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Tow truck operators seek relief on commercial vehicle insurance as business tumbles


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Tow truck operators in Ontario are seeking a reduction in monthly commercial auto insurance premiums as fewer cars on the roads during the novel coronavirus outbreak have left drivers sitting idle.

Last month, two major insurers – Aviva Canada and Intact Financial Corp. – announced financial relief for customers with commercial vehicles. The measures include premium rebates, allowing customers to reduce coverage limits and flexible payment terms.

But in order to receive rebate credits, many policies require vehicles to be parked for a minimum of 30 days, which towing companies say is not a viable option for their sector.

As a result, the majority of tow truck companies in Ontario are left paying thousands of dollars in monthly premiums when business is at an all-time low.

“Failure to reduce insurance premiums now for towers during the COVID-19 pandemic could have a catastrophic impact on their future viability and service,” said Mark Graves, president of the Provincial Towing Association of Ontario (PTAO).

The PTAO, which represents more than 180 towing and recovery companies in Ontario, has reached out to insurers as well as government officials and industry associations to address the hole in insurance relief.

The relief measures offered by Intact for commercial trucking clients – which include tow truck operators – include: premium adjustments for small and medium-sized businesses that are now closed or have seen business severely affected, premium adjustments for vehicles stored or used in different ways and suspending coverage for trucks and trailers while they are idle or parked.

Meanwhile, Aviva Canada announced in a letter on April 16 that commercial auto insurance policy holders could receive premium rebates if their vehicles have been taken off the road.

But Mr. Graves said a large percentage of tow truck operators do not qualify for a reduction in coverage because they finance their truck purchases and the leasing agreements do not allow them to remove insurance coverage even if they are parked.

As well, smaller companies are not able to simply park a portion of their fleet because each truck has a specialized purpose for towing different types of vehicles. Only large companies have multiple trucks for the same types of towing services.

Tow truck operator Mike Gassum, who owns North Algonquin Towing with his wife Tina Moore, found himself in the latter group. Based in Pembroke, Ont., he operates 11 trucks and trailers for the upper Ottawa Valley region, with each vehicle having different capabilities for towing and collisions.

Since the coronavirus lockdown began in mid-March, Mr. Gassum’s towing for small car and auto-club businesses has plummeted by 90 per cent. Earlier on March 8, Mr. Gassum renewed his annual insurance policy for $90,000. He paid the initial deposit of $12,000, as well as his first monthly payment of $6,900.

Then as the province began to shut down, non-commercial auto traffic rapidly came to a halt – declining between 80 per cent to 90 per cent. Mr. Gassum let go of two drivers and a mechanic and reached out to his insurance company to ask about relief measures.

“There was immediate drop in our service call volume and revenue,” Mr. Gassum said. “I knew I would be able to weather the storm short term – but the only thing threatening our viability, notwithstanding the $20,000 payment on the renewal, was the upcoming $6,900 payment for April.”

The only option he was given was to “park” some trucks to reduce insurance. But for a small rural company – where each truck fulfills a different role for towing – he doesn’t have the option to reduce his fleet.

In an e-mail to The Globe and Mail, Intact said tow operators should reach out to brokers to “discuss the available relief options such as flexible payments or deferrals, even if they are not parking vehicles.”

Aviva said in an e-mail that operators are able to “amend their coverages to reflect changes in exposures as a result of provincial shut downs”

However, Mr. Graves says accumulating deferred expenses is not a solution and could “cripple tow operators’ sustainability in Ontario."

Insurance companies base premiums largely on the service calls that tow operators receive, and the risk factor associated with providing service for those calls, Mr. Graves said. With fewer calls, the reduced risk could be factored into offering premium reductions.

Insurers need to apply a ratio discount based on a company’s revenue stream, said Herb Vink, owner of Herb’s Towing and Recovery in Cornwall, Ont., who has experienced a 65-per-cent decline in business since COVID-19 – the largest drop he has seen in the 60-year history of the company.

“Insurers need to trim the shock to the industry where the volumes have decreased dramatically,” Mr. Vink said. “There is some permanency that is going to come out of this [pandemic] and we may not see business recover fully for 24 to 36 months.”


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