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Key Factors Impacting Transportation Insurance

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A confluence of factors is impacting the transportation industry’s profitability, including its ability to keep up with rising insurance rates. Jimmy Proffitt, Vice President, National Transportation, RPS, shares his expertise of the market and the factors affecting this sector.

Since 2010, the commercial auto segment has been underperforming by 12 to 15 points in comparison to the rest of the insurance industry, leading insurance carriers with a major presence in the space to continually raise rates and tighten underwriting requirements in an effort to improve results. The transportation industry as a whole has struggled with these increases up until the last two years when it was able to weather rising rates because of a strong global economy and a huge demand for freight.

“The economy was terrific from 2017-2018 until the beginning of this year,” explained Jimmy, “enabling truck owners to raise freight rates to meet consumer demand for goods and make enough money to pay insurance increases, hire additional drivers, and raise driver pay.” In fact, during this period, trucking companies purchased additional vehicles and recruited, hired and trained more drivers. “Truck sales were at an all-time high,” said Jimmy. As a result, today there is a lot more capacity. Unfortunately, freight demand has now fallen as part of the ebb and flow of change, the risk of an escalation in trade conflicts and heightened political uncertainty. “Not only is there an overcapacity in the trucking industry but also reduced demand and lower freight rates as well. The decline in freight demand and lower freight rates are eroding profits for truckers, making it difficult for them to pay the higher insurance costs.”

Behind Commercial Auto Underperformance

There are several reasons fueling the continued underperformance of the commercial auto segment in the last few years. A good economy means you have more trucks on the road, which creates greater exposure and the potential for more accidents. Finding qualified drivers has become increasingly more challenging for trucking clients. The nation’s infrastructure of highways and bridges is not as robust as it was 10 years ago. Distracted driving is a huge factor in collisions. In addition, the transportation industry is battling a successful and sophisticated plaintiff bar where six- to seven-figure liability settlements, known as “nuclear verdicts,” are more common. “Recently, I read about a $280 million judgment against a trucking firm,” noted Jimmy. “What’s more, medical costs keep rising, and the cost to repair vehicles has also gone up because of ‘smart’ vehicles. When loss costs go up 4% to 5% and insurance companies raise their rates the same percentage amount to cover these costs, you essentially have a flat increase.”

How Can Agents Help Their Transportation Clients?

If you’re on the retail side, it’s important to specialize in transportation insurance and work with a wholesaler/MGA and carrier whose focus is also in this area. “The transportation sector is better served by people who specialize in insuring this industry – who do this every day, all day, and know the market, the potholes, and how to work around some of the obstacles,” said Jimmy.

He also recommends that trucking companies remain very selective when it comes to hiring drivers. “Make sure drivers are properly qualified and trained. Resist hiring just anyone to get behind the wheel – it’s a tough situation for the trucking owner who has freight to move and needs drivers to do so. But hiring unqualified drivers will eventually catch up to the owner, creating losses and additional insurance costs.”

Jimmy also points to the vast amount of public data that is available today through the Federal Motor Carrier Safety Administration on a trucking company’s safety scores and regulatory compliance. “Encourage trucking carriers to be aware of compliance requirements so their safety scores remain positive. Trucking carriers that demonstrate they have an active safety program, a stable group of qualified drivers, and positive safety scores will be able to purchase insurance with carriers that specialize in the more preferred market. They’ll pay lower rates than their competitors.”


RPS has a dedicated Transportation division with full-time underwriters throughout the country and the markets to place accounts. “We represent most if not all the carriers that provide commercial auto coverage,” said Jimmy, “with many available for clients. We can write preferred and moderate business as well as distressed accounts. There is a home for everybody.”

RPS writes all types and classes and sizes of transportation, from firms that haul goods for hire to public auto risks – those that transport people instead of commodities, such as limousines, rideshare vehicles, charter buses, church vans, social services vans, courtesy vans, etc. For more information about our transportation insurance solutions, please contact us.

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