May 13, 2013 by Terri Goveia
On a lark, a Texas-based fleet operator took Tesone and another colleague across the Nuevo Laredo Bridge, a major freight crossing that spans the Rio Grande. At the Mexican border: a phalanx of armed guards who frisked Tesone and searched the group’s car. In Nuevo Laredo itself: 120-degre Farenheit heat, a rowdy mix of bars and potential misadventure. “I felt like I’d been kidnapped,” he says of the good-natured hazing. “Let’s say it’s a place no one would ever take their truck.”
When it comes to his own business, however, there are few places Tesone, a partner at Dalton Timmis Insurance Group, won’t go. After years of steady growth, he’s taking the Ancaster, Ontario-based brokerage in bold new directions. After debuting a new risk consulting arm and partnering in a new captive this year, he’s solidifying the firm’s presence in the specialty market.
A Niche with Wheels
It’s a tricky time for brokers in the trucking sector. The recession has lingered for independent owner-operators, with many consolidating or closing their doors outright. “We haven’t gotten back from 2008,” he says. With few launching new trucking businesses, “brokers are just jostling their business between markets because there’s not a lot of new business,” he says.
Tesone has seen the landscape evolve since he joined the industry in 1991. After an initial foray as an inland marine underwriter at Chubb, he joined transportation specialist Hargraft Wood Fleming Ltd. before landing at Dalton Insurance as a producer in 1993. There, he put his newfound expertise to good use: “I started the transportation division from scratch,” he says.
Two key events dovetailed in 1997. Tesone and two partners—Greg Padovani and Brian Timmis—bought out Dalton and another brokerage, Saunders & Timmis Insurance; and new Ontario safety legislation set the stage for a new age of risk control for truckers. Target ‘97 took aim at poor vehicle maintenance after a series of dangerous “wheels off” incidents on Ontario highways.
Five years ago, there were probably five insurance companies in the offer and acceptance arena. Today, there are eight to ten.”
That put new pressures on trucking operators to shape up safety records, but it also had a crucial ripple effect on insurance. “That pushed the industry from a dollars-in, dollars-out rating on pricing and moved it to focus on safety and risk management practices,” he says. “The extra time and effort companies put in would reflect in broader insurance terms.”
Tesone’s fledgling transportation division capitalized on the shift, using the new rules to carve out a clear niche. In the shake out that followed Target ‘97, “we had significant growth because we were able to interpret how we could fix a risk and convince an insurer to insure them in that hard market,” he says. “We’ve grown the company organically through specialized programs since then.”
That growth includes a bigger team—just under 100 employees in offices in Ancaster and Burlington, Ont., and Calgary, Alta.—and an estimated 400% increase in revenue since 1997.
But compliance continues to be a cornerstone. It’s behind Dalton Timmis’ latest venture, Epic Risk Improvement Services, which launched in February. The new firm expands the group’s existing consulting offerings, focusing on loss control and risk services that help clients through regulatory hoops. “One of the things the industry would say about the Dalton Timmis Group is that we’re good at managing clients’ compliance needs whether they’re Canadian or [American],” he says.
Epic Risk is poised to handle the latest regulatory shift for truckers. With changes to the “hours of service” rule—the maximum number of hours a trucker can be on the road without a break—looming in the US, cross-border operators will need more compliance guidance.
The new US Compliance Safety and Accountability (CSA) rule, which mandates a break for drivers after eight hours, will affect the majority of Canadian fleet operators. Tesone estimates that 80% of Canadian truckers operate in the US and 90% regularly cross the border. The shortened work period could “fundamentally change how companies move their freight,” he says, pointing to the scheduling, just-in-time shipments and overall planning adjustments that will follow. “It puts a lot of operational pressure on the organization.”
The looming service changes—which take effect in July—are just one of the things that drew Scott DeJong, president of DeJong Enterprises Inc., away from his longtime broker to the Dalton Timmis Group. DeJong’s fleet hauls high-end furniture from manufacturers in North Carolina, Mississippi and Illinois to tony shops like The Art Shoppe in Ontario, Quebec and the Maritimes.
“They are the specialists,” he says of Tesone and his staff. DeJong, based in Norwich, Ont., has warehouses in Canada and one in the US, so it’s important that a broker knows the industry issues on both sides of the border, he says. “They make sure that we’re protecting our business and go above and beyond in providing safety and compliance training and expertise to our operators.
DeJong also takes advantage of Tesone’s broader network, as he did recently when looking for logbook auditing best practices. “I’ll call Domenic, and ask, ‘Do you have a client who does this really well?’ ” he says. “He’s able to point us in the right direction.”
Trucking Solutions “Arsenal”
Despite the lull in the trucking sector, insurance companies looking to broaden their offerings have heated up the carrier market. “Five years ago, there were probably five insurance companies in the offer and acceptance arena. Today, there are eight to ten,” says Tesone, noting that those options, together with exclusive specialty programs and captives have given brokers considerably more choices.
