What are Alternative Risk Programs (ARPs)?

Alternative Risk Programs by Great West Casualty Company are designed for trucking companies to manage and finance their risk efficiently. These programs offer options like self-insured retention, large deductible policies, and captives, focusing on balancing financial risk from accidents with insurance costs.

Alternative Risk Programs | Great West Casualty Company

Q: How does participation in an Alternative Risk Program impact premiums compared to standard insurance?

Participation in an Alternative Risk Program can impact premiums differently than standard insurance plans. In ARPs, premiums are often more reflective of a company's specific risk profile and loss history. Companies with strong safety records and effective risk management practices may benefit from lower premiums compared to standard insurance, where premiums are typically based on broader market rates and risk categories. This can result in more tailored and potentially cost-effective premium structures for companies enrolled in ARPs.

STRATEGIC RISK MANAGEMENT

BALANCING FINANCIAL RISK + COST

Risk financing is finding the right balance between protecting your trucking company from the financial risk of an accident and the cost of your insurance.

Great West has more than 65 years of experience helping trucking companies finance their risk through options like self-insured retention policies, large deductible policies, excess limits policies, and captive options among others.

MOTOR CARRIER STRATEGIES

WHAT IS RISK FINANCING?

As a motor carrier, financing risk is an important component of your overall risk management strategy. You’ll find your risk control and risk finance work in tandem. While risk control is the systematic approach to identifying and reducing the frequency and severity of operational losses, risk financing is a technique you can employ to efficiently pay for losses.

By financing your risk, your overall goal is to pay for losses in the most effective and least costly way available.

Three semi trucks in front of mountains - risk financing

FACTORS TO CONSIDER

WHEN FINANCING RISK

For most motor carriers, getting the most out of risk financing is based on:

Your trucking company’s ability to control losses
Your interest in actively managing your insurance costs
Your ability to balance your risk tolerance and cash flow

When you’re ready to take greater control of managing your trucking company’s insurance costs, Great West provides a variety of effective ways to finance risk.

FINANCING RISK THROUGH CAPTIVES

POWERTECH® ELITE CAPTIVE

PowerTech® Elite is a member-owned captive program for best-in-class fleets that want to play a more active role in their risk management.

Our PowerTech® Elite Captive is a good fit for trucking companies focused on long-term financial strength and stability. You must have a management team committed to safety, solid safety programs in place, and loss histories that are better than average. A long-term mindset for managing your overall cost of risk is key to this risk financing option.

With more than 20 years of experience creating captive programs for trucking companies, Great West, in partnership with Alternate Risk Underwriting LLC, is proud to be your partner in leveraging this risk management approach.

Red semi truck - risk financing captives

USING RETENTIONS TO FINANCE RISK

SELF-INSURED RETENTION OPTIONS

The ultimate focus of self-insured retention, commonly called an SIR, is loss prevention. A self-insured retention may not be the right option for all motor carriers, but it can have financial advantages for trucking companies that are risk tolerant and meet certain qualifications.

If you have a safety culture that promotes the safe operations of your truckline and a willingness to assume more risk, this may be an attractive option to finance your risk.

People often confuse deductibles and self-insured retention plans, but there is a notable difference. While a deductible reduces the amount of insurance available to pay a claim, a policy with an SIR does not.

For example, a $500,000 policy with a $50,000 deductible means that you would be responsible for the first $50,000 loss after an incident and the insurance carrier would be responsible for the remaining amount. When a loss occurs under an SIR, you have the full $500,000 of coverage. Under this policy, Great West settles the claim, then bills you for the total amount of the retention.

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RISK FINANCING THROUGH DEDUCTIBLES

LARGE DEDUCTIBLE OPTIONS

If you’re a motor carrier that runs a safety-minded workplace and you’re focused on cost control, Great West provides large deductible risk financing options. These options are tailored to motor carriers who want to assume more risk for their operations.

A large deductible plan means your company funds the “first layer” of a loss. Your trucking company purchases Workers Compensation policy or truck policy with a minimum deductible. When a loss occurs, Great West provides administrative and claim-handling services, and your trucking company reimburses Great West for any losses below the per-claim deductible you’ve selected. Deductible options for Workers Compensation start at $75,000. For truck insurance, they start at $25,000.

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FINANCING RISK THROUGH HIGHER LIMITS

EXCESS LIMITS OPTIONS

When your trucking company is faced with an accident, protecting your assets is a top priority. An excess limits policy is a risk financing strategy that can help you do just that.

Whether you’re a large motor carrier or an owner-operator, an excess limits policy is designed to help you manage the financial risk of your trucking company facing a catastrophic loss.

An excess limits policy increases your underlying Auto Liability or General Liability policy to a greater dollar value — up to $5 million total in coverage. An excess limits option doesn’t change your liability policy other than making the coverage limit higher. The same terms and conditions as the underlying policy apply.

Trucking businesses can face large payouts as the result of incidents like an accident or injury settlement — sometimes reaching into the millions of dollars. These can easily exceed the limits of a standard liability policy. That’s why many trucking companies leverage Excess Limits policies to reduce their financial risk of having to pay large, unexpected out-of-pocket expenses.

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Happy trucker driving semi - excess limits options

EMPLOYING BUDGET PREDICTABILITY

GUARANTEED COST POLICIES

If you’re a trucking company that is budget conscious and prefers to keep your insurance costs stable, a guaranteed cost Workers Comp policy is a risk financing option that may be a good fit for you.

A guaranteed cost plan is a Workers Compensation insurance policy that is not subject to adjustment due to losses that occur during the policy term.

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Are there limitations or downsides to Alternative Risk Programs that trucking companies should be aware of?

Alternative Risk Programs (ARPs) by Great West Casualty Company, while offering advantages, may have limitations or downsides for some trucking companies. These programs, including self-insured retention and large deductible options, require companies to balance risk tolerance and cash flow. ARPs might not be ideal for all, especially if a company is not prepared to actively manage its insurance costs or assume higher levels of financial responsibility for losses.

How can trucking companies determine if an Alternative Risk Program is the right choice for their insurance needs?

Trucking companies can determine if an Alternative Risk Program is right for them by assessing their ability to control losses, interest in managing insurance costs, and effectiveness of balancing risk tolerance with cash flow. Companies should consider their readiness to take greater control over insurance costs and whether their safety culture supports effective risk management.

Are there potential savings or advantages for trucking companies enrolled in Alternative Risk Programs over traditional insurance plans?

Trucking companies enrolled in Alternative Risk Programs (ARPs) can potentially realize savings and advantages over traditional insurance plans. ARPs often allow for more control over insurance costs and can offer financial incentives for maintaining a strong safety record and minimizing losses. These programs are tailored to align with a company's specific risk tolerance and operational needs, potentially leading to more cost-effective risk management strategies.

How does participation in an Alternative Risk Program impact premiums compared to standard insurance?

Participation in an Alternative Risk Program (ARP) can impact premiums differently than standard insurance plans do. In ARPs, premiums are often more reflective of a company's specific risk profile and loss history. Companies with strong safety records and effective risk management practices may benefit from lower premiums compared to standard insurance, which typically bases premiums on broader market rates and risk categories. This can result in more tailored and potentially cost-effective premium structures for companies enrolled in ARPs.