Insurance rates have been climbing over the past few years, with no sign of slowing down. In a recent study by Bloomberg, insurance rates seem to be one-sided, with most of the financial burden being placed on commercial vehicles, specifically trucks. Why are trucking companies and owner-operators being forced to pay higher premiums than other drivers in the United States?

The Underlying Cause of Commercial Insurance Rate Hikes

Insurance premiums on commercial vehicles are directly tied to the economy. Unlike cars, motorcycles, and other private vehicles, commercial trucks have one intended purpose – to make deliveries. As the economy fluctuates and the costs associated with purchasing and maintaining vehicles go up, so do insurance rates. Combine this with the increasing cost of driver training, the spike in diesel prices, and other factors, and operating a Class-8 vehicle can be expensive. Insurance companies calculate their premiums based on the overall cost of operation, plus additional variables, such as whether or not the drivers make hauls between states, as well as trends involving risk, endangerment, and potential “nuclear verdicts” in legal cases stemming from accidents. In fact, the steady increase in large judgments in court cases has made many insurance providers drop commercial vehicle insurance completely, leaving carriers and owner-operators with fewer options to get the coverage they need. The lack of competition among insurance carriers has all but eliminated the agency and leverage the trucking industry has, and they are left paying very high premiums even if drivers have spotless records.

COVID and Rising Insurance Rates

The COVID pandemic strained supply chains, compounded by the sharp rise of e-commerce because people ordered items directly to their homes instead of going out. The situation meant fleets had to not only hire and retain more drivers, but also bulk up their fleets, with many trucking companies purchasing more big rigs in addition to smaller delivery vans to offer last-mile service. The high demand to keep supply chains moving meant maintenance and repairs increased, and potential accident-causing problems came to the forefront. After the pandemic subsided and demand approached 2018/2019 levels, supply lines were still strained, and insurance companies have yet to adjust their risk assessments, so premiums continue to climb.

Trucking Looks to New Tech to Lower Premiums

Much like car owners use new technology to monitor their speed, brakes, surrounding traffic, and more, the trucking industry is seeing an emergence of gadgets that can help lower the cost of commercial insurance. Automated Driver Assistance Programs (ADAS) give trucks automated braking. Additionally, integrating telematics can help drivers and carriers monitor behavior and provide more accurate data than relying on eye-witness reports in case of an accident. This is becoming more prevalent and important as recent studies show “distracted driving” – as in car drivers that are at risk because they are talking on their mobile phones or not paying attention to the road – is a rising cause of highway accidents, even though juries are predisposed to ruling against truckers. The good news is that the emerging technology for commercial vehicles is passive, and operates without any involvement from truck drivers. The implementation of this technology could go a long way toward mitigating costs for both carriers and owner-operators.

The Impact on Small Trucking Companies

For small trucking companies, the cost of commercial vehicle insurance can seem disproportionately high. Small trucking companies do not have an established record, and purchasing trucks equipped with the latest and safest technology is usually out of reach. Because of this, insurance providers see small trucking companies as a high risk, even if their operating radius is more limited than larger carriers. Small and new trucking companies need to find a way to lower their premiums or offset the upfront cost of commercial insurance so they can keep business moving. Single Point Capital specializes in helping small carriers with their insurance costs, including our insurance down payment program, which covers up to 50% of the initial cost. The deferred payment allows trucking companies to pay off the remainder from a percentage of factored invoices, so they can mitigate costs without placing a strain on cash flow. Contact Single Point Capital today to get started.