The Transportation market is extremely fluid as we head toward 2025. It is marked by increasing rates, competitive challenges and newly mandated regulations that impact every facet of the sector. Ongoing increases in the number of litigated claims are keeping inflationary pressures high for both fleet and non-fleet accounts.
This is making it harder for carriers to meet their profitability goals. Carriers are continuing to offer more flexible policies that cater to high-risk accounts, such as hazmat hauling and long-haul truckers. Increased claim frequency is partly due to the rising reliance on less experienced drivers resulting from the ongoing truck driver shortage. The American Trucking Associations estimated a shortage of roughly 60,000 drivers in August, which is expected to grow to 82,000 by the end of the year.
KEY TAKEAWAYS:
- Rates continue to increase by 5 to 25 percent for most policies, especially for non-fleet policies, due to labor costs and driver shortages.
- Carriers are shortening their limits to protect themselves against rising claims and risky exposures, requiring brokers and agents to use multiple carriers or Excess markets to meet needs.
- Technology like telematics and AI is improving underwriting decisions, making data-rich submissions more important for securing coverage.
- Brokers and agents should submit detailed, accurate data and highlight safety efforts to improve underwriting outcomes and ensure most competitive premiums.
- The Excess & Surplus (E&S) market is growing, offering more flexibility and additional coverage options.
Additionally, specialty classes within Transportation are becoming more restrictive due to increased claim frequency and severity. For example, the potential of multiple claimants associated with charter buses makes this segment particularly risky. Flat beds and intermodal are challenging to place as well.
While risk exposure has been relatively flat the last couple of years, the biggest adjustments are within the Commercial Auto sector. Increased claim frequency and severity are causing numerous carriers to exit the market, or at the very least limit their exposure. Non-emergency medical fleets vehicles are also experiencing higher than average rate increases and capacity restraints.
It is more important than ever for brokers and agents to partner with a wholesaler to meet their needs as we have access to numerous markets for Commercial Auto. With many carriers pulling back on capacity, brokers and agents must find creative ways to help their insureds get the coverage they need, especially since carriers are regularly deploying only $1 million to $2 million of coverage. Burns & Wilcox can help find solutions by utilizing our market presence, relationships, and economies of scale to leverage favorable opportunities.
Rates on the rise now and in 2025
Rates are anticipated to continue increasing in the coming years, similar to trends observed over the past few years. Non-fleet insureds are experiencing higher rate increases, often as much as 25 percent year-over-year. This is being fueled to a degree by the increasing number of federal and state regulations, such as the Advanced Clean Trucks legislation in New Jersey. This law, among other mandates, requires manufacturers to sell an increasing percentage of zero-emission trucks and vehicles over 8,500 pounds annually.
Perhaps the most significant reason for rate increases is simple economics. The cost of labor remains high, and the pool of available drivers is low. With more experienced drivers retiring and newer drivers increasingly on the road, the potential for accidents, and thus claims, are rising.
Excess & Surplus (E&S) market plays a bigger role
Like many insurance markets, Transportation is in the midst of a noticeable shift toward E&S mainly as a result of inflation, litigation trends, regulatory and other challenges. The E&S sector offers more pricing adequacy and additional options that are not often possible within the admitted market. As an example, in recent months, Burns & Wilcox placed both a fiber-optic fleet contractor with loss frequency challenges and strict regulations, and a pickup truck fleet client with a similar risk profile with an E&S carrier that otherwise may not have been available in the admitted market.
Brokers and agents should look closely at terms and conditions and other policy language to ensure the coverage addresses their client’s needs.
Shorter limits becoming the norm
Another trend in Transportation is the introduction of shorter limits. Many carriers are significantly reducing the capacity they are willing to deploy, often by more than 50%, necessitating the need for “buffer layers” to achieve the desired limits needed.
For example, it is not uncommon to see three to five carriers to secure up to $5 million of combined limits. The reason? Increased claim frequency and severity. E&S carriers are well equipped to provide “buffer layers” with shorter limits to layer the placement to the desired limit.
Regardless of the carrier(s) used, navigating reduced capacity and shorter carrier limits often requires partnering with the right wholesaler to arrange the optimal placement.
Technology is becoming more prevalent
The increasing reliance on technological data by carriers to make financially sound underwriting decisions is becoming more popular, and artificial intelligence is making the collection of this data more efficient. Real-time vehicle data is increasingly available on everything from driver habits to routes to vehicle speeds and more. Providing underwriters with such data increases the chances of achieving the most competitive outcome.
Additionally, carriers are increasingly offering customized policies and more accurate pricing based on risk profiles. To ensure these outcomes, complete submissions with detailed summaries combined with telematics and other data assists underwriters who are otherwise overwhelmed with submissions.
Tips for brokers and agents
The Transportation market is more competitive than ever. Here are a few tips to help you navigate the current environment.
- Tell a detailed account story in each submission. Include comprehensive data such as currently valued loss runs and a thorough narrative. Be sure to add photos and specific details for any claims included in loss runs
- Highlight driver education and security efforts. While it is essential to include these details in your submission, emphasize with your clients the importance of providing carriers with information about their investments in driver training, safety scores and other internal improvements. These efforts can lead to significant savings.
- Go the “extra mile” for underwriters. In this challenging market, give underwriters compelling reasons to select your client’s submission over others. For example, sharing current driver and fleet lists in Excel form not only allows underwriters to integrate this data more efficiently into their ratings systems but also makes the submission stand out from the competition.
- Beware of layer trapping. With the increased number of carriers required to meet limit needs and utilization of “buffer layers” as addressed earlier, be mindful of the potential pitfalls of layer trapping. Essentially, the marketplace mandates that layers with higher attachment points receive less premium per $1M of limit than the layer below. Working with an experienced wholesale partner can help identify such potential issues, and ensure the placement is completed to the highest standard.
Final thoughts
Rates will remain moderately higher; however, capacity will be available for most Transportation accounts in 2025. Brokers and agents should set realistic expectations with their clients so there are no surprises. When submissions with in-depth details and telematics data are available, underwriters are more likely to work with you to secure the coverage needed to protect an insured’s business.
The E&S market is providing more of these opportunities than ever. Remember, E&S carriers have freedom of rate and form, providing insureds more flexibility, capacity, and options.
Contributors: Paul Smith, Corporate Senior Vice President, H.W. Kaufman Group; Monica Cantu, Underwriting Director, Burns & Wilcox; Buddy Taylor, Broker, Transportation, Burns & Wilcox Brokerage; Denis M. Brady, Broker, Transportation, Burns & Wilcox Brokerage
