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How carriers can best manage insurance costs and risks in 2024

Nov. 27, 2023
Insurance costs have risen significantly in the past decade, and 2024 should be no exception. What can fleets and owner-operators expect when managing their insurance next year?

Insurance is a major expense in trucking, especially for small fleets and owner-operators. Those expenses could become even greater in 2024—unless fleets take proactive measures.

As freight markets dipped after the pandemic surge, many large and small carriers have struggled. Major LTL fleet Yellow, which folded over the summer, drew the most attention. But the past 18 months have been particularly hard on small fleets and owner-operators. Many small companies and independent drivers who were established during the freight boom of the pandemic era folded during the economic pressures of the last year—a triple-threat of low rates, expensive fuel, and inflation. According to FMCSA data, there have been about 75,000 operating authority revocations among small fleets and owner-operators since 2022 largely due to economic tribulations, according to Donato Monaco, president of Northland Insurance.

See also: Exodus of fleets reaches historic levels in Q1, U.S. data shows

“Note that it’s net revocations,” he emphasized, saying that there have been more than 75,000 revocations because other, newer carriers have entered the industry. He noted that many of those drivers were likely hired by larger fleets.

The good news is that, for the drivers who have survived so far, the worst is likely over, Monaco told FleetOwner. He said for owner-operators, “2024 will not be worse … More experienced drivers have seen more ups and downs.”

Yet while freight rates were down in 2023, insurance costs are not. Nuclear verdicts continue to plague the trucking industry, and carriers pay out millions over crashes that they may not have even caused. Insurance premiums have risen in tandem with these lawsuits and settlements, Monaco said. As insurance rates have risen due to historic economic inflation, increasing nuclear verdicts increase risk for insurers, leading to social inflation, pushing those rates even higher. According to the  American Transportation Research Institute, per-mile premiums for carriers have increased by almost 50% over the last decade.

New technologies, new opportunities, new vulnerabilities

The continued adoption of safety tech, such as advanced driver-assistance systems, cameras, and other telematics devices, will give businesses more opportunities to invest in technology that can prevent or lessen the severity of collisions. This leads not only to reduced maintenance and repair costs but also lower insurance premiums. Some insurance companies, including Northland, have programs that include additional savings for carriers that use telematics.

Now that telematics data allows carriers to share data across their network, many fleets are incorporating that data into their safety programs. This data allows fleets to recognize what mistakes drivers are making and coach them individually. Monaco noted he found rewarding good drivers to be the most effective strategy for improving safety, rather than merely reprimanding drivers who need improvement.

See also: 4 steps to incentivize safe driving

Telematics devices such as cameras can also prevent pricey litigation by exonerating truck drivers. As more trucks on the road become equipped with camera technology, there is a possibility that nuclear verdicts could become less commonplace, though multimillion-dollar settlements for at-fault carriers could still affect premiums industry-wide.

However, as trucks become smarter through aftermarket devices and telematics installed during manufacturing, cyberattacks become a greater risk. Additionally, the number of criminals exploiting cybersecurity vulnerabilities in brokerage operations has increased by up to 400%, according to Ron Green, vice president of business development at supply chain security company Overhaul.

When shopping for insurance, carriers can look for providers who will aid them in establishing good cyber security and cyber hygiene practices.

“Good insurance helps you test and prevent,” Monaco said.

The number of cargo theft incidents continued to rise in 2023 and show no signs of slowing, experts from theft prevention network CargoNet told FleetOwner. According to the company’s latest data, truck cargo theft for the third quarter of 2023 increased 59% year-over-year after comparable increases in quarters one and two.

Insurance with value-added services for cargo theft should be considered, Monaco said, in light of these trends.

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