Shortage of drivers and rising tariffs in the trucking market
A Tough insurance market for commercial trucking companies is not expected to change direction anytime soon, as insurers continue to raise rates, lower limits and restrict capacity for a risk that has a habit of generating big complaints.
“The market continues to get tougher,” said Justin Joyce, president of National Truck Underwriting Managers Inc., a unit of Amwins Group Inc., based in Minneapolis.
“It’s been quite an adventure over the past few years,” said Craig Dancer, US Transportation Industry Practice Leader at Marsh LLC in Washington. “It has been a difficult time for the commercial automobile at all levels” in a market that has not seen insurers record a combined ratio of less than 100% for more than a decade, he added.
Insurers started pulling out of the market about six years ago, as losses increased dramatically, sources said, and truckers have been paying ever higher rates for primary and supplemental liability coverage ever since.
Rates have jumped for Lupus Superior LLC in Grand Prairie, Texas, increasing by about 40% for the 65-truck fleet over the past year, according to safety manager Tony Pagan. Insurance costs per truck are around $ 480 per month, depending on the type of vehicle, he said.
Lupus Superior and other trucking companies are experiencing a chronic shortage of drivers, which experts attribute in part to the industry’s lack of appeal to young drivers. Insurers are concerned that inexperienced drivers will create an increased risk of accidents if the training is not thorough (see related article below).
The rate hikes are stabilizing, however. “It continues to increase, but not to the same extent,” Mr. Dancer said.
Some policyholders saw rates go up to 75% a few years ago, but increases on renewals will likely be much smaller for those with blank records, he said. “If you’re a high performing fleet with extremely good safety protocols, a great investment in technology in terms of collision mitigation, telematics, that sort of thing, these guys are seeing increases of 10 to 10 on average. 20%, ”he said. noted.
Exceptionally good risks can see even smaller increases, Joyce said. Companies with a strong safety culture, favorable claims experience and strict hiring standards could experience increases of less than 5%, he said.
The rate increases continue in part because trucking accidents have become very expensive, experts say.
“Nuclear verdicts” are being awarded to plaintiffs in truck crashes in “any number of jurisdictions,” and insurers are raising primary and excess rates accordingly, said Matthew Payne, senior vice president and chief executive officer. transport and energy team at Lockton Cos. LLC in Kansas City, Missouri.
National Truck Underwriting Managers considers anything over $ 10 million a nuclear verdict, Joyce said. “They have become much more prevalent,” he said.
Ten years ago, insurers weren’t very concerned that an excess layer would be pierced, but regulations today can reach tens of millions, even if they involve conscientious drivers and “contributing factors close to zero others. that they are on the road, “he said.
Large-fleet companies that have been hit by huge regulations will see their rates jump 25% to 75%, according to Dancer.
While major verdicts and other factors have driven rates up, many trucking companies are buying less coverage, he said. “Some who bought $ 100 million three years ago are now at $ 30 million. And that $ 30 million costs more than they paid for $ 100 million.
Trucking companies are required to carry at least $ 750,000 in liability limits and most prefer to carry at least $ 1 million, with large fleets purchasing more than $ 100 million in coverage, sources say.
“It takes a number of insurance companies to hit that limit,” Payne said. Smaller limits are easier to find in the excess and excess lines market, depending on the buyer’s loss history, he added.
Many buyers struggle to get more than $ 1 million in primary coverage, said Gary Flaherty, vice president of commercial automotive E&S at Nationwide Mutual Insurance Co. in Scottsdale, Ariz. Higher limits are available, but for risks that are “the best of the best,” he said.
Surplus insurers are reluctant to set lower limits, Joyce said. Those who offered $ 5 million coverage over a $ 1 million primer in previous years are more likely to tie in at $ 3 or $ 4 million, he said. “And all the while, as you build this tower, the rates today compared to five years ago continue to rise.”
The excess capacity has been reduced to less than half of what was available several years ago, Dancer said. “This corresponded in the surplus market to rate increases of 50 to 200%. “
New capital, attracted by high rates, has entered the market, sources say, but that is not enough to ease conditions.
“New capital has come in, particularly on the surplus side,” said Mr. Payne of Lockton. Domestic insurers on both excess and excess lines have committed capital, as have insurers in London and the Bermuda market, he said. “We always see an increase in rates, so I wouldn’t say the new capital has created a competitive environment. “
Onboard cameras, telematics and loss avoidance technology are important tools for risk managers, along with rigorous driver training, sources say. Other than that, they note, partnering with an insurer who understands the business is an effective approach to loss control.
Insurers look closely at the training and hiring requirements of trucking companies when underwriting risks in the event of a worsening driver shortage.
“Training is a concern,” said Mark Gallagher, vice president, national transportation, for Risk Placement Services Inc. Companies that have comprehensive training programs and clean safety records in place will find that insurers are more efficient. comfortable writing a cover for a younger, less experienced team. of drivers, he said.
It is difficult to attract new workers to an industry that requires extended periods away from home and irregular hours, which poses problems when experienced drivers retire or move among competitors offering high wages on a tight job market.
“I think modern drivers aren’t very interested in driving long distances anymore,” said Gary Flaherty, vice president of commercial automotive E&S at Nationwide Mutual Insurance Co. in Scottsdale, Arizona. “Motor carriers have tried to switch their models to more regional models, bringing drivers home at night. But it’s hard.
If current trends continue, American trucking companies could see the shortage of drivers exceed 160,000 by 2028, according to the “Truck Driver Shortage Analysis 2019” of the American Trucking Associations trade group.
“It’s very difficult to have drivers,” said Tony Pagan, safety manager at Lupus Superior LLC, a trucking company based in Grand Prairie, Texas. Some large companies offer high wages and incentives that make it extremely difficult – especially for small operators – to find and retain drivers, he said.
Insurers want to know what qualifications trucking companies require for drivers and “their hiring thresholds,” said Matthew Payne, senior vice president and team leader of transportation and energy at Lockton Cos. LLC in Kansas City, Missouri. The training of new hires, continuous instruction, monitoring and supervision of drivers are areas of concern to insurers, he added.