Dive Brief:
- Longtime truck insurers are fleeing the industry over a growing trend in seemingly-limitless amounts being awarded in verdicts to victims of truck accidents, the Wall Street Journal reports.
- Those insurers remaining in business have raised premiums an average of 10-30%, costing trucking companies an average of 9.2 cents per mile in 2015, an increase of 44% in 2 years, the Journal reports based on American Transport Research Institute data.
- In 2013, a jury in Texas awarded $281 million to the family of a man struck by a faulty drive shaft which detached itself from a truck, forcefully projecting itself through the windshield and ultimately killing the man. Attorneys for the family argued that the trucking company was at fault for insufficient maintenance, said the Wall Street Journal. Though the amount was later reduced to $105 million and then settled for an undisclosed amount, it is cases like this that insurers cite as "nuclear."
Dive Insight:
The trucking industry is seemingly being choked on all sides: regulations are tightening, driver turnover is high, demand is decreasing and now, insurance rates are growing due to the trend reported above.
A possible tactic for the industry to deal with the storm of rising costs would be to transfer the costs to the supply chain and increase rates, but the heavy fragmentation of the sector makes such a move dangerous now that margins are decreasing.
Meanwhile, the government's electronic logging device final rule and proposed rule for speed governors suggest better enforcement is a solution, as they attempt to encourage safe-driving through hours of service laws and speed limits.
Regardless of the solutions, however, the immediate problem of rising costs without rising demands is unlikely to be resolved soon, leaving the long-term fate of the trucking industry in question as it faces major head winds.
