What is making DSP Insurance so expensive?

• Nuclear Verdicts – since the mid 90’s, our country’s legal system has experienced nuclear verdicts. Today, we consider a nuclear verdict any case where a jury awards $10mm+ in damages. Verdicts like this have been prevalent in the traditional, OTR trucking industry, which has impacted the Final Mile Industry as well. It is commonplace for plaintiff’s attorneys to seek full policy limits for bodily injury and emotional damages claims. 

• Social Inflation – perhaps the undercurrent driving Nuclear Verdicts is Social Inflation. This concept refers to the rising costs of insurance claims above and beyond the inflation the rest of society is feeling. An ever-increasing litigious environment, significant jury awards, and changing societal views are all contributing factors to this concept. 

• Industry Unfamiliarity – another thing we regularly hear from clients is that one year as a DSP feels like five years anywhere else. It’s easy to forget the DSP model has only existed since 2018. At the time, there weren’t many large-scale opportunities for entrepreneurs to develop and operate 50+ unit logistics businesses. Amazon delivered that opportunity to society – seemingly overnight. Newsflash: the insurance industry is borderline archaic. It’s been quite the learning curve for insurance carriers, reinsurers, risk managers, etc. to try and wrap their arms around the final mile world.  

• Lack Of Controls – like anything, the DSP network has gotten safer with every iteration. If we compare the safety features in the vans of a 1.0 DSP to the DSPs of today, light years of progress has been made. Still, the system is imperfect. Dedicated, safe drivers are as hard to come by now as ever. There remain limitations on what safety technology in and outside of vans can accomplish.  Even with Amazon’s increased safety requirements, and safety incentives: stuff happens. 

So – how can you prepare your business to combat the tumultuous insurance market? Here are a few ideas:

• Dial in your hiring practices – the top insurance carriers want to see you going above and beyond Amazon’s expectations for who you allow behind the wheel of a vehicle 
• Run MVRs regularly – in the standard market, many insurance carriers expect MVR reviews semi-annually or quarterly. Amazon currently runs MVRs at hire and annually thereafter. There are continuous monitoring MVR services that exist, and they’re more affordable than you think
• Be prepared to explain large claims – as mentioned above, stuff happens. Don’t push bad incidents under the rug. Own them and be prepared to provide details to your agent about the accident. The right response to a bad claim can put your business in a favorable light in the eyes of underwriters
• Incentivize safety, and punish the lack thereof – the most successful employee safety incentive programs are not only full of carrots. As much as you should reward desired behavior, be prepared to cut undesired behavior off at the head. Safety is an investment worth making 

The insurance environment for Final Mile Contractors, namely DSPs, is very challenging. You don’t need to go it alone. OVD Final Mile was created to work towards a resolution to the insurance crisis businesses like yours are facing. We have several partners – within our industry, and outside of it – whose mission is the same. 

Reach out today so we can kick off the conversation.