The biggest chunk of an independent’s insurance costs is liability coverage, which pays for injuries and property damage from a wreck.
For over-the-road drivers, the Federal Motor Carrier Safety Administration requires $750,000 in primary or auto liability coverage. However, most shippers and brokers do not do business with trucking companies that carry less than $1 million in liability coverage. Certain hazmat haulers, especially those hauling chemicals, are required to have $5 million in liability coverage.
Liability coverage costs have increased markedly. Premiums for a $1 million liability policy now can range from around $6,000 to $16,000 or more a year.
The 2008 recession caused insurance companies to reduce premiums, says Bob Holtzman, president of California-based Western Truck Insurance Services.
“The marketplace was competing for what business was still there, and rates got really low,” he says. As the economy rebounded, he adds, insurers were slow to react and started taking losses “well in excess of premiums.”
In the last three to four years, insurers increased rates. Holtzman says rates are now much higher than the low that was seen around 2011 and are expected to remain at that level for the foreseeable future.
That “high” level, though, is relative. Holtzman says most insurance companies still run their commercial trucking business at combined ratios of over 100%. At 105%, for example, every $100 the insurance company brings in costs them $105.