A beneficial drop in the combined ratio to 101 due to fewer claims during 2020 will not be enough to offset the $4 billion deficit the commercial auto segment posted in 2019, its worst loss in a decade, according to the 2021 U.S. Transportation Market Outlook published by Risk Placement Services Inc.

The increasing demand for transportation services during the recovery is certain to fuel future claims, while developing losses associated with nuclear verdicts, social unrest, natural catastrophes and business interruption will continue to erode insurer profitability. The commercial auto segment has not posted a combined ratio under 100% since 2010, despite double-digit rate hikes every year since then.

Nearly every segment of the transportation industry was disrupted by the pandemic. But while some operations were forced to downsize or suspend operations altogether, others switched gears or reinvented themselves to stay in business. A trucking business that was hauling automobiles, for example, may have started transporting personal protective equipment or essentials like toilet paper. Or a livery service transformed into a non-emergency medical transport service for COVID patients.

Normally any abrupt change in operations might signal instability to underwriters, but as transportation accounts come up for renewal this year, carriers are listening to how an insured adapted to the unstable pandemic environment, in some cases showing leniency, according to Eden Hancock, Area Senior Vice President, Transportation, at RPS.

"If there's a story on the back end—we doubled in size because this other manufacturer had to close because of the pandemic, and all of their drivers came over to us—we're having those conversations with our agents and our underwriters, making sure we get the best rate for the insured and have markets willing to look at it," Hancock noted in the report.

But even though carriers are willing to listen to explanations about how certain transportation businesses survived or even thrived during COVID, they are still seeking premium rates at renewal commensurate with the exposure. And in cases where there were suspensions in coverage, carriers are requiring proof that no accidents occurred.

As the country reopens for business and travel resumes, insurers are expecting commercial auto claims frequency to ramp up, further fueling future rate hikes. But trucking accounts that install telematics to enhance driver safety and help defend claims when accidents occur may see lower insurance costs.

"The transportation industry remained strong during COVID-19, and everything is looking up for continued growth going forward," observed Mark Gallagher, Vice President, National Transportation, at Risk Placement Services, Inc. "Unfortunately, until we can get safety measures in line to reduce claims and manage the rising cost of litigation, insurance premiums will likely increase as well."

Download the 2021 U.S. Transportation Market Outlook to learn more about:

  • Overall market conditions
  • Post-COVID renewal cycle
  • Trucking
  • Intermodal containers
  • Public auto and business auto
  • Liability limits
  • Cyber risks
  • Autonomous vehicles
  • Cargo theft
  • Last-mile delivery

Download the Report