The truck driver shortage in the United States is making trucking companies and suppliers nervous as the number is expected to hit 100,000 by 2025.
In recent years, the freight industry in the United States has seen a major uptick in activity, mirroring a booming economy and progress in sectors like e-commerce and transportation. But while business may be booming in these industries, there are certain restrictions that are playing a factor in just how far things can go before they come to a halt.
Capacity restrictions, such as a truck driver shortage and low truck supply all play pivotal roles in the future of the transportation industry here in the United States. This then rolls down to the trucking insurance market, which relies heavily on the activity in trucking, trade, and commerce. Trucking insurance companies, while still offering great and necessary coverage on commercial vehicles, will have to wait and see how these restrictions play out in the coming years.
Even though experts forecasted a slower rate of growth in the trucking industry this year, the industry as a whole is continuing to see an upward trend in business. But the issue that is facing trucking companies and trucking insurance companies alike is meeting demand head-on with resources and support. A rapid increase in the demand for trucking is being cut short by a driver shortage in a tight labor market that’s only getting tighter.
Freight levels are up and will only continue this trend, but there are not enough drivers and trucks on the road to handle the freight loads. The demand has pushed up the rates for truckers as a lack of drivers is holding back growth, at least the rate of growth that could be achieved.
Trucking Insurance Costs
Just like the transportation industry, the trucking insurance industry is seeing expansion itself. The rates for insuring commercial vehicles is climbing, but this kind of coverage is still needed. Those in the trucking industry are having to evaluate every part of their operations in order to stay in business, including trucking insurance, which some are trying to cut ties with.
Some trucking companies look at trucking insurance as an extra expense that can be cut out in order to save money or allocate funds to more important parts of their daily operations. Rate increases are manifesting in both physical damage and in the auto liability portion of coverage. Trucking insurance rates aren’t expected to go down anytime soon and might continue to increase. Insurance companies are requiring more underwriting information to effectively rate these accounts.
The Role of Small Fleets
While the role of traditional trucking insurance is becoming more tangled up, the way the sector is trending, trucking insurance companies are being proposed with new challenges and opportunities for growth, especially in small fleet units and new venture space.
In Arizona, hydrogen fuel cell trucking company Nikola Motor Company, a startup, is expected to break ground on a new manufacturing facility and produce hundreds of its alternative fuel trucks every year. Companies like this create a unique opportunity for trucking insurance companies on how to insure those in burgeoning tech spaces within the industry.
When it comes to smaller fleets, if they’re looking to pick up another contract and add more units, it presents a challenge because a lot of insurance carriers have certain strict guidelines on growth. Smaller fleet accounts are looking to add more units in their lineup of trucks, just like larger fleets.
What most trucking insurance companies are looking at is underwriting. When smaller fleets have a certain amount of growth, the loss ratios on those accounts usually trend upwards. This presents a challenge for smaller insureds. If that small trucking firm expands too quickly it may have to move to another trucking insurance carrier, which could boost their premium by 50 percent or more. With this in mind, it’s important to note that those smaller units may not be able to afford this change as they don’t have the financial infrastructure to grow at a faster pace.
About Genesee General
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