As with so many other goods and services, insurance for commercial trucks has become more expensive since the pandemic ̵1; but a closer look at the figures shows that this trend precedes COVID-19’s financial disruption and supply chain disruption.
“Despite reductions in insurance coverage, rising deductibles and improved safety, almost all car companies experienced significant increases in insurance costs from 2018 to 2020,” according to a recent report from the American Transportation Research Institute (ATRI). And while the frequency and severity have increased from 2009 to 2018, the report shows that the increase in insurance costs during the period far exceeds the frequency of crashes.
ATRI’s observations are consistent with the findings of a recent study by Triple-I and the Casualty Actuarial Society (CAS) that the phenomenon known as “social inflation” accounted for $ 20 billion in claims for commercial vehicles between 2010 and 2019.
“External factors that go far beyond carrier safety force the cost of commercial truck insurance to increase,” said Triple-I Chief Insurance Officer Dale Porfilio. “The higher premiums ultimately tend to be passed on to consumers in the form of higher prices for goods and services.”
ATRI recognizes three key areas for influencing premiums in addition to crash history and policy components:
- Economic consequences for the insurance industry,
- Conveyor-specific factors, and
- Social inflation.
External economic conditions, including general inflation and rising healthcare costs, contribute to increased insurance premiums.
“Medical advances are helping to save lives, but these treatments directly contribute to higher medical costs,” ATRI points out. “Similarly, technological advances in motor vehicles are helping to increase the cost of repairing them; electronics now account for 40 percent of the cost of a new vehicle.”
These higher costs affect premiums through major damages and losses that must be included in pricing.
Premium prices are also affected by carrier-specific considerations such as operational sectors, cargo values, Länder or business regions, corporate growth and commitment to safety culture and technology.
“Carriers that show consistent improvements from year to year in the use of safety technology, safe driver employment and training methods and crash history can potentially reduce their premium costs, despite the current unfavorable environment,” said ATRI.
“Social inflation” refers to the effects of litigation and government policy trends on insurance claims and, ultimately, costs to policyholders. Social attitudes and behaviors affect insurance payments through changes in laws and propensity to litigate, and jury awards do not necessarily reflect logical conclusions or precedents. Jury decisions can be influenced by emotions, state and local laws or procedures, and plaintiff’s bare tactics. In recent years, practices such as third-party litigation – investments by hedge funds and other third parties in litigation in exchange for a share of the awards – have played an increasing role in social inflation.