Insuring commercial trucks has gotten more expensive since the pandemic, like so many other products and services, but a deeper look at the data reveals that this trend predates the disruption of the economy and supply chains caused by COVID-19.
According to a recent analysis by the American Transportation Research Institute, “nearly all motor carriers witnessed considerable increases in insurance prices from 2018 to 2020 despite cutbacks in insurance coverage, increased deductibles, and enhanced safety” (ATRI).
Additionally, the data demonstrates that even though crash frequency and severity increased between 2009 and 2018, the pace of growth in insurance costs during that time period was far faster.
The conclusions of recent research by Triple-I and the Casualty Actuarial Society (CAS) that the phenomena known as “social inflation” was responsible for $20 billion in commercial auto liability claims between 2010 and 2019 are consistent with ATRI’s observations.
According to Triple-I Chief Insurance Officer Dale Porfilio, “External issues that go well beyond carrier safety lead commercial trucking insurance premiums to climb.”
In the end, the higher premiums typically result in higher pricing for goods and services for customers.
ATRI acknowledges three main factors that affect premiums in addition to crash history and policy elements:
Social inflation, carrier-specific characteristics, and economic effects on the insurance sector.
Rising health-care expenses and general inflation are just two examples of external economic factors that influence insurance premium rates.
ATRI notes that although medical advancements can save lives, these treatments directly raise the expense of healthcare.
The cost of fixing cars is rising as a result of technical advancements; for example, electronics now account for 40% of the price of a new car.
Larger claims and losses that must be factored into pricing result from these greater costs, which have an impact on premiums.
The operational sectors, cargo values, states or regions of operation, corporate growth, and dedication to safety culture and technologies are all carrier-specific factors that have an impact on premium pricing.
As stated by ATRI, “Carriers displaying continuous year-over-year gains in safety technology adoption, safe driver hiring and training methods, and crash history might potentially cut their insurance costs.”
The term “social inflation” describes how litigation and governmental policy trends affect insurance claims and, eventually, policyholder expenses.
Through changes in the legislation and a tendency for litigation, social attitudes and behaviors have an impact on insurance payouts, and jury verdicts don’t always follow logical chains of reasoning or established precedents.
Emotions, local and state laws and regulations, and plaintiff bar strategies can all have an impact on a jury’s decision.
Practices like third-party litigation finance, in which hedge funds and other third parties participate in lawsuits in exchange for a percentage of the awards, have contributed more and more to social inflation in recent years.