Insurance premiums, in general, are experiencing an increase in rates due to the backlash of the pandemic. Though the industry experienced downsizing and some employment loss during the initial stages of the pandemic, the trucking industry has recovered faster and continues to be one of the few sectors to experience minimal long-term business fallout from COVID-19. If anything, trucking has experienced the opposite. The industry has been a driving force in empowering the U.S to adapt to these times with deliveries of vaccines, medical supplies, and consumer goods. So why then are we seeing an increase in premiums for trucking insurance and even congressional mandates?
A Growing Role in the Economy
There is a growing need for trucking in the United States as the percentage of in-store purchases continuously drops in competition with shipped goods. The trucking economy saw an economic increase of 15% in 2021, and a recent FTR analysis stated they expect another 4-6% in 2022. The rise is partly due to e-commerce, but also because of rail transport losing its dependability over the past few years.
Trucking is expected to surpass a large percentage of freight shipping over the next ten years, which will solidify the industry’s role as the leading method for distribution. The U.S Freight Transportation Forecast to 2022 estimates trucking will see an increase of in tonnage with an overall increase of 82.2 % in revenues. This could be partially due to the national cargo ship dilemma and massive port congestion. There’s a growing pressure on trucks to expedite these items that are already arriving late. Underwriters are undoubtedly recognizing the rising role trucking will play for years to come and increasing rates accordingly.
Driver Shortages and Safety Concerns
The trucking industry continues to face driver shortages as companies struggle to find employees even amongst the millions of job openings. The U.S is currently averaging a national shortage of 60,000 drivers with highs of 85,000 in high-demand areas. The rate of hires has not increased over the past year, and experts believe it may be partially due to an increased need to stay home. More children are attending virtual school and many parents no longer have the benefit of child supervision during school hours. In other cases, truckers are retiring earlier or swapping their long hours for office or remote work.
With the driver shortage and increased demand for expedited distribution, the truck drivers that are still working are facing a lot of pressure. Many people are experiencing longer hours without increased pay, and are tasked with new or different routes. Traditionally, underwriters view any change in typical distribution as an increased risk. So, drivers having to make extra trips or take on new routes could increase premiums, as well as the general volatility of the industry right now.
To top it all off, the industry is seeing a sharp increase in the number of violations and accidents. A lot of new hires have little very little experience in truck driving which could be a contributing factor in claims.
Alcohol and drug-related violations have increased since the pandemic as well, with almost 82,000 drivers flagged in 2020-2021. The crisis is not only driving underwritings to increase insurance costs, but it’s contributing even further to the driver shortages as drivers get laid off.
Overhead Costs to Offset Industry Growth
The industry is experiencing growth as its role in the economy becomes more significant every year. The increased demand for trucking services also brings along with it a need for new technology, new services, and a lot of overhead costs. The technology and models of trucks are getting better and companies are needing to pay for:
- Higher maintenance costs
- Cargo tracking monitors
- In-cab cameras
It’s becoming harder to lighten the insurance costs since there are now some mandated laws requiring $2 Million in coverage per truck, estimates based on telematics, and certain technical requirements. In response to the mandates, standard markets sometimes max their limits below the industry standards, forcing trucking companies to purchase an excess policy. So the process is not just getting more expensive, but more complicated as well.
Adjusting to the Price
To get the best possible deal, trucking companies should shop around for the best insurance premiums with multiple carriers. Speaking with your broker to negotiate a fair price will give you better options, rather than just going with the first plan you find.
Insurance specialists will be able to notify you of insurance-related industry changes and implement coverage where there may be hidden gaps. They can also help you pinpoint state regulations and federal laws that may affect your current or future coverage plan.
Another way to lower the premium is by opting for larger deductible plans, which would save you a lot of upfront costs. The issue here is that it could cost you more down the line if you experience a lot of accidents or claims.
If you have rigorous training, hire guidelines, and solid procedures in place- your chances of experiencing a claim will be much lower. The best way to reduce your costs is to become a low-risk company. Opting to use data-sharing technology like in-cab cameras with the insurance carrier can be a solid option, as long as you’re following guidelines appropriately. It’s a good way to build trust with the carrier and decrease your risk and corresponding premium costs. Just be sure to use the equipment correctly and properly train your employees, or else this data could actually work against you.
Trucking Liability Insurance with ECBM
ECBM can help reduce your trucking liability stress by finding the best possible plan for your business. We have extensive market relationships, understand the complexities of the industry, and settle for nothing less than the best service. We understand the difficulties the trucking industry can face, but also feel confident in being able to navigate these new challenges. Visit our website or contact one of our agents to learn more about how we can help you secure trucking liability insurance.