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Forecasting Insurance Costs for Fleets & Owner-Operators

Updated: Sep 22, 2023

It’s no secret that insurance rates in the trucking industry are rising. These increases have impacted both our fleet partners and our owner-operator clients. So, ATBS set out to determine why the increases are happening, what potential geopolitical risks could be on the horizon, and how fleets can utilize the changing insurance landscape to help retain and recruit owner-operators. We also contacted Bill Zenk and Chris Gulker of TrueNorth Companies to help provide industry insight into the insurance increases and how to mitigate them.

“When it comes time to renew insurance each year, truck drivers on their own authority have become used to seeing 5% to 15% premium increases, while motor carriers have seen as high as 35% to 40% premium increases,” says Gulker, Practice Leader at TrueNorth Companies.

These types of increases are even true for experienced truck drivers and fleets who have a history of safe driving.

Unfortunately, these increases in the price of insurance don’t look to be going away anytime soon. The premium hikes could be getting worse... A new measure was included in a highway funding bill recently that was approved by a House panel. The measure, which was initially supported by the Owner-Operator Independent Driver Association (OOIDA), would raise the minimum liability insurance requirement for commercial motor vehicles from $750,000 per truck to $2 million. The American Trucking Association (ATA) and OOIDA have both opposed the bill after the “poison pill” amendment, as the ATA and OOIDA have dubbed it, was added.

Those who support the amendment argue that the current minimum insurance liability doesn’t adequately compensate victims involved in large truck accidents. Those against the bill say that the subsequent massive increase in insurance prices will force many small trucking companies and drivers to go out of business. Additionally, opponents of the amendment believe raising the minimum insurance coverage will do nothing to improve highway safety and feel the new minimum number is not comprised using a fair and data-driven process.

Whether or not the increase in minimum liability insurance passes, the cost of insurance looks like it’s going to continue to increase. Gulker expanded on this topic by saying: “The increases are primarily driven by the recent frequency and severity of large claims. Today, it’s common to see multi-million dollar verdicts, including claims valued in the tens, if not hundreds, of millions of dollars. With the number of claims and dollars spent by insurance carriers on the rise, several insurance carriers have left the Commercial Auto market entirely; thus, leaving fewer insurance carriers willing to operate in this line of business. With fewer insurance carriers left to write the business, on top of the declining profits to the insurance carriers remaining, insurers are becoming more selective on the Motor Carriers they will insure. This is leading insurance costs to continue to rise.”

In order to help protect your fleet from increases in premiums, and to gauge how these increases in insurance costs will impact the owner-operator side of your fleet, we must first look at the expenses that owner-operators cover. We will be looking at the differences between insurance required for owner-operators on their own authority and owner-operators leased onto a carrier. Then we can determine how these increases can impact your fleet.

Owner-Operators on their Own Authority

Owner-operators on their own authority pay anywhere between $15,000 and $30,000+ per year for insurance. As mentioned earlier, all truck drivers with their own authority are required by the FMCSA to have primary liability insurance with a minimum coverage of $750,000. This coverage can cost anywhere between $12,000 and $25,000+ per year. Additionally, it’s common for independent owner-operators to have the following types of insurance:

Cargo $1,680 - $3,300 per year

Cargo insurance covers the loss or damage of a load during transport. This type of insurance isn’t legally required, but is typically required by shippers and is necessary to avoid problems with individual shippers.

Physical Damage $2,000 - $4,000 per year

Physical damage insurance pays for damages to the truck but not any damage to the cargo. This insurance is a requirement for all owner-operators who are financing their truck and costs typically 3.5% to 6% of the value.

Bobtail $420 - $720 per year

Bobtail insurance covers the driver and the truck when there is no chassis or trailer attached.

Non-Trucking $350 - $450 per year

Non-trucking insurance protects the driver while they are using their truck for personal use.

Work Injury Insurance (Occupational Accident OR Workers’ Compensation) $1,140 - $5,000+ per year

Work injury insurance protects the driver if they are injured during the course of business and includes coverage for medical expenses, in addition to disability income replacement.

