Technology helps and hinders commercial trucking insureds in a volatile marketplace

Technology helps and hinders commercial trucking insureds in a volatile marketplace | Insurance Business America

Technology helps and hinders commercial trucking insureds in a volatile marketplace

If Burns & Wilcox’s Rebecca Roberts had to pick one word to describe the state of the commercial trucking insurance business today, it would be ‘volatile.’ Pricing in certain classes is very competitive while other classes of business are seeing higher insurance costs, according to the vice president, alongside fluctuating capacity in the marketplace as insurers make hard decisions about which states they’ll be operating in going forward.

“Michigan, for instance, is a no-fault state, and some insurers pulled out of this state altogether because they couldn’t be profitable,” explained Roberts, who specializes in commercial transportation and adds that volatility in the marketplace is heightened because laws vary from state to state. Nonetheless, the high price tag of insurance in commercial trucking has been offset by a strong economy and stable fuel costs, which means freight continues to move.

“Last time this happened, the economy wasn’t strong, so it’s a very interesting dynamic that we have going on,” said Roberts. “It does seem that trucking companies are able to withstand the cost of insurance and I’m not seeing them go out of business, like they did previously during the last cycle.”

That doesn’t mean that trucking fleets are in the clear when it comes to the risks they face today. Low unemployment numbers, an aging driver workforce, and strong economic expansion in the US has motor carriers facing a balancing act of whether the additional revenue is worth the increased risk and costs of widening driver hiring guidelines, according to Great American Insurance Group trucking division experts, Thomas Skuggen, business developer manager, and Randal Smith, divisional senior vice president.

Moreover, all commercial trucking companies have had to switch over from using paper logs to electronic logging devices (ELDs) to record truck drivers’ Record of Duty Status (RODS), thereby replacing the paper logbooks previously used to record compliance with Hours of Service (HOS) requirements. The change was a result of a federal mandate that came into effect in 2017, and the transition from paper to ELDs hasn’t been easy for everybody in the business.

“While owner operators leased to large motor carriers had already adjusted to the ELD environment, few true independent drivers operating under their own authority had these implemented in advance of the deadline. This has caused strain on the individual owner operator with potential detrimental impacts to their ability to generate revenue, further reducing truck capacity available to shippers,” explained Skuggen and Smith.

For insurers, the ELD rule was good news as the devices removed some of the gray areas associated with using paper logs.

“There was a delay in how information would be recorded or there was some room for error if you would physically write the information down in a log. Then at some point in time, you would have to file that information, and there would be a lag in when that information would be uploaded into the DOT’s website,” said Roberts, adding that the information collected by logs is also used in underwriting. “It’s a predictor of how compliant that motor carrier is with the regulations that the government has on that motor carrier. Those regulations are all driven towards safety. Safety is an indicator of how likely they are to have a loss, so with the electronic logs, think about how quickly that information gets into the system and how accurate that information is.”

ELDs are just one type of technology having an impact on truck drivers. Collision avoidance, automated event records, and anti-rollover systems are just some of the innovations gaining popularity in the commercial transportation space, though there are also downsides in their implementation.

Read more: Telematics ‘a foregone conclusion’ in the commercial auto industry

“Technology has been a double-edged sword in the trucking industry. Trucking companies have access to a number of technologies that can help reduce accident frequency, but these technologies also increase the value of their units,” explained experts from National Interstate Insurance Company, including Paul Stock, assistant vice president of risk management, George Skuggen, senior vice president of truck and passenger transportation, and Tony J. Mercurio, president and chief executive officer.

“While those who have implemented these technologies and manage them proactively should experience lower frequency, the costs to repair the damages to their unit after a loss have increased due the increased value of the unit.”

However, for truck drivers who are often subjected to deductibles of between $1,000 and $2,500, having safety-focused technology in place has the potential to pay for itself quickly, Great American’s Skuggen and Smith told Insurance Business, considering the savings in deductible payment, and mitigation of premium increases due to large loss. Add to that the now-commonplace use of ELDs, and the future of trucking safety looks bright.

“The implementation of ELDs and a push towards the usage of more telematics will create opportunity for those insurance carriers able to integrate with the motor carrier and the driver,” commented Skuggen and Smith. “This integration has the potential to benefit both the insured and insurance carrier, creating both efficiency and driving data-driven pricing methodologies that will benefit the safest of motor carriers and their drivers.”