Average operating costs rose 12.7% in 2021 to $1.855 per mile, the most expensive level ever recorded in the annual survey. Rising fuel costs, driver shortages, and supply chain issues led the way as major cost centers for trucking companies through 2021 and 2022.¹ However, after nearly 10 years of rising premiums, the ever-increasing cost of primary trucking insurance slowed at the end of 2021 and the beginning of 2022.¹

FACTORS IMPACTING TRANSPORTATION BUSINESSES

Trucking companies faced record-high operating costs in 2021 and throughout 2022. Not surprisingly, fuel costs were the largest contributor to increased expenses. In 2021, fuel costs increased 35.4% over the previous year, and diesel prices continued to rise across 2022.2 At the end of 2021, the average price per gallon of diesel in the U.S. was $3.64. It reached a peak of $5.75 per gallon in June 2022, and by October, the price still remained above $5 per gallon.³ Fuel wasn’t the only rising cost that trucking companies faced. Repair and maintenance costs increased by 18.2% from 2020 to 2021, and driver wages rose by 10.8% over that same period. Driver wages are on track to continue their sharp increase as the industry struggles with driver shortages. In 2022, the trucking industry experienced a shortfall of 78,000 drivers - the second-highest shortage on record, behind the 2021 shortfall of 81,258 drivers.⁴ While transportation companies listed fuel costs and driver shortages as their top two pain points, truck parking, driver compensation, and the overall economy rounded out the top five concerns.⁵

2023 PRIMARY TRUCKING INSURANCE MARKET OUTLOOK

Insurance is notably absent from the list of top issues facing trucking companies. Commercial insurance premiums have risen for 43 consecutive quarters. However, pricing showed signs of flattening in early 2022. The rate of increase in the first quarter of 2022 fell to 5.9%. Just a year earlier, premiums rose by 9%.6 There are several reasons why insurance premiums aren’t rising as quickly and are even declining in some cases. Additional insurers have entered the market, which has created competition for companies with favorable risk profiles. Insurers are also relying more heavily on GPS, cab cameras, and other telematics to better understand an insured’s exposures and offer more competitive rates. These trends should continue throughout 2023, creating a competitive insurance marketplace for trucking companies with solid records.

Trucking companies with experienced drivers, high safety scores, and favorable loss histories can expect more competition for their business from insurers. The increase in available markets has also led to a segmentation of the industry. Many new insurers are exclusively focused on trucking companies with favorable risk profiles. However, companies with poorer safety scores, a higher number of inexperienced drivers, or other insurability issues may find that competition is lower. They may also see price increases at renewal. Insurers can use innovative technology to obtain more data about applicants than ever before, which means they can be more selective about the accounts they’re willing to underwrite.

RISE OF TELEMATICS

The first trucking industry telematics system arrived on the scene in 1988 with the unveiling of the OmniTracs system, but the use of telematics didn’t become widespread until after the implementation of the electronic logging device mandate in December 2017.⁷ Since that time, the use of telematics has expanded far beyond electronic logging. Today, trucking companies use telematics to record speed, location, and driver behavior. The technology can even be utilized to review accidents and safety via in-cab cameras. Overall, there are more than 18 million wireless devices in use by trucking companies today.⁷

Telematics help transportation companies avoid accidents, monitor drivers, and even manage maintenance more efficiently, which can subsequently help reduce insurance costs. While the use of telematics is relatively new in the insurance industry, it is likely to become more common. Very shortly, telematics data may be a submission requirement for many insurers. Already some insurers rely almost entirely on telematics data to evaluate insurability and determine rates. Telematics is a big part of underwriting because it can also help manage losses. For example, a no-fault accident can be confirmed with the use of cameras, GPS, and other devices. The very presence of telematics data can help an insurer feel more comfortable with a risk and the ability to manage any potential claims.

DRIVER SHORTAGES IMPACT INSURABILITY

Perhaps the biggest long-term issue facing the industry is the ongoing shortage of truck drivers. While the current shortage has eased a bit, the industry is still facing a projected shortage of 160,000 drivers by 2028.⁸ To combat the shortage, many companies are expanding their pool of applicants. For instance, some are recruiting outside the industry and training new drivers to join their fleets. While this strategy may help with driver shortages, it can also alter the fleet’s risk profile for insurance purposes. New drivers can reduce the collective experience across the fleet, increasing rates or even making it more difficult for the carrier to obtain coverage. As companies continue to find creative ways to fill open cabs, they may find that their hiring strategies have ripple effects on other areas of their business, including risk management policies and insurance coverage.

BOTTOM LINE

While premiums have been on the rise for nearly a decade, the rate of increase has slowed, largely due to the increase in carriers willing to compete for accounts with strong safety records, experienced drivers, and favorable risk profiles. Telematics data has also helped companies improve their insurability and vie for affordable rates. Both of these trends should continue as the primary trucking insurance industry continues to expand its reliance on telematics for underwriting and reviewing claims. As the industry continues to evolve, an experienced wholesale broker can be a valuable ally in helping agents and insureds make the most of their premium dollars. Contact your local CRC producer today to learn how we can help your transportation clients obtain the right coverage at the right price.

CONTRIBUTORS

• Chris Slezak is the Director of CRC Group’s Central Transportation Region.
• Julie Sirois is the Director of CRC Group’s Northeast Transportation Region.
• Alek Turko is a Managing Underwriter and Office President with 5Star Specialty Programs, a division of CRC Group.

ABOUT 5STAR

5Star is a full-service MGA, and subsidiary of CRC Group, offering unmatched expertise in the trucking, public auto, and Worker’s Compensation sectors. With more than 30 years in the industry and strong partnerships with multiple highly rated carriers, 5Star writes both fleet and individual policies, making it easier for trucking companies to sponsor a program and ensure that every leased driver has adequate coverage with known limits.

5starsp.com

END NOTES

1. Insurance Shines While 2021 ATRI Report Finds Costliest Year Ever in Trucking, CNS Insurance, August 18, 2022. https://www.cnsinsures.com/news/insurance-shines-while-2021-atri-report-finds-costliest-year-ever-in-trucking/
2. Cost of trucking grows to record high, The Trucker, August 12, 2022. https://www.thetrucker.com/trucking-news/the-nation/cost-of-trucking-grow-to-record-high
3. Monthly retail prices for diesel fuel in the United States from November 2020 to November 2022, Statista, November 2022. https://www.statista.com/statistics/204169/retail-prices-of-diesel-fuel-in-the-united-states-since-2009/
4. Washington lawmakers still believe there’s a truck driver shortage, FreightWaves, November 8, 2022. https://www.freightwaves.com/news/washington-lawmakers-still-believe-theres-a-truck-driver-shortage
5. Cost of Fuel Ranks as Trucking’s Top Concern in ATRI 2022 Survey, Transport Topics, October 22, 2022. https://www.ttnews.com/articles/cost-fuel-ranks-truckings-top-concern-atri-2022-survey
6. Insurance Shines While 2021 ATR Report Finds Costliest Year Ever in Trucking, CNS Insurance, August 18, 2022. https://www.cnsinsures.com/news/insurance-shines-while-2021-atri-report-finds-costliest-year-ever-in-trucking/
7. How Trucking’s Adoption of Telematics Has Forever Changed Fleet Management, Transport Topics, June 21, 2022. https://www.ttnews.com/articles/how-truckings-adoption-telematics-has-forever-changed-fleet-management