Jobs in truck transportation may be showing signs of a slow comeback, according to new data from the Bureau of Labor Statistics. The latest numbers, released Jan. 5, indicate that seasonally adjusted truck transportation jobs grew by 3,300 in December to a total of 1,586,300 jobs, FreightWaves recently reported. It is the second consecutive month of growth for trucking jobs.
While the latest numbers could be a positive sign, the transportation industry likely has a long road of recovery ahead.
“I think it is certainly a good trend but when you look at the overall loss of jobs over the last 12 to 18 months, I am not sure it is overly impactful,” said John Woods, Vice President, National Practice Group Leader, Transportation, Burns & Wilcox, Scottsdale, Arizona. “It is certainly a more positive trend than we have seen during that period of time.”
It is certainly a more positive trend than we have seen during that period of time.
Challenges in the industry have also been reflected in the Transportation Insurance market, where large losses and other factors have led to rising premiums on policies like Truckers Auto Liability Insurance, Auto Physical Damage Insurance and Motor Truck Cargo Insurance.
“We have not heard of as many nuclear verdicts lately because the court system is so backed up, but I think we will start seeing those come back out,” said Gene’ Cain, Broker, Transportation, Burns & Wilcox Brokerage, Atlanta, Georgia. “There has been movement in some states on tort reform, which will be interesting. Depending on how quickly tort reform begins, carriers are going to see losses and large verdicts. It is important for transportation companies to know they have the right coverage and make sure they are fully protected.”
New ventures ‘down tremendously’
In September of 2023, Time Magazine reported that the “trucking bubble has burst,” with the soaring demand for goods created during the pandemic quickly reversing, stranding many newcomers to the industry and driving down freight rates. Some have described the slowdown as the “great trucking recession,” Fox News reported in November.
“What we ended up having was an excess capacity in the transportation segment,” Woods explained. “That, of course, led to more competition for freight, which then led to lower freight rates, and we had continued high fuel prices and truck prices, repair costs and insurance costs.”
It is important for transportation companies to know they have the right coverage and make sure they are fully protected.
Many new transportation companies that opened during the boom have since closed, and new ventures are now much less common. According to an analysis by FreightWaves, around 35,000 new trucking companies shut down in the fiscal year ending Sept. 30, 2023. After Yellow Corp. filed for bankruptcy last year, many of its former truckers struggled to find work, Minnesota Public Radio reported in October.
Over the last 12-18 months, there has not been the historical number of new ventures and new trucking risks entering the market. “I think we are at or quickly approaching that balance point as the vast majority of the excess capacity in the market may be gone, Woods said.
New ventures “came down tremendously” during 2023, Cain observed. While fuel prices and interest rates remain high and the industry continues to face other challenges including parts shortages, “I think we will see that sector grow again” as the economy improves, she said.
According to Woods, some improvement in the transportation segment may be expected as the second quarter of the year begins. “I think we will see some improvements in the economic segment, particularly if we see Federal Reserve rate cuts,” he said. “I think that will spur economic growth, which will in turn spur improvement or additional need in the transportation segment. Then you could potentially see additional growth opportunities within existing transportation carriers.”
Making insurance decisions amid challenges
During the trucking business boom, some new insurance carriers and insurance-tech companies entered the market and started offering Transportation Insurance policies, according to Cain. Now, some of them are pulling out or raising rates, she said, and newer companies that are still offering coverage may soon see higher-than-expected losses.
“They learn really quickly that the losses catch up with them,” she said.
At a time when many transportation companies are struggling, it is more important than ever to be protected by insurance. When shopping for Transportation Insurance policies, trucking businesses are encouraged to work with experienced retail and wholesale brokers “who have significant experience in the industry and specialize in transportation risks,” Woods said.
It is a tough enough business for these transportation risks to operate at a profit. What they do not want to do is end up with uninsured exposures.
“It is so imperative,” he said. “It is a tough enough business for these transportation risks to operate at a profit. What they do not want to do is end up with uninsured exposures or be in a position where claims are denied because an inexperienced broker did not do something that they should have.”
Working with a broker who specializes in the industry is essential, Cain advised. “My advice to them would be to pick a retail broker who understands the trucking industry,” she said. “They can advocate on your behalf via coverages and pricing, and they understand your coverage.”
Preparing for the year ahead
Challenging times also call for careful attention to “the fundamentals,” Woods said.
“Those fundamentals are hiring the most qualified drivers you can, making sure that you are paying attention to maintenance and safety protocols, and all the while understanding that the Transportation Insurance market has been one that has lost significant sums of money and had very unprofitable results for I think 11 out of the last 12 years,” he explained. “They are most likely not going to see any reduction in insurance premiums. They can expect to see a continuation of the premiums that we have seen over the last couple of years and in all likelihood continue to see increases in premiums going forward.”
My advice to them would be to pick a retail broker who understands the trucking industry. They can advocate on your behalf via coverages and pricing, and they understand your coverage.
While the trucking industry has looked to possible relief through tort reform, which could limit compensation paid to victims of trucking accidents, it is unclear whether any forthcoming laws will significantly change the outlook for trucking industry losses. According to a July 2023 report from PBS, new tort reform laws have been prompted in seven states over the past three years.
“Until there is some significant tort reform, or something that helps control losses or control judgments, it is just going to be very, very difficult” for insurance carriers to reduce Transportation Insurance rates, Woods said. Losses “continue to escalate all the time,” including liability losses as well as cargo and physical damage claims.
As always, risk management is crucial in the transportation industry. According to Cain, technology like dash cameras can be a beneficial investment for trucking companies. “I encourage them to use cameras,” she said. “What it does is if we are at fault, it allows us to mitigate that claim. You do not need an attorney involved. Most of our policies have $1 million limits. When you hear about those nuclear verdicts, claimants are not getting that money.”
Expanded use of cameras could help avoid some of this, she said: “If we can get to the claimant as quickly as possible, let them know we care and we understand their loss, and here is how we want to make sure we take care of them, I think that is one of the best things we can do as an industry and for public safety.”