Trucking insurance premiums have increased roughly 5% year over year across the board for the past few years. Despite carriers’ attempts to reduce premiums, rates are still increasing, mostly due to the fact that trucking insurance market has not been profitable for 10 of the past 11 years.
Some of the main factors causing insurance companies to lose money are the rise in cargo theft and nuclear verdicts, which have pushed insurers to increase premiums, making coverage costs a larger burden for motor carriers.
Carriers are looking for ways to reduce premiums, and insurance companies are looking to return to profitability. That’s where the wider use of telematics in underwriting for insurance companies comes in. This advancement has enabled carriers to secure competitive rates while encouraging safer driving practices.
When it comes to external factors that affect motor carriers’ premiums, Jackson Alexander, executive vice president of sales at Reliance Partners, said, “Unfortunately for trucking companies, there is almost no correlation between insurance costs and external economic factors like increased fuel prices and decreased revenue per mile.”
Alexander adds: “From an insurance company’s perspective, whether a trucking company was paid $2 per mile or $3 per mile doesn’t really impact their exposure. The chances of being involved in a liability claim, the cost to repair any damage to the insured’s truck and/or trailer, the value of the cargo, etc. are all the same regardless of how much you were paid to run that load. The same can be said for the cost of fuel. This is why trucking has been so tough for the last couple of years – there is pressure from all angles.”
Insurance companies look to mitigate risk and reduce the likelihood of having to pay out a claim. That is where the use of telematics has become so popular. Insurers are looking for data around harsh braking, sharp turns, speeding and following too closely. These factors are analyzed more critically than others because data shows they are frequent causes of truck accidents.
The wide adoption of telematics is predominant in the new space of insurtechs. Insurtechs are insurance companies that heavily utilize technology. They believe that analyzing individual driving behavior through telematics is the most important factor in weighing risk.
“Some insurtechs, HDVI and Nirvana for example, do a holistic look back at the last 90 days of telematics data prior to even offering an insurance quote,” Alexander said. “If you are not willing to share your historical telematics data, you aren’t eligible for a quote from them.”
“While it’s not a guarantee that using an insurance provider that incorporates telematics in their underwriting will reduce a trucking company’s premiums right away, there are several insurtechs out there that are offering aggressive rates,” he says. “They believe the additional data points they have from the telematics gives them a leg up on insurance carriers who rely more on traditional sources of underwriting information (loss run reports, CSA scores, driver records, etc.) and allows them to better price risk. Of course, even if the telematics data is favorable, other red flags to an insurance company could still cause insurance rates to rise.”
The adoption of telematics in insurance underwriting represents a critical step toward addressing the challenges facing the trucking insurance industry. For motor carriers, the integration of telematics offers an opportunity to control rising insurance costs while fostering a culture of safety and efficiency. Meanwhile, insurers can use telematics to build more sustainable business models, ensuring the long-term viability of coverage for the trucking sector.