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In 2023, Yellow filed for bankruptcy after nearly 100 years in business. According to Commercial Carrier Journal, it wasn’t the only trucking company to go bankrupt recently and isn’t likely to be the last. The trucking sector is going through a challenging time right now. Some companies won’t survive the trucking recession, whereas those that do will need to find ways to control rising insurance costs.
Margins Shrink While Costs Rise
The trucking industry has experienced a massive slowdown. Margins are as thin as ever while freight rates on the spot market remain historically low. FreightWaves explains there are currently too many trucks for too little freight, which is leading to bankruptcies and layoffs in what is shaping up to be a severe freight recession.
Competition has become fierce and thin margins are affecting everyone – from owners and drivers to brokers and insurers. At the same time, costs have risen. A 2023 report from the American Transportation Research Institute found that the cost of operating a truck reached a record of $2.251 per mile in 2022 – up from $1.855 per mile the year before. The two biggest costs tend to be fuel and insurance, both of which have increased.
The Bureau of Transportation Statistics (BTS) says motor fuel prices saw record-breaking increases in 2022. In March 2022, on-highway diesel costs soared by 27% compared to the previous month. For comparison, the biggest hike before then had occurred in March 2008, when prices only increased by 15% from the previous month. There was another jump in prices in mid-2023, which FreightWaves says boosted rates but threatened trucking capacity. Overall, prices have dipped since the 2022 peak. The U.S. Energy Information Administration expects prices to decline in 2024 and 2025, but fluctuations in costs are still a concern.
Insurance costs have also risen. According to MarketScout, U.S. commercial insurance rates increased by 5.60% in the fourth quarter of 2023 and by 4.56% for the entire year. However, the transportation sector saw higher-than-average rate increases. In the fourth quarter, prices were up by 7.70%, which was more than any other industry in the MarketScout report.
A Proactive Risk Management Stance Is Crucial
For many trucking companies, this is a make-it-or-break-it moment. A proactive risk management stance is a crucial factor that will help you make it through these challenging times, as we covered in this article, outlining six key risk management considerations.
Another factor is making sure that you have a very experienced, determined and creative insurance partner in your corner. In the past, it may have been possible to renew each year without planning ahead, but that’s no longer the case. Now, you need to be strategizing about insurance and risk management throughout the year, and thinking about how safety practices and claims handling will impact future rates.
Find An Insurance Partner Who Will Go to Bat for You
In a hard insurance market, the right agent can make all the difference. An agent with the following three qualities can help your company navigate this challenging market:
- A strategic approach to safety. Good safety scores and consistent risk management best practices can help you keep claims low and position your company as a more attractive risk for insurers. It’s important to work with an agency that provides intentional safety consulting and resources throughout the year – all with the goal of improving your access to the best coverage and rates. You can’t wait for your renewal to start talking about safety measures – by then, it’s too late.
- A tenacious claims team. Work with an agency that offers in-house claims oversight and advocacy. This will help ensure that claims with big reserves aren’t left open unnecessarily. It will also help ensure that your carrier investigates and denies claims in which your liability is questionable. At the carrier level, file handlers are spread thin, and sometimes they pay claims without digging into the details. An agency can ask the right questions and help defend your loss ratio. For example, we recently spoke with a trucking company that was still paying sky-high rates for a $750,000 claim from three years ago. Even though there was evidence that the driver was not at fault, their insurer simply paid the claim. In these types of circumstances, a tenacious claims team can ask questions, help manage litigation and advocate for your company.
- Expansive market access and options. Work with an agency that specializes in the trucking industry and brings many options to the table. The ideal agency will have direct appointments with specialty insurers in your industry. Ideally, your agency should also have access to excess & surplus coverage and captive insurance solutions, so you have options if and when the traditional insurance market is too expensive.
Propel Insurance has direct appointments and exclusive program access to help you secure the coverage you need. We also offer strategic safety resources and a determined claims team that advocates on your behalf. Learn more.
With four years of experience in the insurance industry, Jacob specializes in transportation. His journey into the insurance profession was inspired by his wife when he moved to Atlanta to be with her. Her suggestion, coupled with his background in sales, led Jacob to discover his passion for helping clients navigate the complexities of insurance. More about Jacob...