A common theme among the vast majority of trucking companies in 2019 is increased operational costs, and the corresponding need to negotiate rate increases in order to pay the bills and remain profitable. It’s a conversation that insurance agents are typically having with trucking company management around renewal time. In short, trucking companies need more money coming in the door, or face the very real potential of sudden business shut down, trucks and cargo stranded on the highways, etc. See example of Falcon Transport Co., who closed its doors without warning.(link here)
What is driving this increase in costs?
The American Transportation Research Institute (or ATRI) is helping to answer this question. They recently released the 2019 version of “An Analysis of the Operational Costs of Trucking,” which relies upon detailed financial data provided directly by motor carriers. Among the ATRI’s findings were the following:
- The average marginal cost per mile incurred by motor carriers in 2018 increased 7.7 percent to $1.82.
- Costs rose in every cost center except tires, with fuel costs experiencing the highest year-over-year growth of 17.7 percent.
- As a strategic response to the severe driver shortage that existed in 2018, driver wages and benefits increased 7.0 and 4.7 percent, respectively – representing 43 percent of all marginal costs in 2018.
- Repair & maintenance (R&M) costs, at 17.1 cents per mile in 2018, have increased 24 percent since 2012;
- Insurance costs saw the second fastest year-over-year growth at 12 percent.
As one industry executive put it: “ATRI’s 2019 Operational Costs Research highlights the extent of the cost increases our industry experienced in 2018. Savvy carriers will continue to use this cost data as a benchmarking tool, and to better educate our customers on the financial and operating pressures our industry faces.” 
Insurance Costs Continue to Increase
As the severity (i.e. the total dollar amount paid and in reserve) of trucking accidents continues to increase, that cost is passed on to trucking companies in the form of increased insurance premiums in 2019 and 2020, which in some cases are increasing as much as 25 percent or more. The primary factors influencing the continued rise in accident severity include: ever-increasing medical expenses, attorney fees and nuclear jury awards (i.e. awards in the tens of millions). See $40.5 million verdict against Werner Enterprises. (link here)
How to Reduce Insurance Costs
Accident prevention is the best way to ensure a reduction in insurance claim costs. For most companies, a great place to focus or refocus efforts is on prevention of distracted driving, as it is unfortunately the root cause of many serious and fatal accidents involving trucks. The proliferation of cell phones, tablets and other portable devices is a reality for most truck drivers – and these devices can take their attention away from the road, other vehicles and pedestrians at critical points in time. However, companies who are investing in safety training and technology such as inward-facing dash cameras and facial recognition software – are ahead of the curve when it comes to identifying and addressing distracted driving risk factors before a serious accident occurs. More importantly though, are the catastrophic injuries that never happen, and the lives that are saved as a result of accident-free driving on our country’s highways.
If you would like more information on accident prevention or safety resources, please reach out to your local Marsh & McLennan Agency representative.
 Barradas, Samuel. “585 Truckers Stranded When Company Shuts Down Without Notice.” TruckersReport.com, 10 May 2019, https://www.thetruckersreport.com/585-truckers-stranded-company-shuts-without-notice/.
, 3 Murray, Daniel. “ATRI’s Newest ‘Operational Costs of Trucking’ Research Shows Dramatic Increases in Industry Costs.” American Transportation Research Institute, 4 Nov. 2019, https://truckingresearch.org/2019/11/04/7851/.
 Hawes, Clarissa. “Jury Slaps Werner Enterprises with $40.5 Million ‘Nuclear Verdict’ in Fatal Crash.” FreightWaves, 14 Oct. 2019, https://www.freightwaves.com/news/jury-slaps-werner-enterprises-with-405-million-nuclear-verdict-in-fatal-crash.