Insurance Outlook
Rising insurance rates make it tough for truckers
It hasn’t been good news lately for owner-operators who are looking at new and renewal quotes for truck insurance

After a decade-long period of stable and often declining insurance premiums, the market began to harden in late 1999, and prices are still on the rise with no relief in sight for small-business truckers.

According to Transport Topics, a survey of 1,000 carriers conducted by the American Trucking Associations (ATA) indicates insurance premiums were an average of 32 percent higher in 2001, nearly doubling the rate increases trucking companies saw from late 1999 to 2000.

As small-business truckers watch their profits dwindle with each premium increase, the question on everyone’s mind is, “why?”

Many insurers claim the business of insuring trucks has never proved to be very profitable for them, and as a result, the number of those truck insurance providers has dwindled considerably. Less competition for this book of business means more trucking companies seeking insurance from just a handful of insurers, which translates into higher premiums in many cases.

In addition, declining stock prices, coupled with the Sept. 11 terrorist attacks, have taken a huge bite out of insurance company reserve funds, causing them to dip into premium income in order to pay for all the losses. Although most of the claims associated with the terrorist attacks did not involve trucks, the ripple effect is a factor in rising insurance rates. Insurers must now consider how they are going to build and maintain reserve funds for a type of risk not prevalent in America prior to September 11 … namely the possibility of more terrorist attacks. Even the fear of such attacks plays a part in premium increases because it causes more demand for increased coverage limits as businesses scramble to protect their assets.

More lawsuits and higher jury awards are major contributing factors to spiraling insurance premiums, as a sue-happy public presses for its day in court. Although statistics show the majority of truck-car accidents prove not to be the fault of the trucker, the fact remains the parties involved often end up in lengthy, and therefore, expensive litigation causing higher defense costs, which are passed along to truck owners through higher insurance premiums.

You also can point an accusatory finger at unscrupulous body repair shops for the role they play in causing higher insurance rates for truck owners. While we’d like to believe most repair shops are reputable in their handling of damage claims, many are guilty of inflating costs for parts and labor, sometimes even making unnecessary repairs in an effort to get more of the insurance company’s money into their pockets. While it may be easy to convince the owner he or she can get a full paint job at the expense of the insurance company for that little scratch on the hood, you can bet the additional cost eventually will be absorbed by the trucker in the form of higher premiums at renewal time.

Fortunately, there are some owner-operators who are faring better than others as they search for reasonable insurance rates. For the most part, these are the small-business owners who have anticipated higher prices, and have taken steps to cushion the blow.

They have analyzed their risk factors and eliminated major deficiencies, while strengthening their individual safety programs. Some have accepted a larger share of the risk in the form of retaining higher deductibles in return for a lower premium, while others have chosen to cut out the “frills” and opted for basic coverage only.

OOIDA knows owner-operators are the safest drivers in the world. It is because of this knowledge and the ability to prove it that we were able to convince insurance providers to help us develop programs for our members.

Because rates on OOIDA programs are based solely on the loss experience of our participating members, as opposed to outside factors that may negatively affect either the insurance or trucking industries, OOIDA’s premium increase has been minimal, averaging less than 5 percent. Factoring in a standard depreciation schedule, most members have experienced no increased cost at all and in many cases the result is a net cost reduction.

As a result, most of our members choose to remain on the association insurance programs developing stability through longevity that adds up to more reasonable premiums for them, as well as additional referrals and a broader membership base. With more members choosing to participate in association programs, we are able to offer enhanced benefits and services at more reasonable rates than outside insurers.

Although it appears increases in truck insurance premiums remain a harsh reality for small-business truckers, you still have options that will make the hit to your profit margin a little easier to take, and you should consider them now.

—by Donna Ryun