TRUCKING INSURANCE: MOVING AMERICA FORWARD

The challenges

Five challenges are weighing heavily on industry insurers as well as the independent agents who work with them and the transportation industry. They include:

1. Not enough interest from reinsurers and carriers. Even with strong financials and outlooks, insurers have reported difficulty in securing reinsurance in recent years. In fact, according to a late 2023 Fitch Ratings review, the hard reinsurance market was expected to last through January 2024 renewals and beyond. As predicted, price increases during January 2024 renewals contributed to further tight capacity. As new interest from reinsurers remains low, independent agents should look to maintain and strengthen existing relationships with carrier partners in the space. Additionally, independent agents should look to work with carriers and MGAs who have good connections and good working relationships with reinsurers.
2. A high rate of bad claims outcomes and nuclear verdicts.  According to 2023 research from the U.S. Chamber of Commerce Institute for Legal Reform, the trucking industry is facing significant litigation challenges. Between 2010 and 2018, the average verdict against trucking firms beyond $1 million increased by 867%. This increase in costly verdicts has made insurance organizations working with the trucking industry wary. Many insurers have begun to immediately pay out claims to avoid trials and minimize expensive verdicts. In my experience this is the wrong approach. It is important for MGAs to closely analyze each claim, weighing the risks and options.
3. The third-party administrator (TPA) world is shrinking. Despite projections that the global TPA market will reach $515 billion by 2030, there is a distinct lack of talent in the space. For example, good claims adjusters can be hard to find. Before partnering with an organization, look at their TPA. A thorough vetting process is important, and if you know of a good adjuster, make recommendations to the MGA or program manager with whom you are working. When looking for good talent, coaching is key. Consider encouraging the organizations you work with to invest time and resources in adjusters they like to elevate them to the next level.
4. MGAs are losing contracts. As good TPAs become more difficult to find and negative outcomes continue to mount, MGAs are losing contracts with their reinsurers and carriers. In many of these situations, MGAs and program managers hand claims over to their TPAs who push to fight the claim in court no matter the situation. This often-unnecessary push to go to court leads to negative outcomes, and the combination of bad claims results, bad underwriting results and a lack of necessary balance in claims settlements has carriers and reinsurers increasing rates or dropping accounts completely. To combat these situations, independent agents should look to partner with MGAs and program managers with strong loss ratios.
5. Fraudulent claims are on the rise. With the challenges facing the trucking industry, drivers are having a difficult time finding loads and making a profit. For example, after the 2023 Yellow Corp. bankruptcy, C.H. Robinson reported in its 2023 Q4 results that gross profits decreased 20% to $609.3 million. Additionally, during the driver boom, many truckers bought rigs for hundreds of thousands more than they were worth due largely to supply chain concerns and robust market demand. Now these drivers are deeply in debt, demand for drivers has ebbed considerably and there isn’t enough profitable work to go around.
       As shipments disappear and drivers make less profit, insurance companies are paying more for fraudulent claims and many drivers have defaulted on large loans. This has created the perfect storm of decreasing loads, rampant overpayment in equipment costs and a glut of drivers. As drivers struggle and fraud climbs, independent agents will need to lean into their communications skills, keeping in close contact with both insureds and insurers alike to ensure that everyone is on the same page.

In this tough market, insurers are raising premiums as truck drivers look to cut costs. Unfortunately, both parties are doing the right things while both pay the price and negatively impact their respective businesses. The insurance market dictates a higher premium, while the trucking market dictates a lower price. The needs of the two sectors don’t match.

To continue to prosper in the commercial trucking space and help drivers find the right coverage, independent agents should focus on strong partnerships. The right MGA and program managers will have the existing relationships and operations to carry them through difficult times. On the flip side, independent agents with strong carrier and MGA relationships can work together to try to mitigate these issues.

To continue to prosper in the commercial trucking space and help drivers find the right coverage, independent agents should focus on strong partnerships. The right MGA and program managers will have the existing relationships and operations to carry them through difficult times.

The path to success

Despite market challenges, there is a light at the end of the tunnel. Fitch Ratings predicts that the reinsurance market will soften by 2025, bringing more capacity to the market. As capacity grows, rates will also likely begin to drop. The entire country is already experiencing these benefits. Our loss ratio is 30 to 40 points lower than the industry average of 75% to 80%. That success can be achieved by following several best practices.

While underwriting is important, it is not the only variable. Success depends on endorsement, monitoring every policy, policing policies and having the right team in place. Arming your team with the right resources and training can greatly improve your operational prowess as well. Consider these best practices for your agency when working with commercial trucking clients:

Invest in your people. When building your team, search outside the box. Many organizations throughout the insurance space are utilizing nontraditional talent to bring in fresh perspectives. Independent agencies should be no exception. Individuals from unique or different backgrounds often bring with them valuable experience and a willingness to learn about insurance. Agencies can harness that willingness to teach them about the specific type of insurance programs they work with, while tapping into unique skill sets and fresh perspectives to find new ways to best help clients.

Provide automated processes as much as possible. The insurance industry is built on relationships and a human connection. With that in mind, automation will never completely replace the need for real people behind roles such as underwriting and adjusting. However, having systems in place to do administrative work can free agents to focus on interfacing with clients, responding quickly to requests and helping them with their needs. Automation can also help reduce errors when checked by a human and increase the quality and quantity of leads by creating a process for agents to follow.

Share new tools, but don’t rely on them. Similar to automation, there are many new tools and technologies on the market that insurers are leaning into, such as telematics. While technology can be a great tool, it will never be your operator. Organizations should not rely on technology to solve everything. It is important for independent agents to remain up to date on such technology to make recommendations to partner MGAs if necessary. Additionally, independent agents can make recommendations on types of technology and tools their MGA partners can use to support their business, but it is important to clarify that these tools should be used supplementally and not as a catch-all solution.

The commercial trucking industry is facing a tough insurance market, and it is not projected to get easier in the coming months. I have found through first-hand experience that our industry can thrive in the toughest of markets with the right tools and mindset—and independent agents are no exception. Current and future success for your agency in the transportation space will come from a thorough understanding of current trends and challenges and adopting best practices to stay ahead of the curve. To persevere, stay committed to finding the best outcome possible, keep your records in order and work with your partners to find the best possible outcomes for your clients.

The author

Harish Kapur is CEO of Across America Insurance Services, a specialized wholesale insurance brokerage serving the commercial trucking and transportation industry since 2015.