What is Happening with Truck Insurance?

Have you heard about the insurance market for trucking companies? Some are saying that it is out of control. Others are saying that the insurance issue is a little simpler than that, and that the insurance companies have finally woken up to the reality that some trucking companies don’t deserve to be covered. Wow!

So, what is happening? Trucking insurance rates are going up, and up! They are like a shuttlecraft going skyward – going out of this world. To demonstrate, let me quote an insurance underwriter; “Three or four years ago, insurance on a small fleet (about 25 trucks) was averaging about $10,000 per vehicle. Now the same fleet is paying about $20,000 per unit. That is double the amount in a short period of time. Not many other required expenses have doubled in the same length of time. Certainly, I can’t think of another”.

If you think that insurance is a small cost for a trucking company, you would be incorrect. Insurance is often one of the top five expenses for a company.

So why the increase? There are several factors. Huge settlements are being paid out by the insurance companies. These are often not negotiated but court-ordered settlements. Once the court orders one outlandish solution, then everyone wants the same or a more significant settlement. We all know how that works. If your next-door neighbour got a settlement because of a crash and a week later, you got into a wreck of a similar nature, you would want at least as much as your neighbour; if not more.

Because of these astronomical payouts, several insurers have quit writing trucking insurance. After all, the insurance company wants to make a profit. With trucking insurance historically not being profitable, they have left the market and have discontinued offering insurance to trucking companies. Who has left the market? Zurich was once a significant player in the trucking insurance space but is no longer. AIG seems to be moving or is out. Then others have tightened up their underwriting. They have decided that if you have a ‘conditional’ CVOR, then they will not insure you and it does not seem to matter what the historical losses are for that trucking company. Many insurers have also left other markets – for example; gravel haulers used to have a difficult time getting insurance and now it is nearly impossible to obtain it. Other segments are the same.

Are you interested in starting your own trucking company? Is insurance available? The insurance companies have many rules about new startups. Does the owner have at least three years of experience as an Owner Operator? If they do, then maybe they can get insurance, but only for one or maybe two trucks for the first several years. Yes, the insurers are saying no growth until you demonstrate a few years of low losses. So if you want to start a trucking company, I believe that the first step is to first secure your insurance since it is extremely difficult. Talk to a trucking insurance specialist first and get the lay-of-the-land.

What does this mean if insurance companies have not been making money in the trucking market, some companies have left the market and the remaining insurance companies are determined to make a profit? It means that rates are going up. With trucking companies mostly making poor returns on their companies (4% to 6% seems to be a trucking company profit average) and with insurance and other cost going skyward, it may be a tough year for driver wages.

You, the driver, deserve better, as truck driver wages have not kept up with inflation for many years now and 2020 does not look much better. So, what can you do as a driver? Drive safe! That will help your company remain profitable which will help you to keep your job. And if you ever need to switch trucking companies, it also makes you look beautiful for your next employer.

So please drive safely!

Chris Harris
Top Dawg, Safety Dawg Inc.
@safety_dawg (twitter)

About Chris Harris, Safety Dawg

Chris has been involved in trucking most of his adult life. He drove truck for and worked in various office/management positions for a major truck company. His last position of 5 years in the safety department where he was responsible for the recruiting of Owner Operators and their compliance. He joined a trucking insurance company in 2001 and has been in the insurance side of things until making Safety Dawg a full-time endeavour.