A recent article, “Driving Through the Fog” published by Insurance Business America, discussed the state of the transportation industry and where it’s heading, and featured Jimmy Proffitt, head of Transportation Services at RPS. The industry has been performing well recently, buoyed by economic growth, technological advances, and a high demand for trucking services with increased freight rates and full load boards. However, as Jimmy points out, a down shift in the industry may be around the bend, as there are signs of a potential economic slowdown and trade uncertainty with China, along with a driver shortage that continues to be a challenge for the transportation sector.
The driver shortage, in fact, has put a spoke in the transportation industry’s wheel. To meet today’s trucking demand, many companies may be tempted to hire unqualified drivers, which can significantly increase a firm’s exposure. In addition, distracted driving remains a problem for the transportation industry – a recent study finds that truck drivers who have been in at least one collision are 94% more likely to be distracted by talking on a hand-held mobile phone and 85% more likely to be distracted by texting or dialing a mobile phone than their “non-collision” peers. The key is not only to hire qualified drivers but to also retain the drivers the firm employs, according to Jimmy. “We have a number of programs in partnership with trucking company clients to assist them in doing that. We call it closing the back door – trying to keep drivers from going somewhere else.”
The driver shortage has affected the industry’s ability to meet its demand in addition to playing a role in negatively impacting the insurance industry. As Jimmy explains, while the transportation industry has experienced strong performance recently, the Commercial Auto insurance in the space has underperformed over the last four to five years. Vehicular accidents have rendered multi-million-dollar settlement damages, with attorneys leveraging technology to determine driver error, in addition to alleging that companies are putting profit over safety. The significant costs and losses sustained by insurers are being passed down to transportation companies in the form of rate increases for physical damage and auto liability insurance: 4% to 5% for high-performing accounts; 6% to 10% on moderate accounts; and 20%-25% on poor-performing accounts.
Technology also plays a strong role for both the insurance companies and the transportation companies. Insurers using technology and predictive analytics in underwriting a transportation account and in assessing its risk profile are performing better in the space than those utilizing traditional methods. Equally so, trucking companies that leverage telematics, sensors, cameras and other technology advances can gain better insight into their drivers’ performance. They can then use the data garnered from the technology to improve both the performance of their drivers and their company’s overall risk profile.
As specialists in the transportation insurance industry , RPS can help you manage your clients’ risks and provide sound insurance solutions for a smoother road ahead. Just give us a call.