The transportation industry is a unique category that sees its own risks and liabilities that differ widely from other industries. Transporting goods and services over a long distance can expose trucks, personnel, and the cargo that’s being carried to high risk. Insuring in the transportation industry can be tricky, so having a solid grasp on the market, its liabilities, and the unique nature of the industry as a whole is vital to transportation companies.
According to data from the American Trucking Association, trucking employs more than 7.4 million professionals and with the need for more drivers on account of the upcoming driver shortage, that number could be in flux. Also, the industry sees travel in excess of 450 billion miles every year, moving more than 10 billion tons of freight around the country. With this in mind, let’s look at some of the challenges facing how to go about insuring in the transportation market.
From cargo and freight carriers to passenger services, the transportation industry literally has a lot of moving parts. Besides trucking, transportation also includes public transit, taxis, ride-shares, and car rentals, which means it’s not just freight and commercial trucking that needs to be on the lookout for risks and obtain transportation insurance.
With cell phone use and sleep deprivation increasing in the world of transportation, both from everyday drivers and those pushing people and goods along, it makes sense that the number of fatalities on the road spiked up by almost eight percent between 2010 and 2015, and with even more distracted driving behind basically every wheel, it’s expected that even more fatalities will be seen between 2016-2020 numbers.
In some instances, juries have awarded those who have been injured or families of those who were slain hundreds of millions of dollars in payouts. What’s more, the industry’s adverse loss reserve development jumped up by nearly $1 billion, to a total of $1.6 billion in 2015. Again, those numbers are expected to rise in the coming years.
Rates have seen a rise by as much as 30 percent and are projected to spike up further and further in the years to come. While insurers increased premiums over the last few years, results have continued to weaken. Now, it’s at a moment where insurers can’t get the rate they need to stay competitive in the market. Because of this, many of the largest underwriters have taken off services such as for-hire fleets coverage.
This can potentially create a big problem in the industry, especially for those who need transportation insurance coverage but can’t find the money for it. Insurance is now one of the largest expenses behind salaries and equipment costs and for companies looking to cut out some bills, transportation insurance may be the first thing to leave out.
The cost of coverage is putting more pressure on trucking and transportation companies, with rates bumping up nearly 20 percent on average, which pushes out smaller operators in the meantime. According to federal law, firms are required to cover trucking and transportation professionals up to $750,000 per accident. Many are self-insuring up to $1 million and purchase further tiers of insurance to cover additional costs of operation. This has results in some companies, especially smaller family-owned operations, to cut corners and save costs.
A collaborative effort between truck manufacturers, regulators, and the industry as a whole to cut down on the number of accidents, allowing rates to decrease and level out. Transportation companies should be investing in stringent fleet safety programs to reinforce driver training while monitoring driving behaviors. Training and education are powerful tools to help keep incidents down as well as rising rates.
About Tangram Insurance Services
Located across the Golden Gate Bridge, just outside of San Francisco, Tangram Insurance Services is a full-service Managing General Underwriter and Program Manager offering specialty programs. We focus on industry-relevant coverage, competitive pricing, and practical business and risk management solutions for your clients. Since we are not all things to all people, we make sure to create outstanding custom-built solutions that matter to those businesses, and the brokers who serve those industries. Contact us at (888) 744-9810.