The Transportation Insurance Industry - An Overview

The Transportation Insurance Industry - An Overview

 

Those who have their fingers on the insurance pulse will know that the insurance industry as a whole has been locked in a hard market for quite some time – something we have discussed before. However, within the insurance industry, it must be said that the case of the Transportation Insurance industry is particularly fascinating.

According to Burns & Wilcox, “the Transportation Insurance industry remains entrenched in a decade-long hard market in the commercial auto segment while insurance companies remain as diligent as ever in their risk selection procedures.”

As with all hard markets, this means that insurance rates have continuously risen; though there is some positive news in that there is now some moderation in increases compared to previous years.

Why, then, is this happening? Here we will explain some of the pressures on the market as well as the role data can play in stabilizing the industry going forward.

 

The Pandemic

As is the case everywhere, Covid-19 has had a significant effect. Whilst the market remains competitive for companies whose commercial trucks do not cross the US-Canada border; the story is entirely different for those that do.

Large claims – particularly in the US – have caused many Canadian transportation companies to abandon the market entirely. These claims have also had a strong effect on underwriting as it continues to tighten.

Adding onto the claims and strict underwriting are the facts that Amazon pop-up fleets have become abundant and that there is a driver shortage – all coming together to create an increasingly difficult market to operate in.

However, experts suggest that the areas of economy damaged by the pandemic have improved in 2021 and will continue to improve in 2022.

 

Nuclear Verdicts

As mentioned above, large claims against commercial transportation companies have played a significant role in the hardening of the market. “According to one study, the average nuclear verdict against a commercial transportation client rose from $2.3 million in 2010 to $22.3 million, a stunning 1,000 percent increase.” (Burns & Wilcox)

Companies that were able to find limits of up to $20 million as recently as 2019 are finding it nearly impossible to get even half those limits today – which is a clear representation of where the market is.

According to experts, until there is reform and legislation to limit nuclear verdicts, things are unlikely to change in this regard.

 

Driver Shortages

The Transportation Industry is at a crossroads – the average age of a commercial truck driver is 55 and the grueling demands that come with the job alongside an increasing number of federal regulations mean that the profession is currently undesirable for younger drivers.

In order to fix this shortage, it is clear that the profession must be made more accessible and desirable for younger drivers; something that can be achieved through legislation and change in regulations. Currently, there are a few pieces of legislative reform on the table in both the US and Canada – and if these reforms come to pass, the Transportation Industry may be revitalised.

 

Data & Analytics To The Rescue

Modern trucks are filled to the brim with technology and telematic features – either installed by OEMs or available as aftermarket add-ons. In fact, they have become so advanced that they are now a major target for cyber criminals.

These technologies – which include onboard cameras, recorders, devices measuring speed, and devices monitoring drivers – allow underwriters to better assess risk and support with research on claims. More importantly, they can also help improved driver safety and performance.

Insurance companies then work with external data aggregators in order to build accurate risk portfolios so that they can better gauge which risks are deemed acceptable and unacceptable. Though this process can be frustrating and difficult for clients to follow, the goal is to find ways for clients to mitigate risk and become more insurable in a market where that is increasingly challenging.

 

In conclusion, while it is hard to know when the hard market will stabilize due to the aforementioned factors, the increasing availability of technology and a better understanding of data & analytics will help paint a much clearer picture of risk across the board.

At Hubbard Insurance Group, we can find solutions to your issues by using our team of experts and their excellent connections in order to help ensure the long-term safety of your business. Contact us today by emailing us at This email address is being protected from spambots. You need JavaScript enabled to view it. or simply call us at 905-696-9090.

 

 

Source: Burns & Wilcox

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