U.S. trucking companies aren't the only ones being socked by skyrocketing insurance costs. The Canadian Trucking Alliance reports that motor carriers across Canada are being hit hard, as well, and warned shippers to expect to hear from their carriers soon.
Many carriers from across the country have begun to complain about massive increases in liability insurance premiums - even where the carrier believes it has maintained an excellent loss ratio. Increases of 40% to 50% are common, and 100% to 200% increases are not unheard of.
CTA reports that the number of insurance companies willing to write truck liability insurance has shrunk, especially in the United States, so insurance costs for carriers operating into the U.S. are increasing significantly.
In addition, the group notes, insurance pay-outs from September 11 are expected to be in the several tens of billions of dollars. It is estimated that the reserves of the entire insurance industry have been dramatically reduced and will have to be rebuilt. This has severely constrained the reinsurance market, pushing up premiums.
With interest rates low and stocks showing the impact of a bear market for the past year or so, revenue generated from insurance industry investments are down. These are a major source of profits for the insurance industry.
According to the CEO of the Alliance, David Bradley, "Like the escalating cost of fuel, there is no quick solution to this problem. Ultimately, carriers will have to deal with their insurance providers and their customers. Our job is simply to make shippers and carriers aware of the situation."
He says that ultimately the increased cost should be reflected in freight rates. There is some talk of insurance surcharges being applied, although it is not clear how that would be calculated. "It would be tough to develop a general formula for the entire industry. Things really need to be examined on a case-by-case basis - every carrier's claims/loss experience, deductible and level of self-insurance will be different."
Bradley concedes there may also be some positive impact from the insurance increases. "We are told that some carriers with poor safety performance are learning they cannot even find anyone to write them an insurance policy. The sooner those carriers are out of the industry the better it will be for everyone."
Many carriers from across the country have begun to complain about massive increases in liability insurance premiums - even where the carrier believes it has maintained an excellent loss ratio. Increases of 40% to 50% are common, and 100% to 200% increases are not unheard of.
CTA reports that the number of insurance companies willing to write truck liability insurance has shrunk, especially in the United States, so insurance costs for carriers operating into the U.S. are increasing significantly.
In addition, the group notes, insurance pay-outs from September 11 are expected to be in the several tens of billions of dollars. It is estimated that the reserves of the entire insurance industry have been dramatically reduced and will have to be rebuilt. This has severely constrained the reinsurance market, pushing up premiums.
With interest rates low and stocks showing the impact of a bear market for the past year or so, revenue generated from insurance industry investments are down. These are a major source of profits for the insurance industry.
According to the CEO of the Alliance, David Bradley, "Like the escalating cost of fuel, there is no quick solution to this problem. Ultimately, carriers will have to deal with their insurance providers and their customers. Our job is simply to make shippers and carriers aware of the situation."
He says that ultimately the increased cost should be reflected in freight rates. There is some talk of insurance surcharges being applied, although it is not clear how that would be calculated. "It would be tough to develop a general formula for the entire industry. Things really need to be examined on a case-by-case basis - every carrier's claims/loss experience, deductible and level of self-insurance will be different."
Bradley concedes there may also be some positive impact from the insurance increases. "We are told that some carriers with poor safety performance are learning they cannot even find anyone to write them an insurance policy. The sooner those carriers are out of the industry the better it will be for everyone."
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