This article was produced in partnership with Amwins
The intermodal freight transport market isn’t a place for the faint of heart right now.
“We see a tremendous struggle for our insureds trying to make it financially and we see it every day and pretty much in every area,” senior underwriter Don Oxidine at Trinity Underwriting Managers (TUMI) told Insurance Business.
The punches for the transport sector just keep on raining down. COVID-19 and its aftermath sent freight on a rollercoaster ride in terms of supply, with white-knuckled falls followed by a huge release of pent-up volume. Now, the effects of high inflation are being exacerbated at an inopportune time by local issues ranging from regulatory change in California to a lack of water in the Panama Canal.
TUMI is a program administrator and wholesale broker dedicated exclusively to niche and hard-to-place transportation risks like intermodal freight. Part of Amwins, the largest independent wholesale distributor of specialty insurance products in the US, one thing it prides itself on is its solid knowledge of the sector.
Oxidine has seen the intermodal freight area grow from a comparatively roughneck business to one that is now far more palatable to insurers in terms of risk.
“It’s definitely an evolving business that is becoming a better risk than in the past. We see better equipment, we see better chassis, we see better drivers. It’s sort of moved up the ladder of risk in the trucking industry – intermodal was very tough to insure say 25 years ago, but as a class of business it has improved as a whole,” he said.
Changes in the intermodal industry over that time include better information available through motor carrier data services such as Central Analysis Bureau (CAB) and Safer that help calculate risks and lower premiums. Technological advancements with cameras and telematics have also had a positive effect.
As a firm that is helping midwife the continuing industry transformation, TUMI understands that intermodal insureds are looking for experienced partners on the retail and wholesale side that can, in turn, help them understand their insurance coverage holistically.
“We are pretty familiar with what they do, and we think we can meet their needs as our programs have been designed to give them the coverage that they need,” said Oxidine.
As examples, Oxidine points to TUMI’s compliance with UIIA (Uniform Intermodal Interchange and Facilities Access Agreement) insurance requirements or its experience and understanding around Experience Rating Modification (MOD) and how this can impact premiums.
In the current market, insureds should expect MOD to be impacting premiums negatively. Because there are fewer trucks on the road against a largely unchanged level of losses compared to previous years, accident rates are being calculated at above the industry norm which raises the MOD score.
“If you compare against the same amount of losses, you get an experienced MOD that is higher than before, so they’ll be paying a little bit more probably [on premiums],” Oxidine explained.
TUMI wants to use such insights and experience to help the market run the gauntlet of challenges it is currently facing. After all, a lasting recovery has been a long time coming for freight.
Inflation is a case in point given the continuing impact it is having on consumer sentiment.
“People stopped buying goods, goods stopped being ordered to ship. [Insureds] thought the market would have recovered by June but we’re still in it. They’re still trying to recover,” said Oxidine.
Fuel costs have increased dramatically, and inflation also is pushing up insurance rates due to the higher costs of replacing equipment or providing medical coverage, for example.
“Inflation is a factor affecting the payout side too,” he said. “[What] we keep hearing is that to stay even our insurers probably need a 10 to 12% increase over current rates just to break even for the coming year.”
Other challenges in the transport sector are more regional in nature. In California, the effect of Assembly Bill 5 (AB5) reclassifying owner-operators as employees has led to a dramatic shrinkage of account size for freight carriers.
“We had an account that had 37 units, and then at renewal time they had one unit – they got rid of all their owner-operators. For our largest account there was around 120 units, and at renewal it was down to 40 units. So it’s just been a tremendous change from that standpoint,” said Oxidine.
He estimates the unit count overall for TUMI is between 30-40% lower than last year.
Regulatory changes around emissions are also impacting the sector in a major way, as diesel trucks start to be phased out at California ports from next month.
The California Air Resources Board (CARB) passed the Advanced Clean Fleets rule in April, requiring medium- and heavy-duty vehicle fleet owners to incorporate a growing proportion of zero-emission vehicles into their fleets over the next two decades.
Under the new rule, only zero-emission drayage trucks may register with CARB starting January 1, 2024, including those used to haul containers and freight from ports as well as rail yards. Older drayage trucks will be phased out gradually through 2035.
Trucking firms are scrambling to keep up with the changes.
“Our insureds are trying to order the [zero-emissions] vehicles now. But they are having trouble getting those in, and they are also having trouble getting the recharging stations set up,” said Oxidine.
Ports around the country have also seen a recent drop in volumes, with exceptions in a few spots such as Chicago.
“Some of the ports are not even operating every day,” Oxidine said. “There’s very little freight.”
One reason is lower water levels than normal in the Panama Canal, affecting ports on the Gulf of Mexico and the Eastern Seaboard.
“It keeps the freight from arriving in Florida, Texas and in New Jersey,” he explained. “And some of the ships I understand are not full like they used to be – so it’s kind of a reflection of the economy.”
While Panama transits were only around 10% below normal in November at 32 a day, the canal is planning to incrementally reduce that number to a projected 18 per day by February 1, which is expected to further impact container traffic.
Some firms have been forced out of business due to the continuing poor conditions. Oxidine cited one business that was reliant on a single large contract.
“They lost that contract and they had to shut down, they just had to go out of business,” he said. “We also had one [close] in Florida recently.”
In addition to firms going out of business, a number of intermodal truckers have been sold or consolidated into larger national carriers.
While transport firms are taking evasive action such as shifting from intermodal freight to long haul trucking, the market is continuing to change at pace. Still, Oxidine emphasizes that the underlying business for intermodal is solid and the long-term outlook positive.
“We think it’s an improving class of business,” he said. “But this just happens to be a very tough point in time for the intermodal industry.”
TUMI is continually working for solutions to benefit drivers, insureds, retail agents and carriers to get through the current rough patch.
“We think we have a pretty good understanding of the business, and we want to continue to be a market for our agents that specialize in intermodal. We’ve been in it for over 10 years, so I think we’re offering stability in that area,” said Oxidine.
TUMI has trusted relationships with more than 20 “A” rated carriers. Our capabilities span admitted and non-admitted products, which can be written on a primary or excess basis and are distributed through appointed retail agents across the United States. We are an integral part of Amwins’ Underwriting division, which specializes in offering retail agents an array of P&C programs for specific product lines, industry segments and business types. Amwins is the largest independent wholesale distributor of specialty insurance products in the US.
