According to a statement released by the Canadian Trucking Alliance (CTA) Monday, motor carriers across Canada are being hit hard by sky rocketing insurance costs, and shippers ‘should expect to hear from their carriers soon.’
“Like the escalating cost of fuel, there is no quick solution to this problem. Ultimately, carriers will have to deal with their insurance providers and their customers. Our job is simply to make shippers and carriers aware of the situation,” said David Bradley, the CEO of the Alliance.
Even where the carrier believes it has maintained an excellent loss ratio, many carriers from across the country are complaining about massive increases in liability insurance premiums Increases of 40% to 50% are common and 100% to 200% increases are not unheard of, says the CTA.
The increases are blamed on several factors. First, capacity reductions mean the number of insurance companies willing to write truck liability insurance has shrunk in those markets that rely upon private insurers. In the US this problem is particularly acute, says the CTA, and insurance costs for carriers operating into the US are increasing significantly.
September 11 has had an obvious impact on reinsurance, with pay-outs from the tragedy expected to be in the several tens of billions of dollars. The reserves of the entire insurance industry have apparently been dramatically reduced and will have to be rebuilt. This has severely constrained the reinsurance market, pushing up premiums.
Also, the insurance industry’s profitability is down, because revenue generated from insurance industry investments are down. These investments are a major source of profits for the insurance industry.
Bradley says that ultimately the increased cost should be reflected in freight rates. There is some talk of insurance surcharges being applied, although it is not clear how that would be calculated.
“It would be tough to develop a general formula for the entire industry. Things really need to be examined on a case-by-case basis – every carrier’s claims/loss experience, deductible and level of self-insurance will be different. All CTA is attempting to do is to raise awareness and continue to push for meaningful safety measures and incentives for the responsible, safe operators.”
The insurance increases, says Bradley, could have some positive impact however.
“We are told that some carriers with poor safety performance are learning they cannot even find anyone to write them an insurance policy. The sooner those carriers are out of the industry the better it will be for everyone,” he says.