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How Commercial Truckers Can Save Money Amidst Rising Costs

·6 min read

Life right now is kind of crazy for everyone. Trucking business owners are certainly caught up in the crazy too. Commercial trucking insurance premiums are rising, and trucks themselves are becoming more expensive. At this point, navigating a travel route is probably easier than navigating a trucking insurance policy.

People are asking, “Why is everything so expensive now? What am I supposed to do?”

Fortunately, there are answers.

Why is trucking insurance getting more expensive?

Many factors are working together to create the perfect storm currently responsible for driving trucking insurance premiums up. However, the primary factor responsible for the steep incline in a standard trucking insurance policy’s premium is the rise in “nuclear verdicts.”

Nuclear Verdicts

If anyone isn’t sure what exactly a nuclear verdict is, they don’t need to worry — they’re not alone. Thankfully, the definition is straightforward. A nuclear verdict is a simpler way of referring to jury awards surpassing $10 million.

Unfortunately, nuclear verdicts are becoming more and more common every day. Liberty Mutual Insurance cites three primary issues as being the root cause.

  1. Growing mistrust in large, corporate businesses alongside a growing sympathy for injured plaintiffs.

  2. An increase in litigation financing, where third parties who invest in a lawsuit can profit off the final earnings won from that same lawsuit.

  3. Increased social pessimism, leading to a “loss of faith and a desire for change,” and in turn creating a preference for the suffering plaintiff.

Lack of qualified drivers

There was a shortage of around 60,800 truck drivers in 2018, even before the COVID-19 pandemic. Since then, the demand for more shipping — and in turn, more drivers — has only escalated. Because the need for drivers is growing faster than the industry can keep up, the hiring standards for new drivers have lowered.

Rising accident rates

Observed rising accident rates also tie into the lack of qualified drivers. New drivers are hired and brought on, generally without the years of experience commonly seen in the average 46-year-old truck driver.

The most frequent cause of large-truck accidents is driver distraction. A 2009 study done by the Federal Motor Carrier Safety Administration (FMCSA) found that as much as 71 percent of all large-truck crashes occur because the truck driver was distracted. The same study also found that drivers distracted by texting were 23 times more likely to be involved in an accident than a driver who wasn’t texting.

Shortage of insurance capacity

Insurers are limited in the amount of financial protection they can offer. This limit is often based on the insurer’s financial strength, which is determined by how much of the insurer’s assets exceeds their liabilities.

This shortage of insurance capacity results mainly from the growing number of nuclear verdicts. Nowadays, many insurance companies don’t have the funds they need to offer their clients better coverage.

Increasing used truck prices

There is currently a heavy demand for large trucks that the market can’t meet right now. This heavy demand combined with a shortage of physical trucks means that the value of available used trucks increases. As used truck values increase, it becomes more expensive for fleet owners — and their insurance companies by association — to maintain and repair the used trucks.

Why are used trucks getting more expensive?

Like rising trucking insurance premiums, several different factors have come together to create the perfect storm for used truck prices. The most straightforward answer is COVID-19, but multiple aspects of the pandemic have contributed to the current used truck market.

New truck production and sales decreased in 2019

In 2019, before the pandemic, there was less demand for new trucks. For the most part, the trucking needs of the market were met, and new truck production and sales reflected that at the time.

Truck manufacturers were closed at the start of COVID

At the very beginning of the pandemic, only essential businesses were allowed to stay open. Unfortunately, the major truck manufacturers didn’t qualify as essential, so the production lines were temporarily shut down. However, during their temporary closure, the demand for trucks spiked as people began making more online purchases.

Increased demand for trucks

A spike in online shopping alongside the backed-up distribution and transport lines contributed to the ever-growing demand for trucks as life began to slowly reestablish itself after COVID-19. However, the physical shortage of trucks impeded transport lines, and truck manufacturers were unable to keep up with their demand.

Where does this leave trucking business owners?

Altogether, their trucks have increased in value — possibly past their current insured value. Trucking business owners should perform a quick self-evaluation by asking themselves the following questions:

  • If one of your trucks was to get in an accident and its repair costs exceeded your policy’s limits, could you afford repairs?

  • Could you afford replacing a whole truck?

What should fleet owners do to keep their trucking business protected?

The most important thing a commercial trucking business can do is to maintain an up-to-date commercial trucker’s policy, so it accurately reflects and covers the current value of the fleet’s vehicles. To keep a policy up to date, business owners need to compare their trucks’ value to the value of other trucks with similar years, mileages, and features.

Increasing trucks’ values in a commercial trucking insurance policy may increase the rates, but it’s important to have the needed coverage if something goes wrong. If someone is underinsured, they can lose equity in their trucks and even be faced with costs their business can’t afford to pay.

Commercial trucking insurance policies cover more than just the courtroom. They can also cover:

  • Bodily injury liability if anyone requires medical attention in the case of an accident

  • Property damage liability if a business owner or employed driver caused the accident

  • Physical damage from collision, theft, and vandalism of an insured vehicle

  • Costs incurred from uninsured or underinsured motorists who are at fault when involved in an accident with a truck

How can commercial trucking business owners lower their trucking insurance premiums?

Even though trucking insurance can be expensive, there are a few ways to save money on a policy’s premiums.

  • Make sure new drivers are experienced and can handle difficulties like poor traveling conditions and bad weather. When drivers are well experienced, they are much less of a risk.

  • Hire drivers who have a clean driving record. The future often imitates the past. If one candidate has been in fewer accidents in the past, they’re more likely to be in fewer accidents in the future.

  • Double-check drivers’ employment history. If a candidate has a known history of jumping from trucking company to trucking company in a short amount of time, they may pose a higher risk to a company.

  • Map out trucking routes beforehand, making sure to choose safer and less risky routes. Map safer routes by avoiding high population areas and poor-quality roads.

  • If possible, use newer trucks in a fleet. The newer a truck is, the less likely it will need maintenance or repairs soon.

  • Help drivers maintain high DOT safety ratings by keeping accurate records, maintaining all trucks, and following DOT and FMSCA guidelines. When drivers have a Satisfactory safety rating, it shows insurance companies that they are less likely to be a risk.

  • Find the right trucking insurance agent for you. According to Lee LeBaigue at InsuranceHub, the key to finding a great rate and coverage is working with an independent agency that knows trucking and has many carrier options.

To find more help and advice for protecting a commercial trucking business, visit InsuranceHub.

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