Rising insurance premiums were among increasing costs affecting the trucking industry in 2023, despite declining accident rates.
Truck insurance premiums rose 12.5% year over year to $0.099 per mile in 2023, following three years of nearly flat premiums during the pandemic, according to the American Transportation Research Institute‘s (ATRI) 2023 cost of trucking report, released June 18.
Increased insurance premiums place more pressure on the transportation industry, especially smaller carriers, Alex Leslie, senior research associate at ATRI, told Equipment Finance News.
“There’s a lot of other factors involved to the litigation, environment, nuclear verdicts, the general profitability of the sector, but [commercial insurance] is a definite pressure on motor carriers right now, and disproportionately on small motor carriers, who don’t have all the tools and the size to manage those costs quite as well,” he said. “Smaller fleets are often also running older trucks, and that can have an impact on your insurance costs as well. So they have a couple different areas where truck costs and insurance costs end up intertwining.”
Pandemic insurance
Premiums rose one-tenth of a cent in total between 2020-2022 before rising 1.1 cents or 12.5% per mile in 2023, according to the ATRI report. With the pandemic leading to fewer vehicles on the roads, insurance companies held rates and made profits, Leslie said.
“The story in insurance really begins with the pandemic, where you didn’t have all the vehicles on the road, and so the number of crashes dropped,” Leslie said. “It was great, and that allowed insurers to make profit, which is unusual right now in the commercial auto insurance sector. They had gone something like 10 years without getting out of the red up until that point.”
As the supply chain and transportation industry returned to normal during 2022 and 2023, more traffic led to a rise in premiums, Leslie said.
“The pandemic actually allowed the commercial auto segment to correct itself a little bit,” he said. “In 2023, the party was over, and we saw insurance go up. … That’s a real challenge.”
Commercial vehicle accident trends
While “the party was over,” crashes declined by some metrics, with Federal Motor Carrier Safety Administration data showing 174,711 large truck accidents in 2023, down 4.7% YoY. Should accidents continue to decline, there’s a possibility of insurance premiums declining in 2024, Leslie said.
“There’s some hope in the fact that we did see crashes improve by a pretty significant amount, so that could help down the line, stabilize those premium prices a little bit, if we see it again, probably next year,” he said. “As for right now, we’re seeing those costs go up, and part of that is connected to the fact that trucks are more expensive.”
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