Motor carriers have three major vehicle-based expenses: vehicles and maintenance, fuel and insurance. A carrier cannot run without covering all three. Unfortunately, freight rates haven’t risen at the same rate as costs. Insurance rates have increased by over 50% in the past decade.
According to the American Transportation Research Institute’s Operational Cost of Trucking report, truck insurance premiums in 2022, the last year of published data, have risen 2.3% since 2021. That increase averages out to at least 81 cents of marginal cost per mile, with some regions, like the Southeast, hitting 96 cents per mile.
But there are ways motor carriers can mitigate the risk that insurance providers see.
“Insurance companies look at several factors when underwriting risk,” says Andrew Haun, senior vice president of sales at Reliance Partners. “One of those factors is the loss ratio, which is the percentage of indemnity incurred to premium paid.”
For a carrier, strong, reliable post-accident procedures are crucial to mitigate the risk that the insurance company is evaluating, according to Haun. That includes everything from who the first call should be to all the way to collecting information from those at the scene. Having drivers trained on those policies and procedures can help in the long run.
“For example, if it appears that the motor carrier doesn’t take claims/losses seriously enough to report them in a timely manner, that, in turn, shows to the insurance company that the motor carrier isn’t a reliable partner and is therefore riskier,” Haun says. “If the motor carrier looks riskier, then they will pay more premium.”
Waiting a few days to figure out what happened and assess internally isn’t recommended before contacting the insurance company, even if the police report hasn’t determined the at-fault party. Knowing the insurance companies’ claims reporting procedures is a critical step to add to post-accident procedures so no information is missed.
The biggest thing in any claim is mitigating losses. Each claim is different and has varying circumstances, but if it can be settled before any litigation occurs, that is a huge win for both the motor carrier and the insurer.
Brown & Crouppen Law firm found that the average truck accident settlement is around $73,109, which includes cases in which the defendant was operating a tractor-trailer or another heavy or commercial truck. The number jumps up to $80,211 when it’s just tractor-trailer incidents.
Finding the balance between creating a strong safety culture where accident preparedness is second nature and keeping insurance costs down is challenging.
“I have to take my hat off to motor carriers as they have to balance so many spinning plates on a daily basis,” Haun says. “The need for effective post-accident procedures has to be a priority. I think many carriers are scared to report small claims to the insurance company because they believe it will have a negative impact on their insurance costs in the future.”
Insurance companies want to see that you care enough to follow through with your own policies and procedures to help reduce the total risk or the payout on a claim. Having solid reasoning behind these policies and procedures is crucial as motor carriers need the stats, coaching events and documentation to prove that they are serious about improving safety.
At the end of the day, “Having a high loss frequency and loss ratio can absolutely lead to increased costs. Having long lag times in reporting, not cooperating with the insurance company’s counsel or partial reporting of facts could turn an ordinary claim into a catastrophic loss. If there are motor carriers out there that would rather pay a few thousand dollars instead of reporting a loss, my advice to them would be to speak with their agent about taking on a deductible/higher deductible,” Haun said.