The top three carrier expenses are fuel, maintenance and insurance – things that are crucial to the success of a trucking company but that have seen a drastic uptick in cost the past few years. A new law in New Jersey stands to dramatically increase the insurance cost for carriers. Joe Schreiner, Reliance Partners’ executive vice president of sales, was on a recent episode of WHAT THE TRUCK?!? to break down the implications of the law and its long-term impact on the industry.
“For the companies domiciled in the state of New Jersey, the state is saying you need to pull $1.5 million in liability coverage,” Schreiner said. “It’s going to be interesting to see how this trend goes across the country and how other states and insurance companies are going to respond to this as the majority of carriers are interstate carriers.”
Under the law, any vehicle over 26,000 pounds will have to carry $1.5 million in liability insurance compared to the $750,000 that is standard now.
There are still some gray areas in the law as to whether this applies just to carriers domiciled in New Jersey or if any carrier running in the state needs the additional coverage. That is assuming that other states don’t follow suit, which according to Schreiner is something that could happen sooner rather than later.
The long-term implications of this bill may be running some motor carriers out of business and forcing carriers to take on additional risk as a different way to finance their premiums.
Schreiner says: “The general rule of thumb for a motor carrier is if you have $1 million in coverage and you need another $1 million in coverage on top of that for your entire fleet, you’re looking at 40-60% of your primary auto liability limits are what you’re going to pay in excess. If you have $10,000 a truck for your first $1 million in coverage, you’re looking at $4-$6,000 on top of the $10,000 for the additional coverage.”
Insurance companies are also seeing rates rise as reinsurance and capacity for insurance hardens. “For an insurance company to now be able to go to their reinsurance and have to offer another half a million dollars in coverage, they’re going to have to take on more risk or pay more premiums to be able to offer that high of a limit,” according to Schreiner.
Within the next year, there is a chance that more states will follow suit as more governments have pushed to raise insurance minimums. That combined with new regulations from the Department of Labor suggests the trucking industry is in for a tumultuous few years.