Tough truck insurance market is hitting carriers in the pocket book
Shippers who have the bad luck of having their freight hauled by a truck involved in an accident are facing a double whammy—sometimes that carrier may be underinsured or, worse case, uninsured.
That’s because rising heavy truck insurance costs have become a byproduct of mounting financial pressures in the trucking industry. Increasing truck bankruptcies last year—topped by Yellow Corp. closing its doors early last August as the nation’s fifth-largest overall trucking company—have exacerbated the insurance market.
Truck insurers and managing general agents (MGAs) are experiencing what they describe as a hyper competitive marketplace in some segments after freight carrier bankruptcies and layoffs unraveled insurance underwriters’ aggressive growth plans.
The changing truck insurance market could hardly come at a worse time for fleets. The New Jersey legislature recently passed a law requiring heavy trucks to carry at least $1.5 million in liability insurance—double the current federal level minimum. It applies to trucks weighing more than 26,000 pounds. The law is effective July 1.
The American Trucking Associations and related trucking groups have called the New Jersey law “bad policy.” It’s estimated the new law would raise insurance rates to rise between $20,000 and $40,000 per annun.
Yellow’s exit—taking $5.2 billion in trucking revenue—was far from only carrier exiting the market place. According to an analysis by CarrierOK consulting—more than 88,000 freight carriers exited the market place 2023 along with 8,000 freight brokers.
Lest we give the wrong impression, there is still plenty of truck capacity out there. CarrierOK estimates there are 877,826 general freight carriers holding Department of Transportation operating authority.
But so-called “nuclear verdicts”—jury awards in the tens of millions of dollars in trucking-related wrongful death lawsuits—have taken their toll on insurers. In fact, the American Trucking Research Institute (ATRI) found in jury awards of $1 million or higher, the average trucking verdict value spiked 867% from 2010 ($2.3 million) to 2018 ($22.3 million). That’s the last full year for which those legal statistics are available.
Insurance (and paying for such high jury awards) is just part of a trucking fleet’s rising list of expenditures. Average per-mile costs reached $2 in 2022, primarily driven by high fuel, wage and equipment costs, according to ATRI’s survey of members.
“The tightening of the freight market caused tens of thousands of trucking authorities to be deactivated over the last year, which meant that many insurance carriers and MGAs looking for double digit growth were not able to meet or exceed their goals,” Jennifer Nuest, Amwins senior vice president and transportation practice leader, told Insurance Business. “This has led to a hyper competitive marketplace in certain segments of trucking.”
Besides nuclear verdicts and other high-expense awards, transport companies are vulnerable elsewhere. Transportation ranks as the third most vulnerable sector exposed to cyberattacks. Experts said widespread use of technology makes these companies particularly at risk of losses.
Just like unsafe auto drivers, those carriers with unsafe records in the Federal Motor Carrier Safety Administration data base are being assessed with the lion’s share of the insurance industry’s truck rate increases.
Of course, truck fleets also have dealt with staffing shortages, rising wage demands and cost spikes for necessities like the cost of tractors and trailers, fuel and insurance.
Truck fleet insurance rate rises are expected to temper this year. For a fleet with a recognized record of safe operations, brokers are estimated their premiums rising around 5%. But those with sketchy safety records could be facing double-digit rate hikes as high as 20%, insiders say.
