Trucking insurance: Technology may help stem rising premiums

The big spike in trucking insurance premiums that occurred in 2016 may ease up in the new year, but the major driver of those spikes – high-dollar jury verdicts in accident cases involving commercial vehicles – may dog the industry for some time to come, according to Todd Reiser, vice president of the transportation practice for the Lockton Companies.

However, in a conference call with reporters hosted by Stifel Capital Markets, Reiser stressed that a spate of new technologies – specifically onboard cameras, lane departure warning, collision mitigation systems, and critical event recorders – are poised to not only help mitigate the lawsuit verdict issue but help fleets reduce their premium expenses based on safety performance data.

“Their impact is substantial, especially in terms of rear-end collisions,” he said. “Rear end [accident] claims usually are the biggest; the fact that collision mitigation systems can help eliminate them is substantial.”

Even if a rear-end crash does occur, Reiser noted, collision mitigation technology can reduce the speed of the crash to between 5 and 10 mph versus 62 mph.

“We’re also seeing a massive increase in the use of cameras,” he added. “When they first came out, trucking was hesitant to use them to say the least. But we are certainly now seeing that initial reluctance is passed. More and more fleets are piloting camera [systems] or moving to full implementation. And frankly, they are being exonerated in [legal] cases where they are being targeted for liability.”

Reiser said that’s a big deal because the “severity” of jury awards has worsened over the last decade. “A claim that might have been $1 million 10 years ago is unfortunately now at $3 million, $4 million, and even in excess of $5 million,” he pointed out. “That was very rare back in the early 2000s. Now we’re seeing significant penetration into the $5 million layer – that’s causing a lot of concern.”

Fleetowner Com Sites Fleetowner com Files Uploads 2016 12 09 Travel2

The problem is that many plaintiffs’ attorneys key in on a carrier’s overall safety and performance record instead of the specifics of a particular crash case, Reiser said.

“They try and paint the company as an unsafe carrier and as a menace to society. Unfortunately we see it all the time – even in cases where there is no liability for the trucking company,” he added. “A lot of times a jury feels even if it is not the trucking company’s fault, this guy [the crash victim] needs money – and the trucking company has insurance.”

Would safety technology such as an onboard camera system help alleviate this problem for motor carriers? Reiser told Fleet Owner yes they would, to a degree, but even that “degree” is far better than the current situation.

“I don’t know how much they will really change the dynamics for some of these verdicts,” he explained. “But having evidence to mitigate a carrier’s liability is critical. It could help decrease the cost of a settlement if you have footage showing the plaintiff crossing the double yellow line or cutting off the truck.”

Other trucking insurance and non-insurance trends Reiser highlighted during his presentation included:

Moving forward into 2017, as far as the impact on the insurance marketplace, the “worst has passed in terms of substantial rate changes,” he said. “They were painful, but the message we are receiving now is that rates are generally adequate; we hope not to see type of correction in 2017 we saw in 2016.”
Providers of insurance coverage in excess $10 million revisited their pricing models and made across the board rate increases to get to right pricing. “This caused a lot of consternation in the marketplace,” Reiser said. “[Coverage] of over $10 million is where we saw significant tightening of capacity and price [in 2016]. That is where we see a lower number of [insurance] players.”
Motor carriers with “unfortunate loss activity” will still see increases in their insurance rates from underwriters. “Lowering your costs is not about finding cheaper insurance; it is about not having accidents,” Reiser stressed. “At the end of the day, your record will catch up with you – even if you have bad luck [in terms of accidents] you will pay for it. There is no option out there to get costs to go down quickly; there is no ‘quick fix’ scenario.”
While the effort to raise the minimum insurance level for trucking companies from $750,000 to around $4 million to $5 million is pretty much dead in the water, Reiser said raising that minimum level is still important. “I can tell you $750,000 is just not adequate,” he emphasized. “Moving forward, [a level of] $2 million or in that range would be a good step.”
If a fleet does install safety technology, they need to “take steps” to use the data captured by such devices, Reiser stressed. “We’ve seen where fleets have it and don’t use the data – that’s detrimental from a liability standpoint,” he warned. “A plaintiffs’ lawyer will see that and say, ‘why aren’t you using it?’”
Tort reform hardly came up as an issue in the recent Presidential election and Reiser isn’t sure it will be a focus of the Trump administration. “I hate to say we are resigned to it [big jury verdicts] because all of us still hate to see it and, in a lot of situations, it is egregious,” he said. “But tort reform has been extremely slow to take hold. I don’t know what the new administration will do about – we have to wait and see. We’re not seeing trends right now where jury verdicts are diminishing. Our only hope is that [safety] technology advances will limit them.”
From an insurance underwriting perspective, autonomous trucks are now a question of “when” not “if,” Reiser noted. “[The insurance industry] will take a slow approach but it is open to looking at them,” he said.