Why are Trucking Insurance Rates Increasing? How Can You Reduce Them?

Insurance premiums for trucking have been on the rise for the past decade with no signs of slowing down. No matter how well your trucking company does the previous year, even if there were zero accidents or claims, your premium still keeps increasing. This can be really frustrating for trucking company owners, especially when the price hike is sometimes even in double figures. 

In a study conducted by the American Transportation Research Institute (ATRI), there has been an overall increase of nearly 50% in insurance premium costs per mile over the last decade; it went up to $0.087 from $0.059. Increasing trucking insurance rates, coupled with a driver shortage and those in the industry asking for ridiculously high wages, have made it difficult for many small fleet owners to do business. 

How Much Does Semi Truck Insurance Cost?

By estimation, leased semi trucks are commonly charged about $3000 to $5000 per annum. Truck owner-operators working under their own authority are charged between $9000-$12000 per annum. New authority owners can even be charged around $16000. 

There are also specific coverage types offered by insurance agents for different business needs. These can be:

  • Auto liability: avg cost $5,000
  • Non-trucking: avg cost $400
  • Occupational accidents: avg cost $1,600 to $2,000
  • Cargo insurance: avg cost $400 to $1800
  • Physical damage: avg cost $1,000 to $3,000
  • Workers’ compensation: avg cost of $3,000 to $5,000
  • Trucker’s general liability: avg cost $600

Why is the Auto Insurance Rate Always Rising?

  1. Trucking Insurance is not Profitable.

If you look at the data, you can see that the auto insurance industry in the USA has been operating in an overall non-profit environment for a while now. Although many factors contribute to this, the main one is Property & Casualty payments; the overall industry spent over $4.1 billion in net underwriting loss in 2021

The auto insurance industry pays about $1.05 for every dollar they receive. You would be surprised to know that these numbers are actually better than expected. Over the last 4 decades, the average is around 104%. But then again, Insurance companies generally don’t expect to make much profit from just receiving payments for services; they make money by investing including bonds, mortgages, real estate, and stocks.

Seeing that interest rates are on the rise, insurance companies can make up their underwriting loss with ease. However, even if investments start yielding massive profits for insurance companies, these will have little to no effect on insurance rates because overall industry accident stats, new technologies, government policies, inflation, increasing medical costs, and driver ratings will always be major determining factors. 

  1. Trucking Accidents Keep Rising 

From 2009 to 2020, trucking accidents have increased by over 40%, which is currently even higher, even though 2019 saw Covid-19 lockdowns and fewer cars on the road. But the most disturbing fact is that out of the 100% fatal accidents that occur, 74% of those are caused by large trucks. 

The reason behind this is simple, the demand for trucking is ever-increasing, yet the driver shortage is never quite curbed. There is also an increase in the demand for delivered goods, which means that most drivers are probably working overtime, and fatigue sets in more often. 

Though technologies are built to help drivers, they can also be distracting. Trucks also have multiple blindspots and if you have driven on interstate highways recently, you must have noticed they are becoming increasingly congested. 

Looking at the statistics and the way that the transportation industry is going, it seems that these numbers will continue to grow steadily. I believe one of the main reasons why technology has failed to reduce the number of accidents is because the number of cars on the roads is increasing rapidly over time. 

  1. Lawyers Always Aiming for Nuclear Verdicts

Semi-trucks have a bad reputation when it comes to accidents, many times, the truck driver themselves will not be at complete fault. But the damage caused to the passenger, property, and vehicle is always more than that to a semi-truck. The stats are also stacked against them, as most fatal road accidents are caused by semi-trucks. 

Lawyers often use the argument of distracted drivers to anger jurors to get a more favorable payout for their clients. The many technological devices attached to the trucks to help drivers make their deliveries smoothly are used against them in court. These devices give lawyers the opening push for a nuclear verdict, costing insurance companies millions of dollars.

You would be surprised to know that 75% of accident cases are roughly lost by trucking companies, even when the driver may not be at fault. 

  1. Medical & Technological Advances are Expensive

Medical advances are credited with saving lives, but they directly contribute to increasing medical billing. Similarly, technological advances in motor vehicles make them safer, more luxurious, and easier to drive, but the cost associated with maintaining and repairing them increases. Since insurance needs to cover the cost of repairs and medical billing in case something goes wrong, the cost of insurance also increases. 

  1. The Driver Shortage Issue

Since there is always a massive semi-truck driver shortage in the US. Most drivers coming into the market are fairly inexperienced, and insurance companies view them as risky investments. Another issue is that those working in the industry have to work more hours due to driver shortages. A single driver working more hours means he/she is also driving one truck for long periods of time; this is also deemed riskier by insurance companies which will increase their rates to meet the expected demand for claims. 

Here is How You Can Reduce Semi Truck Insurance Rates

Semi Truck insurance is an expense that is unavoidable for fleet owners as well as independent owner-operators. The most annoying part of this expense is that rates are increasing almost every year. Even a minor claim can see your rates increased by as much as 20%. What’s even worse is the fact that certain insurance conditions are also hidden. 

