On the Road: Tough Trucking Market Brings Challenges, Opportunities for Specialists

The demand for transportation services remains strong and experts believe that trend will continue throughout 2023. That’s good news for transportation insurance experts. At the same time, the trucking sector today faces challenges, including ongoing driver shortages, rising operational costs, skyrocketing medical and litigation costs, and others.

But transportation insurance specialists say those challenges can also open the door to new opportunities and that data-driven technology is helping trucking firms and their insurance partners navigate these bumps in the road.

“Inflation is affecting everything,” said Mark Gallagher, vice president of national transportation at broker RPS, during a recent webinar on the transportation sector. “We’ve seen costs rise in equipment and values of repairs, cargo values and replacement of vehicles.”

RPS’s recent 2022 U.S. Transportation Market Outlook noted that the rise in operational costs has already led to an increase in consolidation in certain sectors of the trucking industry, with larger firms buying up smaller operators as they struggle with the increased cost pressures.

Improving safety scores and embracing loss control services are key in the tough transportation market, especially as truckers themselves come under higher scrutiny every time a loss occurs, Gallagher added.

“The typical trucker out there is operating safely, but unfortunately there’s a stigma,” said Craig Moss, vice president of underwriting at Paramount, an ISC Company in Tyler, Texas, that focuses exclusively on the trucking industry. When there is an accident with a large truck, the driver is often seen at fault, he said. “We paint truckers all with the same brush and because we’re in a litigious society, I think truckers get a bad rep.”

Social inflation and nuclear verdicts are concerns for both insureds and insurance carriers.

“Carriers are challenged with these verdicts, which are being fueled by rising medical costs and the high costs of litigation, including litigation funding,” according to RPS’s Gallagher.

Nuclear verdicts — cases that exceed $10 million in payments — are becoming increasingly prevalent.

“There are certain large law firms out there that have the ability to obtain nuclear verdicts as a result of finding something egregious in the claim,” noted Gallagher. “That is a concern for every transportation client out there, and they are increasingly coming under scrutiny every time a loss occurs.”

Moss agreed. “Unfortunately, truckers are being stigmatized, and in my opinion, they’re also being sought out in a lot of instances,” he said.

Data Paving the Way to Safety

There are many tools to reduce risk, including dash cams, sensors, real-time monitoring and other telematics devices. The tools that enable data analytics have been especially helpful to the insurance industry for rating, underwriting, and classifying the best-in-class trucking firms and their drivers.

The Central Analysis Bureau (CAB) is one organization that has become the “gold standard” in underwriting transportation risks, according to Moss. CAB turns federal data submitted to the Federal Motor Carrier Safety Administration (FMCSA) into better intelligence that insurers and managing general agencies, like Paramount, are using to better evaluate driver safety and performance.

CAB, part of Randall Reilly’s Risk Intelligence Division, is a data supplier to the insurance, motor carrier and other business sectors.

“CAB data has helped tremendously in underwriting,” Moss said. CAB provides a “safety score” that uses “cold hard facts” to validate underwriting decisions, he said.

CAB evaluates data based on reportable and recordable accidents and incidents. Moss notes that the data isn’t always driven by an accident. “It just has to be reportable … CAB can tell you where the accident or incident happened, what the conditions were [in that location], was the street wet or was it raining or snowing, what the violations were [if any], who the driver was, and more.”

When it comes to accurately underwriting and pricing, the CAB data makes a huge difference, Moss says.

“It allows us to look at a specific trucking company’s safety record and determine where their rates should be,” he said. “It helps true up the rates so you’re not offering bad rates to good clients. … We can then price risks accordingly and not price based on the overall industry.”

Moss says CAB scores have become “The Bible” when it comes to improving trucker safety. Trucking operators are able to make adjustments to improve their overall safety performance based on the data. And underwriters “can identify good risks versus mediocre risks versus bad risks.”

Over time, Moss sees the information making a big difference in how truckers operate.

“Data driven technologies, like CAB, are allowing the trucker to make a better decision on who they’re hiring for drivers,” Moss added. That’s because they can pull data on a specific driver. “They’re not hiring the bad guys; they’re hiring the good guys.”

The end result is safer drivers and safer trucks on the roads, he added.

