

This is purely for informational purposes only. If anybody would like to speak in more detail on this, happy to walk through pros/cons of looking at an option such as this.
 
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TRKINSURE said:
I'm not advocating for people to jump ship to Facility Association, rather, I'm trying to illustrate an issue to the insurance companies so we can try and solve this issue. Under the Facility Association there is zero loss prevention that takes place and zero driver approvals (though there are restrictions on the APD & MTC forms).... Insurers put those rules in place to help protect themselves and the carriers they insure.

This is purely for informational purposes only. If anybody would like to speak in more detail on this, happy to walk through pros/cons of looking at an option such as this.
Click to expand...

Are you sure this won't be taken advantage of?

Trucking insurance markets are already in a mess and this just adds another dynamic to the mix.
 
This won’t end well, same price as general market without any of the oversight or controls put in place by insurers to limit losses…. We all know who will be lining up for this coverage, pre packaged corner cutting insurance.

Facility is meant to be an insurer of last resort, you should only be able to use it if you rejected by the general market and it shouldn’t be “cheap”. It should be somewhat punitive with more loss prevention and interventions so when a carrier exits they are able to enter the general market as a better/safer carrier.
 
TRKINSURE said:
Hi folks,

There's been some trend in many trucking operations binding with Nordic (aka The Facility Association) over the past couple of months. This is primarily due to the changes in the OAP 1 auto policy (in Ontario) which allows the consumer to opt out of DCPD (Direct Compensation Property Damage) via the OPCF 49. This change happened January 1, 2024.

DCPD responds to Not at Fault Accidents in Ontario and a couple other provinces (conditions apply)...

The cost for DCPD coverage through Facility can range from $15,000 - $30,000 after you factor in; List Price New of the vehicle, Accident/Out of Province/US Surcharges. This is what made Facility Association cost prohibited and would result in almost every carrier defaulting on their insurance premiums.

Now that you can OPT OUT of this coverage - the total BASE premium for a trucking company - without DCPD/Collision or Comprehensive, is approximately $6,031. ($2M Third Party Liability, Standard Accident Benefits, Uninsured Automobile & OPCF 44R Family Protection)

Carriers that are going the route of Facility Association will still need some sort of coverage on their own equipment (tractors/trailers) as well as cargo & CGL policies. There are several players in this space that offer Automobile Physical Damage, Motor Truck Cargo & CGL Policies - while I'm not going to go into detail regarding the pros/cons on these various players, I will help give you a cost breakdown:

Auto Physical Damage - rate is between 4% and 6% of the Actual Cash Value of the vehicles. ie; $150,000 tractor X 4% = $6,000

Motor Truck Cargo - depending on commodities, limits, how many trucks you operate and deductibles. Pricing between $1,800/unit - $3,500/unit.

CGL - typically is a FLAT rate of between $3,000 (for single o/o's) up to $7,500 for fleets.

So adding up costs:
Auto Liability $6,031
APD $6,000
MTC $3,500
CGL $3,000
Total $18,531

That pricing reflects pretty close to standard market rates (Intact, Northbridge, Old Republic, Aviva, Echelon, AIG, Economical, etc...).
Click to expand...

@TRKINSURE - now I'm curious - what if the carrier in facility chooses to simply run without some or all of Automobile Physical Damage, Motor Truck Cargo & CGL Policies ( or cheaps out on them)? What happens then?
 
thebluffs1 said:
@TRKINSURE - now I'm curious - what if the carrier in facility chooses to simply run without some or all of Automobile Physical Damage, Motor Truck Cargo & CGL Policies ( or cheaps out on them)? What happens then?
Click to expand...
Good question, if they try running without cargo - they get no loads (customers are going to want a COI).
If they go without phy dam, then they would have to outright own all their vehicles as the lessor/lien company’s would require proof of insurance.

In the event the carrier managed to get away with no phy dam, then they’re responsible for their costs for their own equipment which involves; towing, storage and debris removal. Which can easily exceed the cost of the repair to a truck.

Many of these products (auto phy dam and cargo) have a lot of warranties which restrict coverage or implement much higher deductibles. If the carrier is acceptable of these then they assume the risk - no problem. The issue is, many brokers aren’t reviewing the shortfalls which puts the carriers in a financial crunch when a loss occurs.
 
Ins-Broker said:
Are you sure this won't be taken advantage of?

Trucking insurance markets are already in a mess and this just adds another dynamic to the mix.
Click to expand...
100% you’ve likely seen this too! The same folks opting out of WSIB are the ones lining up for Nordic.
But bigger picture, yes the insurers need to get on board to combat this. Driver approvals is one of the biggest pain points of most carriers. Longevity doesn’t equate to better driving.
I think the insurance industry needs to figure out how to get qualified individuals on their policies, without relying on a 3 year rule.
That, I don’t have the answer to. Unfortunately, but I think we can all agree; too many unqualified drivers are on the road today.
 
TRKINSURE said:
Good question, if they try running without cargo - they get no loads (customers are going to want a COI).
If they go without phy dam, then they would have to outright own all their vehicles as the lessor/lien company’s would require proof of insurance.

In the event the carrier managed to get away with no phy dam, then they’re responsible for their costs for their own equipment which involves; towing, storage and debris removal. Which can easily exceed the cost of the repair to a truck.

Many of these products (auto phy dam and cargo) have a lot of warranties which restrict coverage or implement much higher deductibles. If the carrier is acceptable of these then they assume the risk - no problem. The issue is, many brokers aren’t reviewing the shortfalls which puts the carriers in a financial crunch when a loss occurs.
Click to expand...
Given the propensity of new entrants to the market which take other compliance short cuts- driver payroll, WSIB etc, who's to say they just won't fake the certificate to show cargo coverage - or different limits etc?
I'm not convinced that even requesting them from a broker is sufficent to prevent fraud, given some of the actions of insurance brokers recently.(No disrespect intended to any good insurance brokers, some of whom are my friends)
 
Some brokers are in on the scam for sure. (not all of course, great folks) but there are a few companies that when it comes across, I dont trust it.
 
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thebluffs1 said:
Given the propensity of new entrants to the market which take other compliance short cuts- driver payroll, WSIB etc, who's to say they just won't fake the certificate to show cargo coverage - or different limits etc?
I'm not convinced that even requesting them from a broker is sufficent to prevent fraud, given some of the actions of insurance brokers recently.(No disrespect intended to any good insurance brokers, some of whom are my friends)
Click to expand...
Well than you need to avoid those brokers, period!!
 
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