GOING BARE: It's an insurance expression used to describe a company that has limited or no insurance coverage for some kinds of potential losses. Increasingly, it's also a term that is working it’s way into the vocabulary of the trucking industry. Property and casualty insur­ ance premiums have risen broadly…In some cases by as much as 1000%. Still, the idea of "going bare" is hardly a comforting notion in an era when abundant insurance protection has often been prudent. A liti­gious society, toxic waste, and the inclination of both judges and juries to reinterpret the legal principles of fault -- all these forces have underscored the need for comprehensive and hefty insurance protec­tion. Now, it's very hard to come by. In previous reports, we've talked about the highly cyclical character of the property and casualty insurance industry. What's happening and where are we headed? Here's a number that tells much of the story. Last year the insurance Indus­ try experienced pre-tax operating losses of about $3.5 billion. Those losses originated from ruinous rate cuts during the previous five years…rate levels that were often absurdly below rational underwriting standards. The sheer scope of these financial losses suggests that a new cycle of rate increases is inevitable. The availability of coverage for truckers is now a major industry concern.

WHERE ARE THE LAWS OF SUPPLY .AND DEMAND? That's a question we hear often today. With insurance premiums moving up, why haven't more providers entered the field? The answer lies in the very nature of our highly regulated industry. Simply put, we have an industry-wide capacity shortage caused because many major providers have sold coverage up to their regulated limit. State insurance departments regulate insurers to make certain that pol icy holder premiums are paid off. One of the most common criteria of an insurer's sound­ ness is called the risk ratio. Basically it relates net premiums written to the firm's "surplus," a term that roughly equates the net worth. The basic rule of thumb is that this premiums-to-surplus ratio should be no more than three to one. Here's the Catch 22. The losses from the old cut-rate market depleted surpluses. This, in turn, has limited the amount of new coverage a firm can write. So as a result, many insurers are now pleading "capacity constraints" which limit them from writing all of the business they can get.

BALANCE WILL COME: But, it will take time. From an underwriting view­ point, the market has been irrational for at least five years. It will simply take time to move the insurance industry back to an equilibrium based on sound underwriting standards. Price increases will be steady and inevitable. The supply of coverage will increase over time, as premiums rise to reflect actual underwriting experience. There are no easy answers or quick fixes. Our best advice is to look for quality, underwriting experience and historical staying power in your insurance provider. W. F. Roemer can confidently deliver on all three scores.

THOUGHTS FOR THE TRUCKING FUTURIST: A quick survey of some of this industry's traditional bread and butter shippers would hardly pro- duce a euphoric outlook. Steel is a shadow of its former self and seemingly headed south…tonnage wise. Domestic manufacturing has rebounded but it’s still plagued by a high dollar and a wave of Imports. The simple truth is that the old reliables are beginning to look unreliable. We hear lots of talk about the nation's trans­ formation from an industrial to a service society. But lawyers, accountants and business consultants don’t ship much freight. Where are the engines of growth for tomorrow's truckers? Small companies. Smaller plants. Firms with specialized and comparatively narrow product lines. They are not traditional Fortune 500 companies. Dun and Bradstreet Statistics indicate that about 53% of all new jobs created In 1985 will be generated by firms with 100 or fewer employees. Another 29% of the new jobs will originate within firms employing 1,000 or fewer people. Still, growing companies have a way of shipping more than declining ones. The marketing question for truckers is one of becoming a sunrise or a sunset carrier. This may well be determined by the type of business that a carrier aggressively pursues. Today, our economy is undergoing a revolution in small business start-ups and growth. Indeed, this wave of entrepreneurship is probably the economic story of the decade. Targeting and developing these smaller, emerging shippers could well be a key to your outfit's future growth and profitability.

"VALUE-ADDED" TRUCKING: A second element to contend with is the status of transportation services as a commodity…leaving truckers in a business that is notoriously price sensitive. Realistically, few outfits want to be in the position of selling on price… period. In the post-deregulation era, somebody will always haul freight for a lower price. The "value-added" marketing approach makes a great deal of sense for truckers. Selling benefits, extra services, peace of mind, dependability and professionalism is perhaps a better-long-term strategy than promising to be the cheapest guy on the highways. Consider the enormous growth of the overnight freight business. Some of the biggest players in this industry aren't selling price…they're set ling peace of mind. A final marketing point. The term "selling" may now be obsolete. "Building relationships" is now the way to grow and prosper… a fact that is particularly true in the case of emerging shippers.

LEANER STAFFS ARE HERE TO STAY: Tom Peters, best-selling author of In Search of Excellence and A Passion for Excellence, believes that leaner staffs are here to stay. Payrolls have traditionally expanded and contracted with economic cycles. But in the last recession a new trend was born: the lean and mean management mentality. Since the late 1970s, many corporations have made a startling discovery. By shrinking executive ranks -- by as much as 70% In some cases -- they can dramatically improve productivity, morale and overall efficiency. Peter Drucker, management guru, began advocating hierarchical trims thirty years ago. Even then, he urged corporations to limit themselves to six or fewer levels of management. His plan was not to eliminate accounting or purchasing departments, but rather to rid firms of expensive, non-productive bodies. Management bloat engenders second-guessing, busy work and a general drag on effectiveness, which ultimately hurt the company's fop and bottom lines. What's the origin of overblown staffs? Companies used to add employees whenever new problems arose. Hence, systems became the scar tissues of past mistakes. Tom Peters contends that American corporations are now in the midst of "radical decentralization." Companies are ruthlessly cutting fat, replacing the lines and boxes on organization charts with horizontal networks. But these radical changes spell success only when a firm's top level executives also pitch in and work harder.

WINGLESS WAGE GAINS: Despite an apparently solid economic recovery, American wages are rising at their slowest rate since the end of World War II. During the recession years of 1981 and 1982, average annual pay gains fell from 9% to 6%. But rather than rebound with the economy, they've continued to slide -- to 5% In 1983 and 4% last year.

Deregulation and the muscular dollar have rounded American wages, enforcing a price discipline that is keeping companies lean. Fortune magazine estimates that 70% of all construction contracts now go to low-cost non-union firms…a far cry from the early 70s when wage gain generosity ruled the day. The auto industry has fared no better. Annual improvement factors have been whittled away, and initial wage gains at Ford and GM slumped to 2.25% last fall. Unionized workers see pay freezes and work-rule changes in their immediate future. In fact, many companies have stringent new bargaining strategies, which include: (1) dumping provisions for COLAs and automatic wage hikes, (2) countering pay hikes with demands for increased productivity, and (3) cramping the growth of the high-wage, high-seniority union core. Two-tier systems, imposed on over 200,000 Americans last year, are the major tool for wage compression. The recent pact signed in the trucking industry can thus be viewed within the context of these wage trends. Even as rank-and-fi le resentment of two-tier inequities mounts, an increasing number of employers will choose to cut labor costs at the expense of new hires.