Canada’s commercial insurance market is witnessing an intense competition between insurers, brokers, and trucking companies. Owing to the high percentage of claims of continuous under-pricing, insurance companies are struggling to stay afloat. This desperate situation has led insurance companies to undertake different measures such as rate hikes by 30% to 50% and stricter safety-screening practices for fleets even before issuing quotes. Canada’s trucking industry is bearing the brunt of these rate hikes.
As put forth by David Bradley, the president of the Canadian Trucking Alliance, “Insurance is a major concern for the trucking industry.” The Canadian Trucking Alliance is a federation of provincial trucking associations and it represents close to 4,000 carriers.
The trucking industry in Canada is already struggling with thin profit margins due to low returns on equity. Sadly, the rising insurance cost is another thorn in their side which is adding to their woes. In fact, these rising costs of insurance are accounting for the highest increase in the operational costs for trucking companies.
In addition to the increased percentage of premium claims, another factor affecting the insurance market is the segmentation of the trucking industry which is leading to market volatility. The trucking market can roughly be divided into three segments i.e.
A. The small fleets (consisting of less than 10 trucks)
B. The mid-sized fleets (consisting of 10 to 100 trucks
C. The large fleets (consisting of more than 100 trucks)
Each of these segments is served by a different set of insurance companies. All these sets of insurance companies have their own compliance standards and regional differences. This uncertainty is contributing to the volatility of the trucking insurance market.
The stricter norms by the insurers to deal with the hard market are taking a heavy toll on the fleets. The trucking companies have ahead of them, a tough battle of negotiations while staking claims. Perhaps the toughest battle to win is the one to prove that your trucking company has a good safety and compliance rating. If trucking companies fail this safety insurance audit, then they are refused regular insurance and are forced to take facility insurance. Facility insurance costs way more than regular insurance and so the trucking companies need to pay more to stake their insurance claims.
The situation becomes worst for many insurance companies when they found getting mixed up with bad or faulty trucking claims. With a high chance of incurring losses due to a huge amount of money not being properly utilized, insurance companies are forced to raise rates for truck insurance. Because of the higher amount of claims applied by non-compliant trucking companies, insurance companies are left with no other option to raise the truck insurance rates so as to mitigate their loss.
For trucking companies to stay clear of these loopholes and recover the claim that they deserve, the fleets need to have a safety and compliance net in place. They also need to enlist the help of a knowledgeable risk management company or a broker who can monitor this safety net and keep it up-to-date with the changing norms in order to mitigate and reduce the insurance company’s risk as well as the trucking company’s risk. This is also the reason why some insurance companies refuse to insure trucking companies with bad safety ratings or failed insurance audits.