November 2020

Insurance costs back in the Top 10 ATRI Industry Concerns after 15 years

American Trucking Research Institute (ATRI) recently announced the results of its 2020 annual industry survey. For the first time since the group launched the poll in 2005, Insurance costs/access were back in the top 10 of industry concerns. This reflects the nagging insurance concerns that have been troubling the transportation industry for years. Unfortunately, the commercial auto liability insurance segment has struggled for a decade with unprofitability. It is foreseeable that the triple-whammy of higher numbers of accidents due to distracted driving (frequency) combined with ever-more complicated and expensive trucks that cost more to fix (loss-cost) exacerbated by the meteoric increases in nuclear verdicts (severity) will continue to drive insurance costs up.

Although Driver Retention and Parking are at the top of ATRI’s concerns list, the impact of higher insurance costs is an increasingly vexing challenge for the industry of late.

According to several ATRI analyses of insurance costs, including the group’s annual Operational Costs of Trucking, insurance costs per mile increased 18.3 percent over the last five years.

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Worry meter in the red for small fleets

Respondents to ATRI’s “Critical Issues in the Trucking Industry 2020” survey put insurance costs fifth, giving it a solid 58 on the Institute’s Industry Concern Index (ICI) worry meter. Beating out Driver retention (ICI 57.4), but well below Compliance, Safety, Accountability (ICI 64.7) insurance cost concerns hadn’t ranked this high since 2005 when it was slated third overall.

Concerns about insurance rates have returned with a vengeance placing insurance at 5th place in the survey. And who could blame the industry – since insurance expense is always near the top of fleet’s largest expenses on the P&L. It is always a challenge to adjust rising business costs, but when a major component jumps nearly 20 percent in five years and at a rate faster than the depreciation of the capital it is protecting, something’s bound to give.

ATRI finds small fleets were especially vulnerable: “The costs are even more dramatic among smaller fleets, which experienced insurance premium costs per mile more than three times those of larger fleets.” ATRI also cited availability of insurance as a reason for multiple fleet failures as well.

As the Roemer Report has noted more than once, unsustainable insurance costs were blamed for several high-profile fleet “Fails” in 2019 and 2020. And that was already occurring before our national economy was hamstrung by state overreach and political overreactions in response to the pandemic.

Chaotic and unpredictable, so what’s new?

ATRI unequivocally described 2020 as “the most chaotic and unpredictable time period in many decades.” It’s hard to understate and ATRI didn’t try, noting that over several months, the largest economy in the world spiraled from record-high consumer sales growth, low unemployment, industry-favoring trade agreements and a dramatically improved regulatory landscape, to an economic slide paralleling the Great Depression.

A world turned upside down, inside out

Noting lock-downs and the parsing of essential workers, ATRI explained in 2020 commercial business models were instantly recalibrated going from inside to outside and upside to downside, as long- established supply chains, markets and business cycles were disrupted by the disease and government diktat.

Although the toll has not yet been tallied completely, there is sparse empirical evidence to show the heavy-handed precautions and measures by state and local officials did much to help stop the spread of the disease or lower mortality rates. In fact, some evidence is pointing the other way. But our politicians and unelected bureaucrats made moves that definitely slowed our economy to an idle.

Impact on the highways

ATRI points out, that while fatal crash rates skyrocketed, fatality crash numbers plummeted – an interesting phenomenon due to fewer cars on the road and the higher speeds due to empty roads and AWOL troopers.

Interestingly though, ATRI also finds the same operating environment allowed trucks to move essential goods in record time. “In many instances,” explains ATRI, “the trucking industry benefited from both temporary COVID-related regulatory exemptions as well as permanent changes to rules such as the hours-of ­service.”

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It is time to put this disease in the rear-view mirror

The nation’s just made a big decision hopefully for politicians who are for the country’s fundamental principles and our version of capitalism, warts and all. But like ATRI, here at the Roemer Report we all understand, that in spite of it all, the trucking industry survived.

Optimistically ATRI also noted that in limited instances the industry actually thrived. “As [a] foundational component of both the macro U.S. economy and consumer demand on a micro level … recent trends in truck activity suggest that the U.S. has turned the corner on the COVID recession.”

How about just back to normal?

The roadmap back to normal is a bit murky. Naturally, we have faith in American ingenuity and our ‘can do’ spirit to see us through. Regardless, given the outcome of the election, it’s likely we’re going to need Tons of paper towels for months to come, you know, to clean up the mess. Thank God for U.S. truckers, we’re going to need you.

Bob Tales