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Knowledge Center Items Behind the Rising Insurance Rates for Transportation Risks

Behind the Rising Insurance Rates for Transportation Risks

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The transportation industry is the lifeblood of our economy, delivering goods we produce and use from one end of the country to the other. In the last nine years, however, the transportation industry has experienced a tough insurance market with rising commercial rates. In fact, the Commercial Auto market for insurers has been challenging, with the sector underperforming as compared to the rest of the market, by 12 to 15 points. The last time the Commercial Auto market posted a combined ratio under 100% was 2010.

There are several reasons for these poor results, including the fact that there are more trucks on the road since the economy rebounded, increasing exposure and congestion. Additionally a shortage of qualified drivers has led to more inexperienced drivers behind the wheel and more losses. Distracted driving that comes with smartphones and smart vehicles has upped the ante in lawsuits and resulted in “nuclear” jury verdicts in the tens of millions of dollars. Our aging ports, roads, and bridges have made it difficult to keep up with the demand for trucks.

The result has been many insurers raising rates, tightening underwriting requirements, and restricting business or getting out of certain segments altogether.

What is Being Done to Improve the Market?

The more sophisticated carriers are leveraging data and predictive analytics to better refine risk selection for improved future results. Those carriers that are ahead in the technology process are starting to outperform the competition.  

In addition, trucking companies are also adopting technology such as telematics, which can improve their risk profile and subsequently get them better rates. Telematics, for example, is the use of technology to identify driving habits such as rapid acceleration, sharp turns and sudden stops. Armed with this data, transportation firms can coach drivers into better driving habits, leading to fewer accidents and lower premiums. Cameras installed in the trucks can also help settle a dispute in an accident when it was not the fault of the trucker.

Insurance industry expertise is also critical with insurers requiring specialization from their distribution partners. Working with MGAs and wholesalers experienced in the transportation industry gets better results for all parties – the carrier, MGA/wholesaler, and insurance agencies.

What’s Down the Road?

Trucking insurance rates will continue to climb until there is underwriting profitability, which will eventually happen with the use of technology and specialization. The industry will be controlled by a smaller number of insurers and producers who are specialists in the industry sector and tech-savvy.

Additionally, as the economy softens and freight rates fall, combined with rising gas prices, trucking firms will feel the heat to manage their costs, operations, fleets, and drivers.

RPS is poised to continue to provide the insurance protection the transportation industry requires for the road ahead. Our carrier relationships and industry expertise enable us to help you manage your clients’ risks and provide sound insurance solutions.

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