A push by lawmakers to raise truck liability insurance for the first time in 40 years has advanced further than ever in Congress and the resulting rate increases would hit small trucking companies the hardest, according to an insurance expert.
The provision included in the Moving Forward Act, which the U.S. House of Representatives passed on July 1, raises the minimum coverage level for general freight from $750,000 per accident to $2 million. It would be adjusted every five years to account for inflation based on Bureau of Labor Statistics data.
The minimum coverage cap is $2.9 million less than what was proposed in a standalone bill introduced last year, known as the INSURANCE Act, which called for hiking minimum coverage to $4.9 million. But it still represents a $1.25 million jump in coverage — or 166% — that many owner-operators would not be able to afford, according to Thom Albrecht, CFO and chief revenue officer at Reliance Partners Insurance.
“It would be a huge financial obstacle to overcome,” Albrecht told FreightWaves. He explained that fleets in general can take steps to help lower insurance premiums, such as investing in technologies like lane departure warning systems, collision avoidance, active braking and forward-looking cameras.
“However, in terms of micro fleets [10 or fewer trucks], their lack of scale, along with cash flow issues, will keep most of them from the aforementioned investments. So the 166% increase in minimum liability coverage will disproportionately hit them, along with many fleets with 11 to even 200 or 300 trucks.”
In a 2013 report on carrier liability responsibility, the Federal Motor Carrier Safety Administration (FMCSA) asserted that doubling the level of liability does not imply a doubling of the dollar value of the risk. “It depends upon how frequently the higher cost events occur, relative to the frequency of the lower value,” FMCSA stated.
But Albrecht said that while midsize to large fleets typically will have self-insurance retention, where they can afford to pay anywhere from $1 million to $5 million and higher on their own before their insurance policy kicks in, smaller fleets typically can afford only “first-dollar” liability, where coverage starts from the first dollar of the cost of an accident.
“So using simple math, if you’re now paying $7,000 to $8,000 per truck per year, you’re potentially looking at more than doubling their rates,” Albrecht said, which could mean those same rates increasing to $15,000 to $20,000 per truck annually. He pointed out that insurance companies would also factor in risk assessments when coming up with a rate.
A recent survey on nuclear verdicts by the American Transportation Research Institute found that over the past two to five years, commercial truck insurance premiums have increased 35%-40% annually for low- to average-risk carriers, at similar rates as increasing litigation awards. Increasing insurance costs have also been cited as being indirectly — and sometimes directly — behind recent trucking bankruptcies, including a 13-power-unit company in Illinois forced to shut down earlier this month.
Increasing the minimum liability caps to $2 million — a change that’s supported by trial attorneys — is not going to address the higher insurance costs associated with nuclear verdicts, Albrecht contends. “Our conversations with fleets suggest that only 2-5% of all claims exceed the current $750,000 minimum. So the question is, what does the $2 million level solve?”
Fortunately for small trucking companies, the provision to raise the cap on insurance liability is contained in an infrastructure bill that the U.S. Senate is not likely to support. Still, Albrecht recommends that owner-operators check in with their insurance brokers. “It’s not only what your loss runs have been and your driver profiles, but where those losses are incurred now, and what that could mean if you get in a trial situation,” he said.
“At the end of the day, there has to be an incredible focus on safety, whether you’ve got one truck, 1,000 or 10,000.”
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Billy W Venable
Folks let’s get it down to what the real problem is. The problem is the American people in general. The attorneys out here have these people so brainwashed into believing that they can receive so much money from getting involved in an accident with a semi that they purposely caused the accidents. It is statistically proven that 93% of all accidents involving a semi and car is the direct cause of the 4-wheeler. Plain and simple it’s always going to be about money when it comes to politics. they need to start implementing the absolute maximum that is always been allowed for injuries and or dismemberment when an accident is involved. But now they want to increase the payout in order to ensure at these snowflakes better too damn lazy to get up and get a job is going to have a free ride. The other day I had a little girl could’ve been older than 25 years old driving around an $80,000 SUV that pulled directly in front of me and then slammed on her brakes. pretty much tells me where she got the money for that car then yesterday I had a Hispanic woman who came blazing around me jumped in front of me right before the hill and slowed way down while other vehicles are passing me. When I could finally get around her she refused to even look close to my truck I went around her and 3 miles later she came blazing around me doing about 80 miles an hour. There’s the problem people. Everybody wants to blame us and make us pay for it. It’s time we put a stop to that.
Jeff
It’s going to take angry enough people to start assassinating these asshole attorneys, CEOs of these mega truck companies, and “know nothing” law makers! If I’m forced out of business, someone is going to feel the pain!!!!
Skj
Why not the work on low rates???
Why they are sending low business out of business.
Rate are lower . Even lower than 80’s.
Bunch of crazy snowflake morans sitting in AC room and making decisions about labor class which never ever experience the pain of working hard in hot and cold weather.
RIP TRUCKING
Kelvin Blunt
They’re trying to shut out small businesses all together
Ray Morgan
I guess people will have to pickup and deliver their own stuff! Say goodbye to most of the trucking industry! Enjoy no product on the shelves!
Ben
Typical ignorant responses. Poor me.
Disappointed that the “expert” had no real answers.
Doubling mimimums doesn’t double risk. He even admitted that with how many payouts are above current minimums.
Give a real premium number.
Tye Moore
Its not ACCIDENTS…the purpose of insurance is the amount of CLAIM ALLOWANCE by BROKERS…I DONT GET THE POINT OF THESE LAW PUSHERS AND LAW MAKERS THAT REALLY DONT UNDERSTAND THE TRUCKING INDUSTRY!I GUARAN”DAMN”TEE. YOU THAT IF THESE FOLK THAT MAKE THE LAWS ACTUALLY GET OUT HERE AND WORK THESE LAWS AS WE DO…THEY WILL DEVELOP A NEW FOUND RESPECT ABOUT THIS INDUSTRY!
Michael Tharpe
I think there should be more regulations on the schools that are training these drivers some people just are not cut out for driving a commercial vehicle it shouldn’t be about the money it should be about the safety of the driver the company and the public that would lower the accidents if they were well trained