What does insurance do
A must-read overview of Landstar System (Part 4 of 14)
LSTR Insurance segment
Landstar System (LSTR) provides insurance services through the company’s two subsidiaries: Signature Technology Services and Risk Management Claim Services. Through these subsidiaries, the company provides risk and claims management services to some of the company’s subsidiaries and reinsures certain risks of the company’s independent contractors. The segment also provides a certain limit of property and casualty insurance directly to some of its operating subsidiaries.
Because Landstar works with its independent contractors on an agreement basis, these contractors are not considered to be company employees. They are not within the scope of the company’s liability, and their are responsible for their vehicles.
However, Landstar does provide certain insurance coverage to its independent contractors. The company provides:
Fleet Workman Compensation Plan: available for fleets of two or more employee drivers Contractor Protection Plan: covering occupational and non-occupational accidents, death benefits, medical and disability benefits, and passenger coverage Third-Party Liability Coverage: for bodily injury and property damage caused by
an accident for its owner-operators. Segment contribution
The insurance segment of Landstar System contributed about 1% to the company’s revenues for 2013, 2012, and 2011. The segment’s revenues primarily come from reinsurance premiums from third-party insurance companies that provide insurance programs to BCO Independent Contractors. In these programs, all or a portion of the risk of loss is ultimately borne by Signature Technology Services.
For the nine-month period ending September 2014, the company saw a rise in its insurance and claims by $825,000. This represented 10.8% of its gross profit when compared to 12.2% from the same period last year. This was primarily due to an increased frequency in the number of insurance claims. The reinsurance premiums from third-party insurance companies for the nine-month period ending September 2014 stood at $28,978,000, up from $27,233,000 last year.
Other trucking companies in the US are YRC Worldwide (YRCW), Swift Transportation (SWFT), and Werner Enterprises (WERN). These companies are part of the iShares Transportation Average ETF (IYT).
Browse this series on Market Realist:Source: finance.yahoo.com