Copyright 2002, Traffic World Magazine
Trucking companies, which have enjoyed a 30 percent drop in diesel fuel costs to help offset the sagging economy, are being whacked for sharply higher insurance costs in the post-Sept. 11 transport environment. Double-digit increases are the rule but one unfortunate carrier is reporting insurance premiums rising by 1,000 percent.
The American Trucking Associations, documenting what carriers have called a major financial crisis in the industry, released the results of a major survey of 1,000 trucking companies demonstrating the severity of the rising cost for primary and "umbrella" insurance.
The survey shows that primary, or general liability, rates increased by 32 percent for carriers renewing last year. Those renewing their policies after Sept. 11 paid an average 37 percent more. Renewal rates for umbrella insurance last year rose an average 74 percent while rate increases after 9-11 climbed to 120 percent.
"This information from our members demonstrates the depth of the insurance crisis in the trucking industry," said ATA President and CEO Bill Canary. "Considering the fact that trucking moves a majority of the freight in America, a crisis like this is a real problem for the national economy."
Canary said that while some increases in costs were expected because of 9-11 insurance losses, the jump in the percentages of increases is perplexing because both government statistics and the industry''s experience show that trucking companies are driving safer than ever before.
In response to the industry''s insurance situation, ATA Chairman David McCorkle of McCorkle Truck Lines has appointed an Insurance Task Force to study the issue. The panel, chaired by Fred C. Burns Jr. of Burns Motor Freight, includes motor carriers of all sizes, representatives of the state trucking associations and some of ATA''s insurance-industry partners. Its role is to highlight the trucking industry''s insurance-cost situation and to seek long- and short-term responses.
"The best long-term solution is legal reform at the state and federal levels," Burns said. "Today jury awards not based on any commonsense reality are driving up insurance rates and continue to be completely out of hand. In addition, the 50 states have 50 different legal systems in which insurance companies and the trucking industry have to operate."
Burns added that law enforcement and the insurance companies have a role too. "We need stepped up, tougher enforcement of traffic safety regulations and insurance companies must begin denying coverage to unsafe carriers and drivers who don''t belong on the road," he said.
Michael J. Riley, president of the Motor Transport Association of Connecticut and chairman of the 50-state Trucking Association Executives Council, said: "We know that since 9-11, it is costing everyone more to do business. But ours is an industry where 80 percent of trucking companies have 20 or fewer trucks, where profit margins are slim and where undue costs at one end threaten the entire business. We have to drive insurance costs down or our hometowns are going to lose some family-built, family-owned trucking companies and all of America''s freight deliveries will slow down."
In the short term, ATA is developing educational materials for state association members - of all sizes - to assist them in providing and promoting better safety programs and practices, better driver hiring, training and monitoring systems, better safety incentive programs and better loss prevention systems - all of which can lead to lower insurance rates.
"We move the American economy," Canary said. "If increased insurance rates put us out of business - America stops."