This is important because large trucks often mean severe injuries, as well as fatalities. Big rig accidents experience a fatal collision with a vehicle in 74% of all crashes, 81% of all injury cases, and 76% of all property damage cases, according to the Federal Motor Carrier Safety Administration.

RPS’s Gallagher said that the trucking clients who keep their safety scores in check will be the accounts that insurance companies want to retain. As the cost of insurance continues to rise, risk management and embracing loss control services will be more important than ever, he added.

“We ask clients to embrace risk control services and utilize those services and adopt technology in your vehicles that allow for sharing of the data through telematics systems,” he said in the RPS webinar. “In the end, it will likely improve your client’s margins.”

Some insurance carriers offer discounts on either premiums or the equipment, he added. Some carriers are even mandating telematics systems such as forward facing and driver facing cameras as a requirement for coverage.

Non-Fleet Trucking

Mike Mitchell, RPS area president, says that when it comes to the “non-fleet” space, which typically is thought of as one to 10 trucks, there are new entrants from the insurtech world.

“We are seeing some new markets enter into the marketplace for non-fleet — a lot of insurtechs and a lot of technology involved with the new markets that are coming in,” Mitchell said in the RPS webinar. “They’re trying to find that edge over some of these carriers that have been in the business for a long time and trying to find that competitive advantage.”

This is leading to an uptick in usage-based insurance, he added. “We’ve seen this in the personal lines world, and now we’re starting to see this carryover into the commercial trucking space, as well.”

Cover Whale Insurance Solutions Inc., launched in 2020, is one commercial auto insurtech looking to improve driver safety and reduce insurance premiums along the way.

Cover Whale CEO and Founder Dan Abrahamsen says agents can get a bindable quote in under three minutes on Cover Whale’s portal. But even better are the extra embedded risk management services that the insurer can provide to improve driver safety through technology, he said.

The Cover Whale Driver Safety Program is a combination of advanced dash cams, driver coaching, and insurance coverage that is aimed at enhancing driver safety, lowering costs, and ensuring compliance with vehicle usage policies.

“With the purchase of our policy, insureds get their driver set up with a dual-facing, AI dash camera, but we like to call it an ‘event recorder’ to really try to highlight some of the privacy concerns,” Abrahamsen said. “It’s not recording you 24/7. It’s recording in the case of an event, so if the device senses there might be an accident, or the truck’s trying to avoid an accident, the recorder will snap some short video around those events.”

Abrahamsen says getting drivers comfortable with on-board technology such as dual-facing dash cameras takes a little bit of time but the benefits in driver safety performance and ultimately better pricing on good accounts is a value-add. That’s when they realize that their safe driving can help them get an even better rate on renewal, he said.

“We’re really trying to buck the trend of just blanket rate increases for everybody,” he said.

Through technology and usage policies “we’re trying to really identify which drivers are the ones that should be getting the discounts because their driving history and information shows that they’ve been operating really safely, and they shouldn’t just get that 15% rate increase everybody’s getting this year,” he said. “Sorry, we don’t buy into that … we’re working to tailor pricing based on driving behavior.”

Cover Whale focuses on the smaller fleets, those with 20 trucks or less, or even the owner-operator trucking firm.

Better insurance pricing is important to any businessowner, especially small trucking firms that face tight profit margins as the costs of fuel and equipment have skyrocketed in recent years. But price isn’t everything, Abrahamsen says.

“We recognize that an improvement in safety is real, and that is measurable. People, and even our drivers, can get excited about that,” he said.

Even drivers who didn’t want a dash cam but found themselves wrongfully blamed in an accident changed their opinion on the device, he said.

“Even in our own portfolio, we have drivers that maybe at first didn’t want the dash cam, but were involved in a claim and we had the video that proved they weren’t at fault,” he said. “So we’re really trying to ‘exonerate’ as much as possible, and I think in a lot of ways the event recording from dash cams help do that in the worst of all situations.”

Telematics is a huge conversation with transportation carriers today, said Eden Hancock, RPS area senior vice president, in the webinar, stressing that it’s not “big brother” watching.

“That’s not what it is anymore. Transportation companies are getting past that and going ahead and doing it from a safety standpoint,” she said.

But insurance companies also want access to that telematics data.

Let insurance companies have access to that data to help offset the rising costs of insurance, she advised. “So don’t be afraid.”