These reasons can often make cost management more difficult. While there is no way of avoiding insurance, there are ways in which you can reduce the cost. There are many factors considered by insurance providers when calculating your commercial trucking premiums. Knowing these factors can help you reduce your overall insurance costs. 

  1. Employ Experienced Drivers

One of the key factors in determining insurance rates is driver experience. The better your driver profiles, the better your insurance rates. Consider hiring drivers with a minimum of 2 years of CDL experience. The reason is that insurance companies believe that an experienced driver would make fewer mistakes in difficult driving conditions, so they are considered a low-risk asset. Age is also an important factor; too young is considered more reckless and too old is considered riskier. The ideal age bracket for drivers is between 28-60 years of age.

  1. Company Age (Stay in Business)

One of the most effective ways to lower your trucking insurance costs is by staying in business. You must keep your business under the same authority and name. Insurance companies tend to give lower rates to businesses that have been established for a long time because new businesses are considered riskier to insure. 

  1. Keep a Clean DOT Safety Record

A DOT safety record shows how well your drivers and vehicles have complied with the rules and regulations set by the Federal Motor Carrier Safety Administration (FMCSA). When you have a good DOT record, your insurance premiums are considerably lower. 

Here are some common DOT violations that can raise your insurance rates:

  • Poorly maintained vehicles
  • Vehicle inspection not properly done
  • Drivers have a record of drug use or alcohol
  • Transporting hazardous or dangerous materials
  • Drivers not having proper qualifications
  1. Employ Drivers with Clean Records

When employing drivers be sure to check their driving history. If they have several accidents or misdemeanors, then insurance companies will consider them as high risk and this will result in increased insurance costs. 

  1. Keep Higher Deductibles in Consideration

If all else fails, consider higher deductibles which will definitely lower insurance rates. But the downside is that you have to bear higher costs upfront in case an accident occurs. So, if you plan to go down this route choose a deductible that won't put a strain on your budget. This works best for companies that have a very low number of accidents, so do study your accidental history to see if this option is viable for your business. 

  1. Use Newer Trucks

The value, condition, and age of your trucks play a massive role in calculating trucking insurance costs and technology is also a determining factor. If your semi-truck has accidental avoidance technologies like motion-censored braking, reverse cameras, collision warning systems, and such then you can expect a better insurance rate. 

Older trucks have gone through a lot of wear and tear in their years of service. They are more likely to cause an accident. Moreover, since trucks older than 10 years are less likely to have advanced accidental avoidance technologies, they are deemed riskier to insure. So it is best to use trucks that are no older than 10 years and have modern technologies enabled in them. 

  1. Your Routes Affect Insurance Rates

The roads your trucks drive on have a massive impact on your insurance rates. If for example, most of your operations take place in metropolitan areas which are dense in traffic and population, then you have to pay higher insurance rates. Because the chances of having an accident increase considerably. 

Another factor is the probability of bad weather in the routes you cater to. If your routes include areas that have a high probability of rain and snow then these slippery roads are considered riskier to insure.

If you have a small fleet and you make long hauls regularly, this will also affect your premiums. The reason is that the insurance company would consider your drivers to be more fatigued and your trucks to require more maintenance as they spend more time on the road. More time on the road also increases the chances of accidents. 

If possible, try to split your routes to decrease the time each driver and truck has to spend on the road. For those with a small business, this may not be possible. You can also try to cater to loads in less populated areas and areas with fewer chances of unexpected weather changes.

Will Auto Insurance Rates Ever go Down Naturally?

Honestly, it will take a miracle for auto insurance rates to go down. The auto insurance industry is not likely to make profits anytime soon. Accidents are unlikely to go down and the driver shortage will remain because the profession though high-paying, is toug,h giving people an unbalanced work-to-personal life ratio, which is highly valued by the coming generation. 

Though I believe one possibility does exist, and that is autonomous driving success. If and when these technologies are perfected, the law is likely to favor these big corporations. This will lower the driver profile risk considerably since all companies will be operating under similar circumstances, driver shortages will be curbed, and accident percentages will decrease. 

Similarly, fatality numbers due to accidents will also drop thanks to better accident prevention technology and safety features. Moreover, the number of road accidents will also drop otherwise the technology would not be commercially successful. 

All of these factors will allow auto insurance to be profitable, and a lower risk percentage will mean better insurance rates. But this is all if and buts, the reality remains that under current circumstances we are unlikely to see trucking insurance costs go down. 

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Mubasshir Ijaz started his career as a creative writer and digital marketer back in 2016. He has worked under multiple niches and aims to provide readers with a free-flowing, easy-to-understand copy that will provide them with value for their time. He aspires to be a problem solver, and through his extensive writing experience, he aims to provide trucking business owners and employees with informative technological solutions.

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