As the number of drivers and risks on the road increases, many carriers are reducing their capacity, leading to challenging times for the trucking industry.
Current Insurance Market Challenges
The trucking industry is facing extreme hardships in the insurance market, far more severe than typical fluctuations. Rates are climbing, markets are contracting, and insurers are becoming highly selective with their clients. Brokers report that many companies have struggled to renew their insurance programs this month, with some even closing due to these difficulties.
The Impact of Rising Rates
The insurance challenges are particularly pressing, as most trucking firms require extensive liability coverage to operate. Several factors have made it increasingly difficult for buyers to find adequate protection, with double-digit rate hikes becoming commonplace during renewals. Previously, trucking companies could compensate for domestic capacity shortages by accessing a robust excess and surplus market, but that option has also diminished recently.
Legal Liability Issues
A significant factor contributing to these issues is the phenomenon of “nuclear verdicts,” where courts award substantial settlements in liability cases involving transportation companies. For instance, a Georgia court awarded $280 million to the families of five victims involved in a truck accident linked to Schnitzer Steel. In another case, RCX Solutions in Alabama closed a division following a $7.5 million verdict and its struggles to secure insurance.
Driver Scarcity Amplifies Risk
As accident rates rise, one of the industry’s most pressing concerns is the lack of qualified drivers. Many trucking firms are relying on less experienced drivers, which, combined with deteriorating infrastructure and distractions like smartphone usage, increases accident risks. Consequently, insurers have become hesitant to provide coverage, leading to a departure of underwriters from the sector due to poor performance.
Shifting Towards Self-Insurance
Insurance ranks high among the top concerns for trucking companies, especially as premiums per mile surged 17% between 2013 and 2019. Insured companies are increasingly consider higher deductibles and retention tools to manage costs. Some larger fleets are encouraged to explore self-insurance options, but establishing a captive insurance structure can be a lengthy process.
Enhancing Risk Management Strategies
Given the challenging market conditions, trucking firms must bolster their risk management and safety protocols to reduce exposure to costly liabilities. Many insurers now require more efficient risk prevention strategies during renewals, emphasizing the use of technology for safety. Companies that do not invest in such technologies may find it increasingly challenging to secure insurers willing to partner with them.
Proactive Renewal Strategies
Trucking companies need to adopt a proactive approach for policy renewals. Unlike in the past, where last-minute renewals were common, brokers now advise starting discussions 60 to 90 days post-renewal to avoid complications. Adjusting to these new buying cycles is crucial to securing favorable terms in an evolving market.
