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What Does ATRI’s New Trucking Survey Reveal about Insurance Costs?

TheRoad_InsuranceThe American Transportation Research Institute (ATRI) released their annual Analysis of the Operational Costs of Trucking for 2015. Based on a compilation of survey results from motor carriers representing 54,833 tractors and trucks across multiple segments and fleet sizes, the survey results identified an 11% year over year increase in truck insurance premiums when normalized on a per-mile basis. While the study did not break out the increased costs by coverage line, there are a number of factors driving premium increases.

As motor carriers are turning over their fleets, the costs of new tractors with mandated stricter emissions controls, higher efficiency standards—as well as the inclusion of new technologies such as anti-roll/stability control, automated transmissions, lane departure, and anti-collision collision devices—have dramatically increased the cost of a tractor, which impacts the costs to insure for physical damage. Increases in physical damage premiums will largely impact the owner-operators and small- to mid-sized fleets that purchase the coverage versus large fleet operators that typically self-insure this exposure.

Workers’ compensation premiums in the motor carrier industry continue to rise at an average pace of 3 to 5%. While the Occupational Safety and Health Administration (OSHA) has recently heightened its inspections and enforcement within the motor carrier industry, an aging workforce, compounded by chronic driver shortage—particularly with younger drivers—is driving both frequency and severity of injuries. This trend will not be stemmed as the average age of the workforce continues to increase, and may become further acute if the Federal Motor Carrier Safety Administration (FMCSA) reinstates the 34-hour restart rule, which has been shown to keep drivers on the road longer and during high traffic times, which increases the potential for accidents and pushes more drivers away from the industry.

The market for trucking liability insurance has been under pressure since 2013 to raise rates, and the industry has experienced a dramatic acceleration in rate increases beginning in the second quarter of 2015. We would speculate that at least half of the 11% rate increase reflected in ATRI’s survey results are attributable to liability coverage. Rate increases are highly correlated to poor underwriting results across the industry, driven by an alarming increase in claim reserves. One carrier with significant market share in the motor truck industry increased reserves on trucking claims over $200 million in Q2 of 2015. Other carriers with dedicated transportation underwriting units are experiencing similar results on their reserves, including Zurich, who announced last month to close their transportation underwriting unit and are non-renewing all transportation business. The impact of these declining results and contraction of market capacity are reflected in an average 10% rate increases on primary coverage. Changes in buffer and lead excess layers are more dramatic, with at least one carrier announcing their exit from the transportation market and other carriers imposing minimum 20% increases on top of increases in the attachment of insurance coverage.

What are your thoughts on the survey’s results? Share your comments below.

- Senior Vice President - Marsh USA, Inc.


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