It’s a well-known fact that the trucking industry as a whole has a very narrow margin of profit. Even those companies that see the most success earn just pennies on the dollar. This is why unavoidable costs like those for insurance can be so challenging for carriers — especially when these costs keep steadily increasing.
Expect Rate Increases for Trucking Insurance for 2021
The fact that insurance rates for 2021 are expected to increase shouldn’t really be much of a surprise. For about the past 10 years, carriers have seen their bills for insurance rise even as their coverage shrunk.
These year-over-year increases are especially hard for smaller companies that already have fewer resources. As they are squeezed for more money — even as the country continues to grapple with a recession and other costs inch upward — these carriers might be faced with the business decision that is always difficult to come to terms with.
Effects of Increased Insurance Rates
If smaller companies are forced to shutter their businesses or search for a buyer, the capacity of the entire industry will shrink. When this is combined with the end of the recession in early 2021 and freight volumes rebound, capacity will be further tightened.
If capacity is squeezed enough, it will provide carriers with the leverage they need to negotiate prices. One idea is to levy a surcharge that covers insurance on each load.
This side effect is nothing new: in the 1970s, a fuel surcharge was created by carriers in an effort to offset the price fluctuations of that time. These were fueled by the decision of OPEC’s Arab members to place an oil embargo on the United States.
Like the increasing fuel costs of the 1970s, carriers have little control over their rising insurance costs. As insurance companies have seen their legal expenses grow as they defend carriers who have vehicle accidents and must pay for jury verdicts that continue to increase, the rising costs of insurance are felt by everyone in the trucking industry. Both carriers who have lodged claims against their insurance companies and those who have not, are subjected to these price increases which have been in the double digits — or even higher in some cases.
Insurance Surcharges Lead to Transparency
While carriers can shop around for lower insurance rates, the fact is that they will still be paying more for the same — or even less — coverage. Being transparent about the costs of these increases and their effects on both carriers and consumers is a practical and fair solution. It could also help reduce the financial strain that carriers feel when they try to shoulder the burden of insurance rate increases that are the result of aggressive attorneys who go after extremely high jury verdicts.
Other Tips to Reduce Truck Insurance Costs
During these times when carriers who have spotless safety records and loads of safety technology are experiencing the same types of rate increases as those who don’t have the same records, there are ways to stave off those costs. The bottom line rests with the safety of each carrier.
This is best approached by a combination of telematics, safety technologies and coaching. Even smaller carriers could get on-board with this solution with the emergence of risk mitigation that is combined with the above elements.
When the time to renew policies is approaching, carriers can present their best case by gathering their documentation for safety and loss. The development of a strategy that focuses on risk retention is also a plus when it comes to reducing their rates.
While the trucking industry is likely to see an increase in insurance rates for 2021, this doesn’t mean that they are without options. With a clear focus on strategy, and by working together, the industry can weather this challenge as well.