Owner-Operators Leased onto a Carrier

As an owner-operator leased onto a carrier, the primary liability coverage is provided by their fleet. However, they are responsible for everything else. The following types of insurance are typical for a leased driver:

  • Work Injury (Workers’ Compensation OR Occupational Accident)

  • Bobtail OR Non-Trucking

  • Physical Damage

All of these types of insurance were previously mentioned in the section above.

The biggest factor that will go into how much their policy will cost is their truck’s value. If they drive an older truck, the cost might be between $3,000 - $4,000 per year for the three insurance types listed above. A newer truck will likely lead to insurance costing around or slightly more than $4,000 per year.

In addition to the insurance coverage above, owner-operators leased onto a carrier will also typically pay for Occupational Accident insurance. This coverage typically costs between $95 - $195 per month and includes medical, disability, death, and dismemberment benefits for accidents that occur on the job.

What will increased insurance costs do to fleets?

It’s hard to say exactly how much insurance costs will go up for fleets if the minimum liability passes. In the current situation, it’s hard enough for Motor Carriers to affordably find $1 million of coverage, let alone trying to procure an additional $1 million. Bill Zenk, Principal and Practice Leader at TrueNorth Companies, says he “would anticipate Motor Carriers would see around 50% higher costs due to the lack of capacity and increased activity in the $1 million excess of $1 million primary layer.”

Suppose Motor Carrier insurance does increase to this extent. In that case, something will clearly have to give – that will likely be in the form of customer rate increases, driver pay decreases, or both. However, with the limited capacity the industry is already facing, and the difficulty for the industry to recruit new drivers, increasing shipper rates seems to be more probable. Driver pay has been on the rise lately to attract more people to the industry.

How can fleets lower the cost of insurance?

Despite these increasing costs, high quality, well-run, and safe motor carriers can still get a good deal on insurance coverage.

“The best way to do this is to invest in safety, compliance, and loss control. These are all things Motor Carriers need to consider in order to best position themselves for favorable renewal outcomes. This can be done by hiring seasoned veterans to support safety, compliance, claims, etc. Fleets can also consider purchasing the latest in safety technology – Advanced Driver Assistance Systems (ADAS), collision-mitigation and lane-departure warnings, as well as in-cab video-recording systems. Insurance companies will take into account how much a fleet has invested in safety, as they know it will have a direct impact on claims,” says Gulker.

Zenk mentioned additional ways that fleets could reduce the cost of insurance:

  • Improve data management and implement corrective action plans based on the data. A corrective action plan is a set of actions to correct an issue or problem.

  • Increase the deductible/retention in order to limit fixed costs variation.

  • Work with an insurance broker and an insurance company who knows the trucking business and is a true long term partner.

How this Affects Fleet Recruiting and Retention

If the cost of insurance continues to go up, many owner-operators under their own authority will be forced out of business. As a fleet, this means two things:

  1. Owner-operators who previously ran under their own authority may be looking to lease onto a carrier that will cover some of their insurance costs and give discounted group rates vs their current policy.

  2. Owner-operators currently leased onto a carrier may decide to forgo getting their own-authority if the increased insurance costs would eat into their profits.

This means fleets that allow drivers to lease onto them need to look into how to best leverage this idea to help their recruiting and retention.

“The fleets that are able to maintain a strong risk profile will thrive in this marketplace and will be the ‘platform of choice’ for the best ICs with higher pay opportunities. The fleets that cannot control their risk profile will find it not only difficult to be competitive from a pay standpoint but may find it difficult to even stay in business,” says Zenk.

By letting drivers know your fleets’ risk profile, what insurance you cover for them, and how much money this saves them, owner-operators will be more likely to want to start and continue driving for you.

Whether or not the increase in the minimum liability coverage passes, insurance costs in general look to continue to rise for both drivers and fleets. By focusing on the strategies we mentioned in the article, your fleet will be able to keep these cost increases under control and help prevent them from getting out of hand. As insurance costs among own authority drivers continue to go up, many will likely start looking to fleets as the best solution to continue to drive and stay in business as an owner-operator. Make sure you are ready to present your fleet as the best option for drivers who are looking to save money on insurance.

If you have any questions, comments, or want to learn more about ATBS, feel free to reach us by clicking on the link here.

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