How Will Surging Truck Insurance Costs Affect Carriers?


Transportation companies nationwide are feeling the pinch caused by ever-increasing operating costs. But while many jump to driver wages, fuel costs, truck repairs, and lease payments as the primary culprits for these rising expenses, they overlook the real culprit — booming used truck insurance rates and premiums.

The American Transportation Research Institute’s Operational Cost of Trucking report states that commercial trucking insurance insurance costs have sprung from $0.064 per mile in 2013 to $0.088 per mile in 2022 — $1.00 more per hour.

The increase’s effect is felt industry-wide, but carriers who understand the impact can better overcome the current and future challenges.

5 Factors Driving the Surge in Truck Insurance

During the ATA Management Conference & Exhibition on October 21, 2020, Ryan Erickson, executive vice president of McGriff, Seibels & Williams, noted that the insurance sector is in particularly challenging times. The industry has yet to catch a profit, thus thwarting all efforts to turn the market.

He mentioned that commercial fleets are experiencing 100% to 300% increases and stressed that it’s unlikely to change until the sector can share profitability.

The question is, why? Erickson and other industry moguls shed light on the influential factors:

#1 Available Insurance Capacity

The McGriff executive explained that the most significant driver in rising rates is the available insurance capacity. Insurance companies putting up $5 million and $10 million layers have reduced them to $2 million and $5 million, causing the price surge.

#2 Increased Accidents

Trucking accidents have increased by a devastating 40% since 2009, with May 2022’s Insurance Institute for Highway Safety report stating that 4,014 people died in large truck accidents across the nation in 2020. But perhaps the most shocking finding was that in accidents involving large trucks and passenger vehicles, individuals in the passenger vehicles accounted for 97% of the deaths.

Distracted, overworked drivers and the ever-increasing demand for goods are the primary reasons for more trucking accidents. And even though the safety features onboard are becoming more innovative, trucking insurance premiums will continue to rise alongside the collision rate.

#3 Harder Defenses

Increased accidents are only part of the insurance coverage battle — defending said accidents have become more challenging, further hiking insurance costs.

The somewhat-new-found defense challenges include:

  • Nuclear verdicts
  • Social inflation
  • Societal issues
  • Views of defendants
  • Litigation financing

Scopelitis Transportation Consulting’s partner, Jeffery Toole, noted that the “reptile theory” litigation method has garnered more attention following the more significant verdicts directed at transportation companies. As such, it’s one of the fundamental driving forces behind increased liability insurance and premiums.

#4 Driver Shortages

Many drivers entering the US market are relatively inexperienced, prompting insurers to chalk them up as risky investments. Plus, the shortages are causing industry employees to work longer daily, presenting truck drivers with even more risks in insurance companies’ eyes.

#5 Expensive Medical and Technological Advances

While necessary for preserving and saving life, medical advances are excruciatingly expensive. Likewise, more intelligent vehicle technology is necessary for safer, easier journeys but is costlier to maintain and repair. Since insurers must cover the costs of medical and technological bills when accidents occur, they’re forced to increase their rates accordingly.

The Financial Toll on Carriers

Leading carriers, including Knight-Swift Transportation Holdings, Werner Enterprises, and J.B. Hunt Transport Services, have been considerably affected by the rising insurance rates and premiums, with 2023’s first-quarter filings displaying an increase of $73 million compared to the same period 12 months ago. Werner’s insurance expenses, for example, skyrocketed by almost 33%, while Knight-Swift experienced a disheartening 41% rise.

But it’s clear small carriers are disproportionately affected, as rates surged from $0.102 in 2021 to $0.136 in 2022. Safety practices are predominantly behind small carriers’ harsher impact — these providers inadvertently embraced unsafe practices during the recent uptick in freight activity.

Adjustments and Strategies for Carriers

To effectively adapt to rising costs and regain control over premium costs, carriers must put effort into overcoming challenges. This includes maintaining preferable Compliance, Safety, Accountability (CSA) scores, ensuring they hire experienced drivers, and upholding vigorous safety practices.

According to Andrew Haun, senior VP of Sales and Strategic Accounts at Reliance Partners, dashcams are the perfect technological addition all carriers can make to their fleets. By proving their drivers weren’t negligent, carriers can provide powerful defenses against claims, which is the best way to lower loss ratios, make businesses more attractive to insurers, and reduce rates.

Beyond that, trucking companies should collaborate with insurance agents who shop for coverage every year. These professionals are well-versed in securing optimal coverage at competitive prices, relieving financial strain, and improving profit margins.

The Regulatory Landscape

Legal requirements for truck insurance in the United States are set by the Federal Motor Carrier Safety Administration (FMCSA) to ensure safety and protect the interest of everybody involved in the trucking business.

The FMCSA mandates that all commercial trucks have at least $750,000 in liability coverage. So, when the truck driver is at fault, the primary liability policy can cover others’ property damage and bodily injuries. Plus, the Administration necessitates a minimum of $5,000 in cargo coverage, financially protecting everything on board.

But minimums aren’t necessarily directly impacting truck insurance premiums — compliance is the real kicker. 

Since the CSA program launched in 2010, insurers have regarded drivers’ scores highly. The lower the score, the lower the risk. As such, complying with the relevant safety standards and maintaining a favorable rating reduces insurance costs.

Future Outlook

Growing regulations, increasing global economy, booming consumer and business spending, tightening trucking regulations, ecommerce expansion, and the unrelenting demand for commercial trucks will likely shape truck insurance costs in the coming years, with premiums expected to increase by 10% over the next 12 months.

Carriers can prepare for this challenge by investing in safety and compliance, implementing data-driven corrective action plans, working with insurance brokers, and increasing their deductibles. 

The Bottom Line

While small carriers feel disproportionate strain, the rising costs of truck insurance are faced across the industry, encouraging carriers to seek new ways of working and boost their safety practices to reduce premiums. Only time will tell how the landscape will evolve. However, carriers must be ready for further increases.