TORONTO, Ont. – Canada’s truck fleets are facing double-digit increases in insurance costs, when they can find coverage at all, as insurers grapple with the risks of so-called nuclear verdicts and more.
“We’re seeing minimum rate increases of 10-15%, and then much larger depending on the carrier’s safety ratings and claims experience,” said Joe Palmer, senior vice-president of transportation at Gallagher, during the insurer’s online Gallagher Talks presentation. “The excess liability market is equally as difficult. Perhaps even more so.”
The latter insurance refers to the coverage used to build up the limits on top of the original policy, to close gaps in coverage and offer fleets some added protection.
In the language of the insurance industry, it’s become a “hard market”.
“We’re seeing insurers being very cautious on the risks they’re writing,” Palmer explained. “The specialists – the insurers that specialize in trucking insurance – are being very disciplined around rates and focused on profitability more so than growth and market share. Many of the generalists who are writing some truck insurance, we’re seeing them pulling back and pulling out in some cases.”
Until recent years, a crowded market led to the competitive conditions that might have kept rates below levels that are considered sustainable, he said.
The price of protection
It simply costs more to protect truck fleets these days. Tractors are significantly more expensive, driving up the price of repairs and replacements. Even relatively small fender benders can now damage bumper-mounted sensors that support advanced driver assistance systems.
“A standard repair today is significantly more expensive than it was a few years ago,” Palmer says.
Then there are the nuclear verdicts, in the form of court rulings that amount to seven-figure settlements. While more common in the U.S., they also exist in Canada, and that’s pushing liability settlements higher, he said.
That’s where excess liability insurance plays a role, but Palmer says capacity for that coverage is drying up, sometimes leaving carriers with no options.
“We’ve seen rates in that layer double or triple here over the past year,” he said. Coverage once priced at $500 to $600 per power unit has climbed to $2,000 per truck.
“It really puts a lot more emphasis on the carrier’s risk management programs.”
Controlling insurance costs
There are strategies to help. Insurance brokers, for their part, can begin the renewal process earlier, giving them time to assemble detailed submissions, he said.
Colin Parsons, the general manager of Seafood Express Transport and a former insurance broker, says one of fleet’s strategies involved switching to an insurance captive, which has helped to shelter the business from broader insurance costs.
“You still see rate increases from the captive, but they’re much lower than you see in the traditional marketplace,” he said of the approach, which groups several trucking businesses together in a single pool.
Something has to be done. In the days of rising costs for repairs, maintenance and insurance itself, it all affects budgets and profitability.
So far, the fleet has been able to secure the excess liability coverage that it sees as important protection when trucking in the U.S.
Ultimately, the most important step is to manage claims costs – and that begins by being aware of loss ratios and various issues that can threaten the business.
“It really comes down to safety and making sure your fleet practices the best safety practices,” Parsons says.
That includes incorporating inward and outward-facing dash cams that are triggered based on driving behaviors like speeding, lane changes, hard braking, and stability. The 10-second clips that emerge are used as training tools.
Such training is also particularly important for newly hired drivers, especially for recent immigrants who are new to the realities of trucking in Canada.
“We get drivers from all over the world, some who have never seen winter,” Parsons says.
Their initial training includes a month on the road with a driver trainer, and then driver coaches to guide people during longhaul trips.
Palmer also recommends fostering long-term relationships with insurers rather than switching between companies every time a policy is up for renewal.
Specialized insurers have the expertise that can be leveraged to improve safety programs and help identify high-risk drivers, he says. Sometimes the smallest issues can lead to bigger problems down the road.