A trucking firm makes the decision to invest in new tractors,excited by the upgrades in technology and efficiency and by thesatisfaction that comes with investing in the business. Then comesthe insurance bill.

Trucking companies of all sizes are generally experiencingincreases in insurance pricing due to factors that range fromworkers’ compensation costs to fleet issues to rising juryverdicts. The recent "Analysis of the Operational Costs of Truckingfor 2015" from the American Transportation ResearchInstitute identified an 11% year-over-year increase intruck insurance premiums when normalized on a per-mile basis from2013 to 2014.

And in the fourth quarter of 2015, Marsh data showed rates forgeneral liability, auto liability, excess casualty, and workers’compensation remaining flat or increasing — significantly in somecoverage lines and for some transportation companies, depending onspecific circumstances.

Issues behind the premium increases include:

Fleet turnover: New tractors come with mandatedstricter emissions controls, higher efficiency standards, and newtechnologies. These improvements increase the cost of a tractor,which in turn raises insurance costs. The higher rates forphysical damage premiums will largely impact owner-operators andsmall- to mid-size fleets as opposed to large-fleet operators,which typically self-insure.

Workers’ Compensation: The Occupational Safetyand Health Administration has heightened inspections andenforcement, and the frequency and severity of injuries has risendue to an aging workforce and a chronic driver shortage.

Liability coverage: Trucking liability insurershave been under pressure since 2013 to raise rates. A dramaticacceleration of pricing began in the second quarter of 2015 andcontinued through the year. Rate increases correlate to poorunderwriting results across the industry, driven by an increase inclaim reserves. As losses increase, some insurers areretreating from the umbrella/excess marketplace and/or increasingtheir attachment points. Insurers are also quoting smaller limitsto reduce their transportation exposures.

Lawsuits and loss experience: There’s been arise in the severity of jury awards against trucking companies,despite a drop in the frequency of preventable accidents. Adverseverdicts — many exceeding $100 million — have increasedsubstantially, even where it is difficult to identify fault. Withjuries seen as sympathetic to plaintiffs, many insurers and motorcarriers have settled claims that may previously have resulted inverdicts favoring the defense.

The road ahead for many fleet owners renewing their insuranceprograms is likely to be more challenging, time consuming, andcostly, barring unforeseen changes in conditions. Fleet owners needto begin the renewal process early and should anticipate a higherlevel of underwriting scrutiny focusing on driver screening andrecruitment, training, safety, claims management, and use oftechnology.

For more information about insurance and risk trends, seeMarsh’s U.S. Insurance Market Report 2016.

Craig Dancer is the transportation industrypractice leader at New York City-based insurancebroker Marsh LLC.

Editor's note: This article first appeared on Marsh.comand is reprinted here with permission.Visit the Marsh Risk in Contextblog for the original post.

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