As trucking experiences more expensive compensation in the event of an accident, insurers seek to limit the risks
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Trucking companies are facing more costly accident settlements and verdicts, a trend that has alienated insurers from the industry.
Major auto liability verdicts and settlements in the industry have caused “a decline in the number of carriers and underwriters who purchase insurance policies or are willing to provide insurance to trucking companies,” said USA Truck in a title depot on August 8.
This comes at an already fragile time, as premiums and payments have seen steep increases in recent years, according to a report from the American Transportation Research Institute. The cost of insurance premiums has increased by 47% over the past decade and incurred losses have increased by 50% from 2015 to 2019, according to the report.
Industry groups take note of legal fees. Dale Porfilio, director of insurance for the industry-funded Insurance Information Institute, said in a statement in March that “the exponential growth in advertising of personal injury lawyers, investments in litigation funding by third parties and securities class action lawsuits” have all driven up the cost of insurance.
Pressure to settle cases also tends to increase the cost of final payment, according to ATRI. Earlier this year, Werner Enterprises reached a $150 million settlement after a truck hit a parked vehicle in May 2020 on Interstate 30 in Texas, killing two children. Noting the tragedy of the crash, the company also said it chose to settle rather than go to trial as “corporate defendants face ‘nuclear verdicts'” or jury awards that exceed $10 million, across the country.
After a decline in 2020, the accident rate in the trucking industry rebounded last year. The number of crashes involving at least one large truck rose 13% in 2021, according to NHTSA.
According to the ATRI report, trucking companies have tried to adapt by reducing coverage levels or offsetting insurance costs by reducing indemnities. The institute surveyed companies and found that more than one in three companies were cutting wages and bonuses in response to rising insurance costs.
With companies taking on more direct risk, insurance rates saw some relief. ATRI said in its 2022 Annual Trucking Cost Report that commercial auto premium costs per mile have decreased by one-tenth of a cent between 2020 and 2021.
Still, the institute predicted that insurance premiums per mile will likely rise over the next year.
“Concerns about the increasing severity of accidents nevertheless remain, particularly in the context of the continued return to pre-pandemic traffic levels,” ATRI said.