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It’s no secret that trucking is a low-margin business. Even the most successful trucking companies earn only 10 cents on the dollar, which is why many carriers are having such a difficult time managing the astronomical increases in insurance costs over the last decade.

Year-over-year, carriers are having to pay more money for less coverage. These cost increases have forced many fleets, particularly smaller, less resourced ones, to make the difficult business decision to close their doors. At some point, loads are only so profitable and only so many efficiency gains can be made elsewhere in the business to account for higher insurance rates.

While business for many carriers has been more resilient than originally feared, as the recession drags on and other business expenses continue to rise, we are likely to see more carriers forced out of business or shopping for buyers because they can no longer afford the requisite insurance. As carriers consolidate or leave the market entirely, capacity is likely to tighten. If the COVID-induced recession ends in early 2021 and freight volumes rebound across all sectors, capacity will tighten further. Once capacity tightens enough that carriers have pricing leverage, motor carriers may want to consider implementing an insurance surcharge on their loads.

Jennifer Wieroniey


Just as the fuel surcharge was created in the 1970s to offset dramatic price fluctuations caused by an oil embargo placed on the United States by Arab members of OPEC, an insurance surcharge could help offset the dramatic increases in insurance costs over which individual carriers have little control.

Insurance premium increases, like fuel costs in the 1970s, are likened to a rising tide, where both safe and risky carriers have seen dramatic price increases due to insurer attempts to recoup years of losses. In the last decade, legal expenses have grown exponentially for insurers. The costs to defend carriers in vehicular accidents, the size of jury verdicts and even the number of small settlements have grown so much that insurers need double-digit — sometimes triple-digit — rate increases year-over-year to cover their expenses.

Just as breaking out fuel costs in the 1970s showed the true cost that certain members of OPEC inflicted on truckers at the pump, an insurance surcharge would show the true cost of the plaintiffs bar. Carriers can take certain steps to save on their insurance, analogous to shopping around your fuel to save on the margins. Yes, it can make a difference, but if there’s an embargo — or an avalanche of litigation — you are still going to be paying more.

Shippers, and the consumers who will eventually bear the cost, should know exactly how much of their increased freight cost is attributable to unconscionable jury verdicts and aggressive plaintiffs attorneys. An insurance surcharge is a practical solution to improve transparency in pricing and reduce financial hardship for carriers.

Aside from having shippers share the burden of cost increases, what else can be done to prevent insurance-induced carrier bankruptcies? If even carriers with the best safety technology and sparkling clean claims histories are seeing increases, what can be done to incentivize more carriers to invest in telematics and driver coaching? A one-stop shop for insurance, telematics and safety coaching would be immensely valuable for many fleets.

In the near future, more insurers could start to closely integrate safety technology into their suite of services offered to customers. One new tech startup recently received $16 million in its first round of funding to introduce an insurance product for small motor carriers that includes software, telematics and live support alongside liability coverage in the insurance premiums charged. More innovation like this would prove valuable in an industry that is swimming in underutilized telematics data. Additionally, the smaller carriers that have been less able to invest in expensive telematics equipment and also have been less able to absorb the higher insurance costs could benefit greatly from more one-stop shops in risk mitigation.

Absent innovation in freight pricing and an increase in more tech-forward insurance products, carriers can still take certain steps to slow their rising costs. A joint working group of attorneys, insurers and motor carriers from the National Accounting & Finance Council and American Trucking Associations’ Insurance Task Force will be releasing an in-depth guide, “Finding Affordable Insurance for a Trucking Business in the Hard Insurance Market” on Nov. 18 at NAFC’s Virtual Annual Conference. Carriers can prepare for renewal by getting their safety and loss documentation in order early, developing a risk-retention strategy and presenting the best possible case to underwriters. The guide will discuss the practical steps carriers of all sizes can take to achieve the best possible renewal outcome.

Business success in trucking is defined by a few more cents earned on the dollar than the year prior. While taking the steps in ATA’s “Finding Affordable Insurance” guide can’t guarantee dramatic savings, it is likely to move the needle enough to make 2021 a better year than 2020 for most carriers.

For more information about NAFC or the “Finding Affordable Insurance” guide, please email NAFC@trucking.org.

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