For much of the trucking industry, talking about trucking insurance rates is a major point of contention. If you’re an owner operator, you’ve probably seen your rates go up faster than ever. While much of the nation continues experiencing improved economic results, many owners continue wondering what the heck is going on in trucking and what is 2019 going to look like.
Let’s start by looking at historical results. Prior to 2011, the commercial auto industry experienced an 8 year period of profitable results. However, starting in 2011, the industry began experiencing the exact opposite results. Of the top 15 commercial auto insurance companies, only 4 insurance companies have reported profitability in the past few years. According to Fitch, only Progressive, Chubb, Old Republic, and Berkshire Hathaway reported profitable results during this time period. Of these companies, Progressive insurance is the only company that reports profitability every year.
Why are commercial auto insurance companies losing so much money?
Based on the data, companies are losing money first and foremost due to increase accident frequency and severity. On the claims frequency side, the expanding economy, increased driving miles, and driver shortages are the leading factors. Increased litigation and cars with more included technology lead all claims severity factors. Let’s face it, if you hit a car now, the average claim simply costs more to settle.
Insurance company losses can’t be blamed on claims frequency and severity alone. Insurance companies have been slow to change the way they rate commercial auto insurance policies. Slow reaction to loss trends mean they have to play catch-up on rate increases. Instead of keeping up with losses, insurance companies have limited their rate increase apparently in hopes of a miracle turnaround.
What to expect from insurance companies in 2019
With 2017 industry losses of 11 cents on a dollar, 2018 will probably considered the year of the trucking rate increase. Most companies saw quarterly rate increases between 7 and 10%. According A.M. Best and Fitch Ratings, even after 2018 rate increases, the industry still needs about 10% improvement in overall claims and underwriting results until the market can stabilize. That means, rates will go up again in 2019. Aside from rate increases, pundits predict insurance carriers to either tighten their underwriting requirements or leave the commercial auto segment as a whole.
All this means, that as a truck or small fleet owner, you will continue facing profitability challenges as insurance companies get their acts together. In talking directly to insurance underwriters, they all welcomed good risks. Good risks with good claims histories will always find a place. However, the hairier your business, the harder it will become to find relatively affordable insurance. Only the best companies will have any chance for rating stability in 2019. Of all commercial auto segments, new trucking ventures, tow truck operations, and some dump truck operations will continue to be difficult in obtaining insurance.
What you can do to help your rates
As a truck owner, it may appear hopeless. However, here are a few steps owners need to take to help control your rates.
- Keep an eye on your miles and choose your routes wisely. One of the major factors that insurers continue citing is the number of miles driven. The more miles you drive, the more you are exposed to other drivers. We know that most CDL drivers are good drivers. However, the people around you are not. So the need for you to account for traffic in places like Dallas is more important than ever.
- Utilize Telematics Programs. We all know the FMCSA requires all commercial drivers to have Electronic Logging Devices in their truck. Would you believe compliance is less than 50%? Insurance companies like Progressive and State Auto have introduced special discounts ranging from 5% – 25% just for either using the company device or allow the insurance company to access your ELD account.
- Hire the right drivers. Hire drivers that have at least 3 years CDL experience and between the ages of 30 and 60 years old. Unfortunately, a national shortage of drivers make hiring these drivers more difficult.
- Enable more communication across your fleet. Studies show that fleet managers that remain in contact with their drivers, have superior loss results. For a large company with fleets greater than 10 power units, risk management and dispatch programs are more important than ever. Training drivers to rest, eat and fuel up prior to picking up loads and then driving at least 200 miles before stopping is just one training measure fleet and risk managers employ to prevent cargo liability losses.
As a good agent, our job to educate drivers is more important than ever. Electronic Logging Devices and other telematics programs provide more than just a discount and a way for big brother to watch you. These electronics represent a way out for insurance companies by providing the increased data sophistication needed to help with policy rating. Also, good brokers and agents, will have to further communicate when rate increases or non-renewals are due to the insurance company or due to the driver company itself. In the end, it’s about safety. The safer the driver the better the chance for improved rates. 2019 will continue to be challenging