The trucking industry serves as a barometer of the U.S. economy, transporting over 70% of goods carried by all modes of domestic freight transportation, including manufactured and retail goods in the U.S., according to the American Trucking Association. Yet, the industry that plays a prevalent role in the economy—accounting for nearly 6% of all U.S. full-time employment, according to the Bureau of Labor Statistics, and valued at close to $800 billion—faces challenges.

Pressures including inflation, an aging workforce, falling freight rates and an evolving, dynamic marketplace impact the cost and availability of trucking insurance.

The probability of a recession being declared in 2023 is a looming challenge for every business. While economists forecast a 61% chance of a recession in 2023, according to a January Wall Street Journal survey, the trucking industry is preparing for any resultant drop in consumer spending that would negatively impact the overall demand for transportation services.

For now, the demand for trucking services remains strong, according to the 2022 U.S. Transportation Market Outlook report by Risk Placement Services. But the report noted that if consumer demand for goods declines, lower freight rates will follow.

For now, inflationary challenges persist. “The inflationary environment for parts and labor contributed to a sharp rise in the cost of repairing vehicles," says Peter Niro, truck product development manager III, Progressive Insurance. “Additionally, the truck insurance market continues to undergo a hard market cycle, with carriers filing rate increases to keep up with steep severity trends."

As supply chain delays continue, it is leading to significant cost increases. “Used vehicle costs doubled what they used to cost in some cases," says Nick Saeger, assistant vice president of products & pricing for transportation, Sentry Insurance. “And likewise, parts decreased in availability, which only increased the costs of those that were available."

Additionally, litigation continues to apply pressure. The trucking industry is “facing challenges created by large jury awards, which have been increasing in frequency and dollar amounts," says Donato Monaco, president of Northland Transportation. Efforts continue with “trade organizations, such as the American Trucking Association, advocating on behalf of the industry for legal and regulatory reform to help address this issue," Monaco says.

But one of the biggest concerns within the industry today is a driver shortage. Unemployment in the transportation sector in January 2023 was 4.7%, 0.8 percentage points above the U.S. unemployment level of 3.9%, according to the Bureau of Labor Statistics. However, despite vacancies being plentiful, job seekers with relevant skills and experience are not. And with the average age of drivers at 46 years old in the for-hire, over-the-road truckload industry, according to a survey by American Trucking Association, the industry is being forced to turn to inexperienced, younger drivers.

However, risk management solutions may help alleviate the cost of insurance when hiring new, younger drivers. One approach is to offer “driver training programs and safety incentives that encourage safe driving practices," says Mike Yonka, corporate safety services specialist, Sentry Insurance. “Carriers can provide incentives for trucking companies that invest in comprehensive driver training programs or demonstrate a commitment to safety by investing in safety technology or equipment."

Further, “working with an insurance carrier that has a broad underwriting appetite for drivers can help a trucking client navigate changes in their operation—like expanding to long-haul or hiring drivers with less experience during tight labor markets," Niro says.

“Agents can also add value to the client relationship by highlighting insurance carriers that allow trucking clients to control their insurance costs more directly by sharing telematics and dash cam data, which can help offset the rate impact of hiring inexperienced drivers," Niro continues.

“The data collected by Electronic Logging Devices (ELDs) technology is vast, and companies are just now starting to ingest that data and build tools to help truckers," Saeger says. “For insurance companies, beyond pricing, value can be provided back to truckers through easier claims reporting or quicker claims resolution through camera data. The data could also be visualized and summarized, helping coach and correct driver behavior, leading to better outcomes on the road."

The adoption and use of artificial intelligence and technology such as ELDs within the industry “has enabled carriers to reward safe drivers with lower and more accurate rates," Niro says. Additionally, “safety technology like dash cams can help business owners monitor and promote safe driving habits and can help establish facts of loss in the event of an accident."

Olivia Overman is IA content editor.