The cost of cargo thefts is quickly approaching the same levels as collisions. In the Greater Toronto Area, cargo losses can reach $500,000 a day, and have climbed as high as $22 million a year in Ontario’s Peel Region.
Even so, coverage can be elusive for some fleet operators, especially smaller ones with 10 or less trucks on the road. Tesone notes “a restricted appetite” for those risks. “Now, there are only two or three players who will do a small owner-operator who goes to the US.”
In such a contradictory market, and with rates hardening for smaller players, and compliance costs rising, many—including DeJong—are turning to captives. “It’s the trucking companies saying, ‘We’re going to take [on] more risk, and if we win, we’ll be rewarded,” Tesone says.
He shares that view. Already a member of the Convoy Trucking Insurance Company (CTIC) captive, Dalton Timmis is taking a bigger leap into the arena with group captive Epic Re. The Grand Caymans-based captive is jointly owned by the brokerage’s MGA Epic Insurance and BIS Risk Solutions and fronted by Northbridge Insurance. Along with looser tax regulations in the Caymans, “we felt there was room to create a new group captive outside all the other ones in play right now.”
Along with offering clients more coverage choices, the new captive, along with Epic Risk, are part of a broader plan. “We’re trying to load up the arsenal with tools to increase our business,” he says.
It can be challenging for smaller transportation specialist brokers to go up against multinational firms and their networks, especially when it comes to international business. But the latest additions to the group’s solutions arsenal will give it an added edge. “We’ve never been in a better position to compete,” he says. “We’ll be considered a bigger player for some of those other risks.”
Tesone’s other secret weapons? He points to his staff, key partners and his mentor, John Oldfield, a former fleet manager who is now an account executive and transportation specialist at Dalton Timmis. “I’ve worked with some great partners.”
In the office, he prides himself on the same work ethic his father had as a steelworker at Dofasco. And while he maximizes a hard-driving sales style, and trains staff with sales techniques like The Wedge—which focuses on client needs, rather than products—and iWin, he allows his employees to adopt the approach that works for them.
“There’s a balance,” he says. “There’s a lot of cross-training between the service people and the sales people,” who constantly share what they need from each other. “You have worry-free nights with this staff,” he says.
Those employees—including account managers, claims counselors, fleet safety analysts and service reps—set the entire Dalton Timmis Group apart, he says. Insurers regularly acknowledge their skill and knowledge by having them talk to underwriters or test new products, he says.
His business philosophy is clear: “It’s not a one-man show.” Tesone praises his partners Padovani and Timmis, and credits Dave Roth, another Dalton Timmis transportation specialist, for Epic Risk’s successful launch.
But it’s Oldfield who gets the lion’s share of his admiration. They met when Tesone took a transportation training session in the mid-1990s. “John was the initial trainer to teach us what a maintenance file was, what a driver profile was,” he recalls. “On the first day, there were 25 of us, and on the second day, there were five.”
Once he became partner at Dalton Timmis in 1997, he hired Oldfield. “We’ve been a team ever since.” Oldfield’s own trucking experience and risk management prowess have been an integral part of the group’s transportation division success, according to Tesone. “Between the two of us, we’ve been able to develop programs and approaches that set us apart from our competitors.”
Among them: offerings for specialized buy-down insurance to reduce deductibles and down-time insurance for business losses following an accident. “It gives them some added protection,” he says.
It won’t be long before those programs address some emerging issues in the sector. Technology looms large for fleet operators: telematics and crash detection will reshape more industry fundamentals, he says. While increasing automation has its benefits—Tesone grins recalling his time behind the wheel of an automatic truck at a recent trucking show in Toronto—“it’s going to affect [freight] carriers, it’s going to add cost and it’s going to add Big Brother,” he says. “The data is going to give actuaries a lot more to ponder.”
From an insurance standpoint, better data won’t necessarily yield instant rate rewards, though. “There will be a lag between what trucking companies spend to make themselves the best, and what the insurance companies do to reward them,” he predicts.
Loss control will likely continue to be a crucial issue as well. The cost of cargo thefts is quickly approaching the same levels as collisions, he notes. In the Greater Toronto Area, cargo losses can reach $500,000 a day, and have climbed as high as $22 million a year in Ontario’s Peel Region in 2008.
When Tesone talks about the trucking sector, he uses “we,” including himself among the ranks of operators and drivers. His ties to the immediate community are just as strong. He grew up in the Hamilton area, and lives in Ancaster with his family. The Dalton Timmis Twitter account recently celebrated Burlington’s spot on a national “Best Places to Live” list, noting, “it’s not a secret to us!”
Tesone spends a fair amount of time on the road himself, handling Dalton Timmis’ commercial transportation division in Ontario and Alberta. With the business growing so rapidly, there’s talk of him giving up his portfolio for a purely managerial role. He’s not quite sure about it, though.
“That’s the part that got me into the business in the first place, and I don’t want to walk away.”
Copyright 2013 Rogers Publishing Ltd. This article first appeared in the April 2013 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.