The U.S. freight industry serves as a vital artery in the nation’s supply chain. Trucks move roughly 73% of the nation’s freight by weight, according to data from the U.S. Bureau of Transportation Statistics. Truck drivers have faced mounting challenges since 2020.
First, it was a global supply chain disruption during the height of COVID. Then, they were hit with dropping freight rates amid rising inflation and an increase in cargo thefts that further stressed an already tight supply chain.
Now, truckers must confront their latest obstacle head-on – surging commercial trucking insurance rates. These escalating costs are hitting an industry already grappling with other pressures.
U.S. truck drivers can’t seem to catch a break.
What’s Driving the High Truck Driver Insurance Rates?
The steep rise in truck driver insurance premiums is largely driven by an increase in crash frequency and severity. An overall uptick in truck-involved crashes caused bodily injury costs to climb 40% between 2018 and 2022, the most recent years for crash data available. Insurance industry analysts expect another 7% growth in 2024.
Further complicating the matter are attorneys actively pursuing individuals hurt in truck crashes and encouraging them to file personal injury claims against drivers and trucking carriers. More claimants seeking legal representation results in higher rates of expenditure for medical procedures and treatments.
Plaintiff attorneys typically push for settlements that are an average of 37.7% higher than jury awards. States with more litigious environments such as California, Michigan, New Jersey, and North Carolina saw small verdict settlements balloon to between $406,386 to $449,792.
Other factors behind the rising costs include:
- Economic conditions within the industry. Incurred losses of commercial vehicles have grown by 50% in recent years. The increase in losses, coupled with high claims severity, causes underwriting losses despite rising premiums.
- Fleet size and sector. Insurance experts disagree on whether fleet size or safety record is more important. However, both factors, along with the specific sector or type of operation, significantly impact truck driver insurance rates.
- Operational factors. The type of operations, freight values, and regions or states of operation play a critical role in determining truck insurance rates. Carriers operating in high-risk areas or transporting high-value cargo face higher premiums.
- Safety records. A carrier’s safety record heavily influences commercial insurance premiums. Carriers with better safety performance can typically secure lower premiums. Consistent improvements in safety technology adoption, driver training, and hiring practices can contribute to less expensive rates.
The Cost of Replacement
Traveler’s Insurance – one of the largest commercial insurance companies – included vehicle repair and replacement costs as one of the primary reasons for higher truck insurance rates. Newer trucks outfitted with advanced materials and technology make driving more comfortable and safer – but also more expensive.
Vehicles aren’t the only items that may need replacing after an accident. Cargo damage can jack up the final tally of what an insurance company must pay.
How are High Truck Insurance Rates Impacting Drivers?
High truck insurance rates are impacting drivers at a time when they’re already struggling to keep their heads above the water.
Gamina Oliver, an owner-operator with a small fleet of three trucks, said she relocated her business from Illinois to Georgia in the hopes of securing lower annual insurance premiums. Because of the high insurance rates and other pressures impacting the industry, Oliver only operates one of her three trucks.
“My previous insurance was paid for the year when I left Illinois,” she said. “When I went to redo it in Georgia, my rates were almost double. Before I switched states, I was paying $1,223, which I thought was pretty high. When I renewed it in Georgia, I paid $2,223.”
Oliver said the way it works is insurance companies offer annual contracts with truck drivers and carriers that allow them to pay their premium for 10 months with a 2-month grace period to prepare for the start of the next insurance period.
“Before COVID, if you didn’t have any claims, you would get a small discount with your insurance company if you renewed your policy with them at the end of the year,” she said. “Not anymore. There’s no more discounts for keeping your insurance and not having any claims.”
Like many of her fellow owner-operators, Oliver continues to shop around in the hopes of finding lower rates. In the meantime, she said she’s noticing some commercial insurance companies have started offering month-to-month coverage, which is a possible money-saving solution for small owner-operators like herself. Some independent owner-operators park their trucks during slow periods and could drop their insurance coverage during those times if they had a month-to-month policy. “That way, we’re only paying for the months we’re actively driving,” she said.
In the meantime, Oliver said she doesn’t think commercial rates will stabilize until late 2025 at the earliest.
What are Some Strategies and Solutions for High Truck Insurance?
Going green can lower insurance premiums for commercial truck drivers. Individual owner-operators and fleet carriers that embrace eco-friendly practices can reduce their carbon footprints and enjoy savings in their annual insurance premiums.
Sustainable logistics often emphasizes fuel-efficient driving techniques such as maintaining steady speeds, minimizing idling, and avoiding rapid acceleration and braking. These habits save fuel and reduce the risk of accidents, leading to fewer claims and lower insurance premiums.
Advanced technology including telematics, GPS tracking, and real-time monitoring helps carriers track driver behavior, optimize routes, and prevent accidents. Commercial insurers may offer discounts for using this kind of technology because it demonstrates a commitment to safety.
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In the past decade we have seen a continuous rise in accidents, and as a result, the insurance costs across the United States. Not only the frequency of claims but also their severity are increasing.