Rural Transit Vehicle Insurance Study

NHTSA · 1984 · ROSA P / United States. Dept. of Transportation. Office of the Secretary

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Summary

This 1984 study, conducted by the Wisconsin Department of Transportation, addresses the adequacy, cost, and availability of vehicle insurance for rural transit organizations in Wisconsin. The research was motivated by concerns that these agencies might face difficulties obtaining coverage and the need to identify effective methods for managing insurance costs. The study specifically evaluated insurance programs, loss prevention practices, and alternative purchasing methods for 61 selected rural transit systems, including private nonprofits, county government agencies, shared-ride taxis, and tribal transit projects. The methodology relied on written surveys and oral interviews with 51 respondents from the study group. These organizations typically operated fleets of approximately 45 vehicles, serving primarily elderly and handicapped populations, with an average annual automobile insurance premium of $2,550. The researchers analyzed data on coverage types, liability limits, physical damage policies, and premium rates. To assess cost reasonableness, the study compared the premiums paid by participants against Insurance Services Office (ISO) manual rates, adjusting for differences in liability limits to establish a common basis for comparison. The findings indicate that current insurance coverage was generally adequate and readily available, with most participants paying reasonable rates during a "soft" insurance market period. However, the report recommends specific adjustments to policy structures. It advises purchasing liability limits of no less than $500,000, with a strong suggestion to consider $1 million limits. The study recommends deleting the "fellow employee" exclusion from policies to ensure proper indemnification and advises against purchasing medical payments coverage, which duplicates workers' compensation benefits. Regarding physical damage, comprehensive coverage was preferred over specified perils, and actual cash value coverage was deemed appropriate for most fleets, though stated value coverage was suggested for private nonprofits lacking replacement funds. Cost analysis revealed that local government agencies generally secured lower rates than private nonprofits, largely due to larger buying groups and more frequent competitive bidding. The significance of the study lies in its recommendations for proactive insurance management as the market shifts toward higher premiums. The report emphasizes that agencies should formalize competitive bidding every three to five years, expand their search for agents beyond immediate geographic areas, and improve loss prevention through rigorous driver hiring standards and training. Additionally, it suggests that rural transit agencies band together to create group insurance programs or associate with larger buying units to mitigate future cost increases and ensure continued coverage availability. These measures are intended to make agencies more attractive to insurers and secure long-term financial stability.

Key finding

Social service agencies paid reasonable insurance rates below ISO manual levels, but the study recommended increasing liability limits to $500,000 and adopting competitive bidding to mitigate expected premium increases.

Methodology

survey

Sample size: 61

Provenance

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• bus coach