PHOTO: Flickr – Michel Curi
According to both FTR Transportation Intelligence and ACT Research the economic outlook for the trucking industry is turning positive. There will be more demand for shipping than there are drivers to take the loads.
The Economic Outlook for Truckers is Positive
Uber has entered the freight market with Uber for Freight – their cloud-based, on-demand, full truckload, freight brokerage app. It offers one click sign up for loads and guarantees payment in 7 days. A number of other freight matching technology startups offer similar services. Never before has it been easier for truckers to find consistent business. In addition diesel fuel costs remain relatively stable and inexpensive.
But Insurance Premiums are Skyrocketing
So you would think life is finally starting to get better for all the truckers out there, but unfortunately that is not the case.
Commercial insurance premiums are skyrocketing – some by up to 30%! The simple reason is that in 2016, according to Fitch Ratings the New York credit ratings agency, the US commercial auto insurance industry reported its worst performance since 2001. The underwriting combined ratio hit 110.4% which in plain speak means that for every $100 collected in premiums, insurers paid out $110.4 in claims. Progressive Corp. was the only insurance company with a combined ratio under 100% with 92.4%.
On total revenues of $28 billion the commercial auto insurance industry lost an estimated $716 million before taxes on policies. Some insurers have even exited the market including American International Group Inc.
An Explosion of Nuclear Judgements and Jury Awards
Part of what is driving the losses: Many trucking firms hired inexperienced drivers to fill jobs after the recession, and they are more prone to accidents than seasoned ones. In addition, plaintiffs’ lawyers have increasingly targeted trucking firms as the deepest pockets in accidents.
There has been “an explosion of judgments and jury awards,” said Tony DeFelice, an executive at the insurance brokerage of Aon PLC. Some are known as “nuclear” verdicts, at tens or even hundreds of millions of dollars.
Recent examples of “nuclear judgments” are the 2014 accident involving a Walmart truck that injured several people, including comedian Tracy Morgan, and killed one other. The children of the man who died settled for $10 million while Tracy Morgan and Walmart settled separately for an undisclosed amount.
A Texas jury awarded $281 million to the family of a man killed by a trucks drive shaft that had detached and smashed through the big rigs windshield. The judgment was reduced to $105 million and later was settled for an undisclosed amount. Landstar Systems Inc. had a judgment against it in 2011 of $55 million as a result of one of their drivers running a stop sign and hitting a pickup truck, killing the driver.
Federal law mandates trucking companies cover drivers up to $750,000 per accident. In 2015 the average US trucking company spent 9.2 cents per mile on insurance which was an increase of 44% over the previous year, and that hasn’t taken into account this year’s hike. The math is clearly not adding up for truckers but there is light at the end of the tunnel.
Technology Could Be the Answer
Trucking companies are turning to technology for help. Onboard cameras, automatic lane departure warnings, collision avoidance systems and critical event recorders are all coming into play to help mitigate lawsuit verdicts and reduce insurance premium expenses based on safety performance data.
The National Highway Traffic Safety Administration (NHTSA) conducted a one-year field study of collision avoidance systems and found they show potential for significant safety benefits for commercial vehicle drivers. Inward and outward facing cameras are starting to be implemented and are already providing positive results. Event data recorders, similar to aircraft “black boxes,” are being installed.
Safety technology is already starting to reduce accidents, mitigate judgments and reduce insurance premiums. But is this enough of a break to keep the truckers rolling and take advantage of the plentiful business that’s out there for them? Only time will tell.
If you’re interested in learning how shipping by rail might better meet your freight transportation needs call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.