While the transportation industry enjoys one of the best freight rate environments in history, our Q3 market update finds commercial trucking insurance companies experiencing eroding profitability in the face of higher average liability settlements, skyrocketing physical damage claim costs due to increasing truck values, and a low interest rate environment that limits non-underwriting income.
Commercial trucking auto rates have increased for five consecutive quarters, with 7 – 12% average increases industry-wide. Motor carriers with positive claims experience and good safety practices can expect high single-digit increases, while those with poor losses and/or lacking loss control programs may experience increases of 20 – 50% or more.
As widely reported in the National Underwriter article, “Dangerous Curves” and other industry journals, there are numerous obstacles for commercial trucking insurance providers leading to these increases, including:
- Poor Profitability: The commercial trucking insurance combined loss ratio has been poor for seven consecutive years, with a reported peak of 109% – 111% in 2017.
- Driver Shortage: The driver shortage is leading to hiring of lesser experienced and potentially more claim-prone drivers
- Medical inflation rates are outpacing normal inflation, leading to higher liability claims costs.
- Plaintiff’s attorneys are successfully using the “Reptile Approach” to sway sympathetic juries towards large financial awards in liability cases, partially resulting in average costs of police-reported crashes to $382,000 and $3.5 Million for fatalities.
- The cost for new trucks has increased rapidly during the past few years, with $150,000+ physical damage claims becoming common.
Fortunately, there are some glimmers of hope in Q3 market update. Industry-wide ELD implementation should start to minimize fatigued driving issues. The use of technology solutions, ranging from cameras, crash avoidance systems, and telematics are having positive cumulative effects in fleets that have made investments into safety. Controlling claims is the only way to keep your insurance rates low compared to your peers. Please review our numerous blog posts about ideas on how you can improve your safety programs and decrease insurance rates.
As always, the trucking insurance professionals at The Daniel & Henry Company are here to help you understand what measures you can take to reduce risk and insurance costs. Please contact us today if you have any questions about parking related insurance claims or any other risk management matter.