Last year’s ATRI report, “Analysis of the Operational Costs of Trucking,” showed the first decline in 5 years for the average insurance premiums cost per mile.
Before the pandemic, it was expected that insurance costs would rise, but at a slower growth rate than previous years. However, the COVID pandemic has changed things.
If Omicron wreaks havoc in 2022, will trucking insurance rates drop or rise?
What happened to insurance rates in 2020 during the pandemic?
The best way to answer this is looking at the latest ATRI report.
Over Thanksgiving, ATRI’s 2021 Analysis of the Operational Costs of Trucking was released and is the first full view of the effect the pandemic has had on the trucking industry in 2020.
According to the report, “In addition to faster truck speeds, COVID-19 impacts were considerable: dead-head miles increased to 20.6 percent, annual operating miles decreased to 89,358 miles per truck, and fuel costs declined by nearly 20 percent to 30.8 cents per mile. Independent of COVID-19 impacts, insurance costs continued their climb, rising more than 18 percent to 8.7 cents per mile – the highest in the Ops Costs report history.”
Additionally, insurance premium costs per mile remain almost twice as high for smaller carriers at 12.2 cents per mile versus larger carriers at 6.8 cents, and the insurance cost disparity between large and smaller carriers increased slightly from 2019.
Why did trucking insurance increase during the pandemic?
Since underwriters look at many different risk factors to determine your insurance score, it is no wonder that overall risk has increased during a pandemic.
Beyond the normal risk carriers are used to, the pandemic led to:
Increased liability lawsuits and workers’ compensation costs. Specifically, many coronavirus-related employment complaints were filed, becoming a new risk factor for fleet managers.
Insurance facing more losses during the pandemic. Despite the quickly rising insurance rates over the last decade, insurance companies have not been able to catch a profit, which is making it very difficult to attract capacity and capital to try turning the market. This is part of the reason why commercial fleets are seeing anywhere from 100 to 300% rate increases.
Less availability in insurance capacity. Insurers that were willing to put up $5 million and $10 million layers are now looking at $2 million and $5 million layers, which is driving up costs.
Distracted driving getting worse. Distracted driving is leading to roughly $360,000 in injuries per year, and although there were less people on the roads in 2020, the driving behavior was much worse.
Lower driver hiring standards. As we discussed in 5 Reasons Insurance Providers Could Cancel Your Commercial Trucking Policy, adding a driver doubles your insurance premium, but hiring a driver with unsafe driving history will increase it even more due to the safety risk. The pandemic increased the opportunity to make money in 2020 along with the need to hire drivers, but the driver “shortage” has reduced the quality of the driver. Not only has that led to an increase in accidents, but the defense of accidents has been more challenging.
Until the insurance industry can get out in front of this and share profitability, we are going to see much of the same, especially with the Omicron variant in 2022.
How to lower trucking insurance premiums in 2022
According to ATRI’s 2020 report, when rates decrease, “carriers are showing more and more willingness to stake their own risk on safety technology investments and driver development programs.”
In addition, expenses related to litigation, safety technology, safety training, out-of-pocket costs, and even driver compensation are all significant components in the total costs of risk.
But that 2020 report decrease came with a price. Insurance companies said that trucking fleets are also assuming higher risk levels through higher deductibles, self-insurance, expanding use of insurance captives, and lower levels of excess liability coverage.
The best offense for getting insurance costs in line is to become a well-run company.
Our partners at CNS offer DOT Compliance Programs focused on Proactive Safety Management (PSM), a mindset that will ensure your fleet’s safety and compliance is always in order and ahead of the FMCSA.
Our PSM Motor Carrier Program includes:
- ELD management
- Driver Qualification File Management
- New driver on-boarding
- Driver safety meetings
- CSA score management
- Policies and handbooks
- Vehicle maintenance
- and more
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