Truck insurance costs on the rise — when coverage is available
BRAMPTON, Ont. – Many Toronto-area aggregate haulers are angry, and there’s no mistaking the target of their wrath. A recent protest in the form of a slow-moving truck convoy included signs that proclaimed “commercial insurance sucks,” and “honk if you hate your truck insurance.”
They’re among the growing list of Canadian fleets and owner-operators facing higher premiums as insurers re-evaluate the risks they’re willing to cover. And that’s when businesses can even find someone to take their money. Some insurance companies are simply stepping away from industry sectors thought to represent an unacceptable risk — like the aggregate haulers operating in densely populated urban areas.
Jagroop Singh, an owner-operator and president of the protesting Ontario Aggregate Trucking Association (OATA), confirms his members’ typical insurance rates have increased by double digits in recent years. It’s why the group is now looking for a political solution, and formed the convoy to apply some public pressure.
But the truck insurance sector is under pressure of its own.
The performance of transportation-related insurance portfolios has been “less than stellar,” says Todd MacGillivray, vice-president of transportation at Northbridge Insurance. “The performance of aggregate haulers has been worse.” Some of that sector’s challenges can be linked to a condo building boom, leading to frequent trips along city streets where trucks are more likely to interact with cyclists and pedestrians, he says.
Truck insurance claims have generally been rising above original projections because of factors such as pricey legal settlements and technology-laden trucks that can be costly to repair. Average claims in Northbridge’s transportation portfolio increased 9% between 2014 and 2018, while average physical damage costs were up 28.5%.
To compound matters, rates that were charged to aggregate haulers were lower than they should have been, MacGillivray adds.
Insuring the ‘weird and wonderful’
Challenges are not limited to the aggregate haulers, either.
“Anything that’s basically weird and wonderful is difficult to insure,” says Patti Corbishley, senior account transportation executive and project manager with Bryson and Associates Insurance Brokers in Ajax, Ont. Such examples tend to fall outside the realm of 53-foot van trailers and include the likes of livestock trailers, auto haulers, and fuel haulers. Even the commercial haulers of travel trailers can find it harder to secure coverage these days.
“This is the hardest market that I’ve seen in 33 years,” she says of her time in the business.
But history has a way of repeating itself. The ebb and flow of trucking insurance rates tends to follow a cycle of aggressive rate cuts by insurers who want a piece of trucking-related revenue, an unexpected surge in claims, decisions to step away from unprofitable businesses, and the higher rates charged by those who remain.
One of the most notable examples came with 1985’s abrupt collapse of the United Canadian Insurance Company, which at the time was one of the trucking industry’s largest insurers.
Three years’ experience
As the market tightens, insurers are also taking a harder line on the rules established to minimize risk. For smaller operations, this can mean limits on things like hiring new drivers with less than three years’ experience.
That was an unwelcome surprise for Peter LaRocque of JPL Storage in Haileybury, Ont. His 29-year-old son, Clyde Earl, is training to take over the family’s portable storage operation that uses a pair of tractor-trailers to deliver containers to driveways and construction sites.
The family invested $8,000 in a 200-hour truck driver training course, well beyond Ontario’s mandatory minimum, and Earl secured both an 89% average grade and a Class AZ licence. They even secured a $6,000 tax credit to offset the cost.
The only trouble is that Earl is essentially uninsurable if he wants to drive one of JPL’s trucks.
“We’re now up to 12 companies that have declined to insure him,” says a clearly frustrated LaRoque. Each company has said the only option is Facility – essentially an insurer of last resort funded by the insurance industry itself.
Truck insurance on both JPL tractors and a pickup is scheduled to renew for around $7,500. Allowing Earl behind the wheel of a 2010 International would cost about $20,000 under a Facility policy, and even that would only allow less than 80 km of travel per month. It won’t even cover the container, trailer or load. Full coverage would push annual premiums above $30,000.
Traditional insurance would be limited to larger businesses that might be willing to hire him.
There is simply more support for younger drivers in a fleet environment, Corbishley says, explaining why larger fleets might have more flexibility than an owner-operator or small business. “You typically have a safety manager on board. It’s not just an owner wearing five or six different hats.”
“Why did I pay to train him so he can work for someone else?” Laroque asks. “We need him in our business. We need him to be able to drive the trucks.” He’s particularly frustrated at the limits now that Ontario has established mandatory entry-level training for any would-be truck drivers. What’s the point of setting the limits at 103.5 hours if the new drivers can’t be insured by small businesses that have jobs to fill?
“Somebody needs to step up to the plate and change the regulations so that some of these new trainees with the proper training or whatever can become insured,” he says.
There’s no mistaking the higher risks that come with newly minted drivers, however.
Risky new drivers
“The propensity for a claim is drastically higher than it is with someone who has three years’ or five years’ experience,” says Northbridge’s MacGillivray. “The bell curve is quite steep in those early stages … it’s quite substantial.”
Winnipeg-based Rick Geller of Claims Pro says the three-year benchmark was originally established in the 1990s, when he was on the North American Equipment Dealers Association’s insurance committee. Actuaries poured over 115,000 commercial driving records at the time, looking to the likelihood of crash involvement in the next 12 months. They found that drivers with less than three years of experience were three times more likely to have a crash, he says.
“But it was never, ever intended to be a laser pointer as to whether that’s a safe driver or not. It was to be a best practice guideline,” Geller says. “You need to do a deeper dive on exactly who you’re hiring, and maybe a little more stringent road test, and maybe some sort of training – defensive driving training – before you hire them.”
That’s why larger fleets are able to hire those with less time behind the wheel.
“It’s no secret that the results on the trucking industry in terms of insurance haven’t been good, and they haven’t been good for awhile, and the insurance companies are struggling to find that laser pointer in terms of is this a safe carrier or not,” Geller says.
“I think there’s an element of the normal cycle that the insurance industry goes through, but I think there’s a larger element – that this becomes a matter of survival for the insurance industry, and I don’t think you’re going to see a relaxing any time soon.”
Says Corbishley: “Insurance is all about money. It’s money in and money out … you need them to make money to be there.”
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