Beyond Compliance: Building a Smarter Trucking Insurance Program

Is there a more challenging industry to be in today than the trucking industry? Consider some of the factors: 

•  Qualified driver shortage. Drivers are aging out, and younger people who may want to enter the industry are blocked by insurance carriers demanding two years of experience to operate a commercial vehicle. 
• Forty-five-month freight recession. Historically, trucking rates have been cyclical, ebbing and flowing with demand roughly every 12 months. Immediately post-COVID, many new operators (legitimate and not-so-legitimate) entered the industry to take advantage of elevated rates. The over-capacity crushed demand, and freight rates have yet to recover.
• Exorbitant litigation awards. Most carriers are insured by FMCSA regulations to $1M CSL. Trucking lawsuit awards are commonly over $10M, in some cases, in not-at-fault accidents.  
• Insurance costs. Closely tied to litigation awards, insurance rates have been rising every year for more than a decade. Some insurance carriers have just left the space, leaving behind a constantly hardening market with high loss ratios, out-of-control jury awards, higher equipment repair costs, and an increased threat of cargo theft.  
• Other challenges include a lack of truck parking inventory, distracted driving, customers demanding perfect deliveries, and more.

Yet, even with all of these issues, the transportation industry remains resilient and highly adaptable to change. Part of this is consumer demand; trucking delivers 70% of all freight moved in America, and everyone needs those goods, from groceries to manufacturing parts to fuel for automobiles. America needs trucking, period, and truckers must have insurance. 

 What Are the Critical Trucking Insurance Coverages?

 Most trucking carriers start by buying enough insurance to “get me legal.” The recommended bare bones coverage that every trucker must have includes the following: 

•  Auto liability. Required by law for operation, this coverage protects against damage the insured’s trucks cause to another person or their property. It is the most expensive coverage due to the exposure involved. It is also the most indispensable.
• Motor truck cargo. This protects customers’ goods under the insured’s care, custody, and control. Shippers will require a certificate of insurance confirming coverage before loading the truck.
• Physical damage (aka: comp/collision). The insured and their lender will want this coverage in place. It covers repair costs for equipment resulting from a covered loss.
• General liability. This is premises liability that provides coverage for operations not arising from a truck.
• Workers’ compensation. If the insured has employees, the state may require the insured to carry this coverage to protect and indemnify those employees for on-the-job injuries and accidents.

While not exhaustive, this list provides a strong foundation for maintaining compliance and ensuring essential protection for the insured’s fleet, drivers, and overall livelihood.

Why Move Beyond Legal Compliance with Trucking Insurance?

 The failure rate for new trucking authorities is estimated to exceed 60% within two years of startup. For those who want to grow their companies above the break-even profit line, the attitude toward insurance must evolve from the original “get me legal” perspective to a much more analytical risk-management approach: How can I most effectively protect my drivers, fleet, and livelihood? To build a resilient business, this is one of the most vital questions to ask and answer annually.

What does this mean? Consider the following:  

• Insurance should not be the only line of defense. 
• Loss control is paramount to long-term trucking success. 
• Corrective actions are vital, both before and, maybe even more importantly, after an incident occurs. 
• Front-end premiums do not equate to the total cost of risk.  

Adjusting deductible levels, exploring additional non-trucking coverages (e.g., cyber liability, excess liability, D&O), and engaging a safety and loss control specialist to shore up processes, procedures, and training all begin to factor into a broader and healthier risk management strategy. The insurance program starts to define itself not as the cost of premiums, but as the total cost of risk. Understanding this and having professional insurance advisors to guide you along the way is the formula for building a smarter trucking insurance program and a more resilient business.  

Related Reading: When Your FMCSA Profile Gets Hacked: The Hidden Cyber Threat to Transportation Companies

The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.

Authored By:

Mike Lawrence, Director of Operations, Transportation & Logistics