Trucking insurance has serious curb appeal for independent agents who are interested in earning big money. But the highly competitive atmosphere makes trucking a tough niche to crack.

“To insure a trucker for physical damage, cargo, liability and any kind of protection of the worker in the vehicle, a premium could be $8-12,000 per truck—if you know what you’re doing,” says Tommy Ruke, president of Insurance Business Consultants, Inc. “That’s the incentive to deal with this. But there’s also a downside: If you don’t know what you’re doing, you’re going to get into trouble.”

Here’s what you need to know about the trucking market in order to continue serving your clients effectively in the coming year.

Pricing Trends

Rates are currently softening for just about every commercial market—except trucking. “Trucking has not been a profitable area for a number of years,” Ruke says. “It has been very unpopular at the reinsurance level due to losses. It’s always been tough. Any time a trucking case gets in front of a jury, they tend to imply more liability on truckers—and there are big dollars there.”

“It’s a very complex product,” agrees Ward Stein, president of Greenwich Transportation Underwriters, Inc. “Commercial auto, along with workers compensation, has had the worst returns for insurers over the last 20 years because of the volatility of the class of business. Commercial auto is typically offering $1 million limits or more.”

But just because prices are staying fairly high doesn’t mean this isn’t a competitive marketplace. Quite the contrary, says Matt Maurer, transportation underwriter at Burns & Wilcox.

“We’re seeing more [insurance] carriers making filings than we did last year, which would imply a soft market environment,” Maurer says. “However, at the same time, we’re still seeing rate increases by nearly all the markets. Everyone’s still interested in writing trucks, everyone’s still interested in finding a way they can chase the big premium involved with a trucking policy. They’re still aggressively pursuing rate, and most of them have the room to do it.”

“Every insurance carrier wants more premium,” agrees Ruke, who notes that increased premium develops territorially and based on type of risk. The Midwest, for example, has remained “extremely competitive,” he says. “But the coastlines have been where the most increases have been sought. Risks that have any kind of public safety history are also being charged more.”

In fact, very few trucking risks are the same, “whether it’s the regions they’re traveling to or the type of commodities being hauled or the driver criteria or how the insurance company values the DOT information available to them,” Maurer says. “So while it sounds like there’s a lot of insurance companies pursuing new business, there is still ample opportunity to carve out a niche.”

Furthermore, within those classes, you might encounter significant price and coverage discrepancies. “The motor carriers, the guys on the ground operating these trucks, are still facing significant cost increases,” Maurer says. “They need more rate to be viable. From the agent/broker perspective, we don’t have a problem with the consistent increase in rate. We’d rather see [insurance] carriers take more rate than exit the marketplace.”

Whether a company succeeds or fails in trucking depends largely upon the product and program design they have developed, Stein says—and the result is what he calls a “mixed message to the marketplace”: While some insurance carriers are reducing some of their reserves for anticipated claims payments, others are discovering they need to increase those reserves in order to address claims long past.

“When there’s an injury an accident involving an injury, those cases can stay open for a year, two years, five years sometimes,” Stein points out. “Some [insurance] carriers were very conservative, set up reserves and now find out they were redundant, meaning they can take that extra to cash and income. Others are saying, ‘We didn’t reserve enough.’ They underestimated.”

The issue has shoved claims handling practices into the spotlight. “What most truckers want are stable rates,” Stein says. “Most of us recognize there should be inflationary costs that are passed on to consumers as they are in every single element of life, but what people want to stay away from are 10-20% rate increases that are completely unanticipated.”

On the Horizon

Ruke, who co-founded the Motor Carrier Insurance Education Foundation in 2013 to provide face-to-face presentations, Web-based education and information for insurance professionals who provide services and products to motor carriers, says to keep an eye on recently emerging trends like EPLI for truckers and the ongoing driver shortage. “How are we going to get different, nontraditional drivers who aren’t your typical 40-year-old white male?” Ruke points out.

According to Heavy Duty Trucking’s 2015 Fact Book, women and minorities comprised only 5.8% and 38.6% of U.S. truck drivers in 2014, respectively. While the numbers have grown over the past decade—in 2004, 4.5% of truck drivers were women and 29.4% were minorities in 2004—the fact book reports that more than 60% of fleets felt the impact of the driver shortage in the first half of 2015 and nearly 30% expect it to affect them in the future.

Another important trend to watch moving forward? The impact of logistics or freight brokerage on the transportation industry. Stein says that 25 years ago, 5% of the freight that moved across the country went through a freight broker. Today, the proportion has skyrocketed to 45%.

According to Greenwich Transportation Underwriters, a freight broker is not a motor carrier and doesn’t own any trucks. Instead, they’re a third-party, independent intermediary who connects motor carriers with shippers, manufacturers or other distributors that need to move their product from one place to another. The freight broker does not function as a shipper or motor carrier; instead, they work to determine the needs of the shipper and connect that shipper with a motor carrier that can transport the items at an acceptable price.

“There are different liabilities associated with being a freight broker,” Stein says. “There’s a serious need for all agents to understand what the nature of brokerage is and all the nuances for the coverage and how it impacts the motor carrier, the freight brokers and the shippers. It’s a developing area within transportation to understand that, and there are gaps and loopholes in the traditional ways it’s been handled. If it’s not understood and responded to accurately, it could create some potentially catastrophic losses for all parties.”

And beware the coverage gaps that could result from such arrangements. “If your insured is hauling brokered freight, the trucker may not know exactly what they are hauling,” Maurer warns. “It’s very important that the agent understands what is and isn’t covered on their insured’s cargo policy. When in doubt, refer to the bill of loading to find out who the trucker is hauling for— more E&O claims for an agency arise over cargo than auto liability.”

Finally, much like the insurance industry, “you continue to see consolidation” in trucking, Maurer says. “Just like anything, when operating costs increase, the advantage goes to the big guys, and some of the little guys will continue to fade away. [That means] agents need to familiarize themselves with fleet accounts in addition to non-fleet business.”

Learning more about fleet policies will require more than just understanding what the form looks like. Depending on the unit count and your market, you will likely use a reporting form policy versus a scheduled auto policy, Maurer says, “but you’re also going to have a higher standard of submission quality. Nobody’s going to accept the quick-quote sheet you use for non-fleet on a fleet business.”

Experts agree the single most important step you can take to better serve your trucking clients is to get informed—especially when it comes to regulatory changes. “You cannot service in this marketplace unless you become educated,” Ruke says. “If you don’t know what the FMCSA is, if you don’t know what CSA stands for, you don’t need to be in this area because you’re going to be in trouble.”

Don’t know what those acronyms mean? Want more details on how you can stay informed about the trucking market? Keep an eye on IAmagazine.com and upcoming issues of the Markets Pulse e-newsletter.

Jacquelyn Connelly is IA senior editor.