Trucking and/or truck insurance is a fixed cost that every owner-operator must pay and, behind a truck payment, is often the highest fixed cost for a trucking business.
There are a multitude of factors that influence how costly an owner’s insurance premium will be, and a good many of those are totally out of their control. This makes insurance a big pain point among owner-operators, particularly new ventures that have yet to prove themselves in business.
Unfortunately for many an owner-operator, despite doing everything right and avoiding crashes, citations and anything that would lead to an insurance claim, premiums still often go up each year at renewal. That's been the story broadly speaking for commercial auto insurance, including trucking insurance, since the start of the 2020 pandemic year.
Sometimes, too, insurance premiums go up by quite a lot.
West Virginia-headquartered independent Michael Sparks in January was staring down the barrel of a doubling of premiums for his renewal -- an extra $11,000 annually, he said -- which had been scheduled for February 2 and underwritten by Progressive. Sparks' motor carrier authority had been longstanding, active for well more than eight years, following 20 years or more leased to Mercer.
"Nice clean record," he said. "No accidents, no tickets. A clean DOT number" and a 2001-model Freightliner Classic XL and 2020 Benson stepdeck covered on the policy. "I carry $250,000 for cargo insurance. I'm in the process of shopping it around."
Sparks' 2001 Classic XL and '20 Benson flatbed at unloadCourtesy of Michael Sparks
His insurance agent wasn't quite certain why the renwal was coming in as high as it was, yet truth be told, all manner of factors can go into insurance pricing.
Peter Niro, Product Development Manager with Progressive Insurance, said truck insurance premiums “are based on estimated loss costs, which are influenced by individual risk characteristics,” some of which owner-operators can influence themselves, “and changes in the environment,” which owners can do nothing about.
Those individual risk characteristics, Niro said, include things like the operator’s safety record, their equipment, and where they operate geographically. The operator's age, too, according to other insurance sources.
Environmental factors that can influence insurance premiums include changes in driving patterns, vehicle repair costs, medical costs and litigation -- an ever-increasing problem with the proliferation of so-called nuclear high-dollar verdicts in civil suits against trucking companies. “Higher costs attributed to changes in the environment can result in higher premiums, even for owner-operators with a strong safety record,” Niro said.
[Related: What do insurance companies use to calculate our insurance premium rates?]
Chris Demetroulis, Managing Director of Transportation with the Gallagher insurance brokerage and risk management and consulting firm, said the firm has observed 45 straight quarters of increases in the commercial auto insurance market -- more than 11 straight years.
Longtime owner-operator Michael Castaldi, owner of M.D.C. Transport, said he’s seen the biggest impact in rising insurance costs in the last four to five years. He’s been with the same insurance company for 20 years and acknowledged that, based on what he’s heard from other owner-operators, he’s been truly one of the lucky ones. “My increases haven’t been close to what I’m hearing” from other operators, he said.
Castaldi said his annual premiums are just north of $15,000 of late -- on par with the highest percentage of Overdrive readers based on 2024 polling.
As shown, that polling found that 24% of independents are paying more than $15,000 for liability insurance. On the other end of the spectrum, a combined 48% of independents pay less than $10,000 a year.
[Related: Nuclear-verdicts threat rolls downhill to small trucking companies, owner-ops]
If you're not there already, to get down into that 48% group, there's plenty owner-operators can do to improve insurers' view of their businesses. The goal? To be seen as low of a risk as possible, to get the best rate available.
How to better present yourself to the insurance market
The risk factor is the name of the game, here. Niro with Progressive said that beyond keeping a clean driving record, independents operating under their own authority should ensure they’re keeping a clean safety record. Some insurers might review a motor carrier’s inspection history with the Federal Motor Carrier Safety Administration along with the driving record of the driver(s) listed on a policy.
A clean inspection history and safety record from FMCSA could help keep insurance rates low, but on the flip side, “if a motor carrier’s safety record deteriorates or the motor carrier hires drivers with a poor safety record, renewal premiums may increase to reflect the increase in risk,” as Niro put it.
Owner-operator Castaldi recommended the same for other owner-operators. “To keep your rates low, your options are kind of limited,” he said, “but keep your driving record clean and your CSA score in good shape. Then, you definitely don’t want any claims.” If the insurance company doesn’t flat out drop you after a claim, he added, “they’ll end up making the money back” off of you in premiums.
Michael Castaldi's 2003 Peterbilt 379 and 2010 Utility reefer, "Paradise Express." Castaldi said he often gets text messages and phone calls from solicitors who claim they can save him money at renewal. "Some are probably legit, but others I believe are fly-by-night. They probably could save me some money, but with what company?" Good coverage is important -- sacrificing that for a little money saved isn't worth the risk in his mind.
Demetroulis said the first thing insurance carriers will look at is an owner-operator’s losses, or claims. “Let’s just say you have no losses -- the market’s already going up, you know, single digits to low double digits” in terms of percentage increases, he said. “As soon as you start adding losses into that picture, that just exacerbates the problem.”
To address this, the best thing an owner can do is work with an insurance partner -- a broker like Gallagher or other insurance agency -- to mitigate any open reserves on loss runs. In insurance, reserves are essentially money set aside as a budget when a claim is opened before the claim is settled. The insurer doesn’t know what the final claim amount will be, so they open a reserve to set aside money to cover the claim.
An example from Demetroulis: If you have three $30,000 claims open, “and there hasn’t been a whole lot of action on those claims, it’s good to have advocacy to try to reduce those claims,” he said. “If you have a $30,000 claim, and your advocate can go to that adjuster and say, ‘Listen, we feel after looking at this, it’s a $15,000 reserve, can we reduce that?’ Or: ‘We haven’t had any action on this claim for two years, can we close it out?’"
“We’re all guilty of just saying, ‘It’s just easier to renew.' You usually don’t shop, but all it takes is to get out there and shop a little bit.”
--Owner-operator Kenny Wingate, speaking in Part 2 of this feature to savings that can be had shopping coverage around prior to renewal
Getting those reserves down to a low level can hold huge import for your premium at renewal.
“When I go to an insurance carrier and I have $15,000 less in losses in my reserves, or I completely do away with it, that makes a massive difference in your renewal premium,” Demetroulis added.
Mitigation of those open reserves needs to happen before the 90 days prior to your insurance renewal.
“To me, the open reserve reduction or closure is critical when you’re going into a renewal cycle," he said. "Not after … but before you [get to renewal]. That’s probably the biggest piece, I would say, [that] is a moveable obstruction for a small motor carrier and/or a smaller fleet.”
[Related: Yes, you can reduce your trucking insurance premiums, and I have the customers to prove it]
Having that advocate -- an insurance broker's agent -- on your side is key to ensuring you’re getting the best deal possible on insurance, while also ensuring you’ll be covered if you need to utilize that insurance policy.
Agents “have the most experience. They know how to deal with the insurance carrier,” he said. “It is the job of the insurance broker to advocate on that small trucker’s behalf in order to get a better result in the marketplace.”
Read next: Other ways to save at renewal, and a case for shopping coverage around
