October 27, 2023

Unpacking the Factors Driving Increasing Insurance Cost for Trucking Companies

At Reliance Partners, we understand the growing concerns within the trucking industry regarding the increasing costs of insurance premiums. The recent boom in freight activity has led to a surge in operational expenses, with trucking insurance premiums being no exception.

The Driving Forces Behind Premium Escalation

In the last decade, truck insurance premiums have witnessed a gradual but consistent rise, according to data from the American Transportation Research Institute (ATRI). Premiums have surged from 6.4 cents per mile in 2013 to 8.8 cents per mile in 2022. When viewed in terms of hourly costs, this represents an increase from $2.57 in 2013 to $3.57 in 2022.

Our Senior VP of Sales and Strategic Accounts, Andrew Haun, attributes this upward trend to several contributing factors. These include the escalating costs associated with equipment, medical expenses, and the unfortunate prevalence of litigation abuse.

Impacts on Small Carriers

One notable consequence of these rising insurance expenses is the disproportionate impact on smaller carriers. According to ATRI, per-mile truck insurance premiums for small carriers saw a significant uptick, surging from 10.2 cents in 2021 to 13.6 cents in 2022. In contrast, larger carriers experienced a decrease in premiums, dropping from 8.2 cents in 2021 to 7.2 cents in 2022.

The driving factor behind this disparity lies in the safety practices of carriers. Carriers with riskier safety records naturally face higher insurance premiums. During the recent surge in freight activity, many smaller carriers, particularly those new to the industry, inadvertently adopted unsafe practices.

A telling statistic from the Federal Motor Carrier Safety Administration’s Roadside Inspection Visualization highlights this issue. Fleets with one to 20 power units witnessed violations surge by 338,311 from 2021 to 2022, while fleets with 21 to 100 or more power units experienced a far more modest increase of 91,737 violations during the same period.

As Haun explains, “[Small fleets] were running over hours, they were hiring drivers with less experience. Insurance companies view that as a risk. … All you’re doing is transferring the risk [to the insurance company].”

Effective Strategies for Cost Management

Regaining control over insurance costs requires a concerted effort on the part of carriers. This includes implementing robust safety practices, maintaining favorable Compliance, Safety, Accountability (CSA) scores, and ensuring the hiring of experienced drivers. We strongly recommend that carriers leverage the available safety tools and data, such as electronic logging devices and dashcams.

“Dashcams provide crucial evidence in litigation. … Proving that you and your driver were not negligent can be a powerful defense against claims,” Haun emphasizes. “Reducing claims is the most effective way to lower your loss ratios, making your business more appealing to insurance companies.”

Moreover, carriers can actively manage costs by collaborating with insurance agents who continuously shop for insurance coverage each year. At Reliance Partners, our commitment is to educate trucking companies and help them secure optimal insurance coverage at competitive prices. With access to a significant portion of the insurance marketplace, we empower businesses to make informed decisions by explaining the factors influencing their premiums.

For deeper insights and personalized assistance with your trucking insurance needs, please visit Reliance Partners.

In conclusion, while the challenge of rising insurance costs is real, it is not insurmountable. Through proactive safety measures, informed decision-making, and a strategic partnership with Reliance Partners, trucking companies, including smaller carriers, can navigate this evolving landscape and secure a more sustainable future for their operations.