2023 US Insurance Cost Surge: Carrier Insights
Table of Contents
Anatomy of rising insurance costs
Werner Enterprises is facing the heat
As insurance costs rose, Werner’s spending in that category rose nearly 33% to $36 million. John Steele, Werner’s chief financial officer, said in a May earnings call: “Increased claim costs are becoming increasingly evident.
Knight-Swift’s financial burden
Battling rising insurance costs, Knight-Swift posted a nearly 41% increase in expenses to $138 million. Factors such as an increased frequency of claims and a specific jury verdict played a role in this increase.
J.B. Hunt’s Financial Challenge
J. B. Not immune to the trend of rising insurance costs, Hunt saw expenses skyrocket by more than 52% to a total of $70 million. Higher insurance premiums contributed significantly to this.
The wider implications of rising insurance costs
The transportation industry, especially trucking, is struggling with the effects of rising insurance costs. These costs have risen for a myriad of reasons, many of which are beyond the carriers’ control. For example:
While the frequency and severity of truck crashes increased from 2009 to 2018, the rate of increase in insurance costs over that period outstripped the nominal increase in the number of accidents. Litigation has increased financial pressures on insurers, which then pass on to motor carriers. These are not just high-level “nuclear verdicts”. Even smaller verdicts and settlements in the trucking industry saw average payouts ranging from $406,386 to $449,792. Economic conditions in the insurance industry also played a role. Incurred losses for commercial vehicle insurers increased each year between 2015 and 2019, representing an overall increase of 50%.
How carriers are adapting
To combat these rising costs, carriers have adopted various strategies. One common response has been to reduce the level of coverage, particularly for amounts in excess of $1 million. While this may reduce premium costs in the short term, it also increases carriers’ exposure to high-value verdict cases.
Higher deductibles have emerged as another tactic to lower premium costs. However, this also means that carriers bear a larger share of losses per incident. For small carriers with tighter profit margins, many of these strategies are not feasible. They may prefer to pay slightly higher premiums over time rather than risk significantly higher incident costs that could potentially ruin them.
Adoption of security technology
The silver lining in this challenging environment is the industry’s pivot towards security technology. An incredible 92% of carriers have adopted new security technologies in recent years. Road cameras, speed controllers and collision warning are among the most popular options. However, it should be noted that the adoption of these technologies did not show a significant correlation with insurance premiums. To dive deeper into the topic of fleet safety in transportation, click this link.
Slide: Key insights from the increase in transport insurance costs in 2023
Rising insurance costs in 2023:
The most prominent carriers affected include J.B. Hunt Transport Services, Knight-Swift Transportation Holdings and Werner Enterprises.
Total insurance expense increase of $73 million compared to the prior year.
Anatomy of cost growth:
Werner’s insurance costs rose nearly 33% to $36 million.
Knight-Swift’s expenses rose about 41% to a total of $138 million.
Factors such as an increased frequency of claims and specific jury verdicts contributed to the increase.
Causes and their impact:
Werner’s positive steps in insurance and claims management despite setbacks.
Steele’s emphasis on a decrease in the number and frequency of accidents.
Record low DOT preventable crashes for Werner the previous year.
The transportation industry, especially trucking, is facing the effects of rising insurance costs.
Costs have risen for a variety of reasons, many beyond the carriers’ control.
The industry is oriented towards security technologies.
92% of carriers have adopted new security technology.
Popular options include road cameras, speed controllers and collision warning.