It’s no secret that the excess trucking insurance landscape has been rocky in recent years. Pricing for commercial auto insurance began rising near the end of 2011 and increased for 40 consecutive quarters. A recent history of harsh vertical judgments also seriously hampered the sector. Over the last ten years, commercial auto underwriters recorded more than $22 billion in losses (source 4). However, after several years of keeping pace with or surpassing primary carrier increases, the excess trucking market is starting to show some stability.
In 2019, only a select number of carriers would entertain lead excess layers, and most accounts were hit with double-digit rate hikes. However, rates have mostly stabilized as increases over the past three years are now having an impact. The market is less hard than it was. Over the last year, the buffer market ($4M in excess of the primary and $5M in excess of $5M) has turned and stopped asking for double-digit increases. Most carriers now seek low to mid-single-digit increases on good accounts. The majority of privately held large trucking firms looking to build a large tower ($50M or more) will find that increased premium costs are hovering around 3% - 6% percent of the total tower.
Those seeking $5M in excess of $10M or $5M in excess of $15M or $20M report that underwriters are still reluctant to reduce prices, but decreases are happening on select accounts. For the majority, inside the first $10M, flat renewals have become attainable in some instances, but they’re not common. When building a $25M - $100M tower, there’s more capacity available than in 2019 or 2020 due to new marketplace entrants as well as legacy carriers that have re-entered the excess trucking space.
However, large accounts are seeing carriers that would typically take two layers in a tower, reduce that appetite to only one layer. Previously, a few markets were willing to put up $10M, split between two layers with ventilation between. However, most are now providing only $5M in one layer, and the days of $10M layers are gone. It can take 16 — 18 markets to build a $100M tower, and there are very few carriers interested in playing in the first $20M of coverage. Excess insurers continue to pay close attention to pricing relativity on lower tower layers and those above where they’re participating to avoid “layer trapping” or “inversion.” For the last couple of years, pricing relativity hovered around 80% — 90% of the layer below, but in 2022, carriers are seeking 75% — 80% of the lower layer.
When it comes to lower limits, 3 — 6 new carriers have entered the sector and started writing small to mid-size trucking accounts with 50 — 250 unit fleets. This is putting pressure on premiums due to increased competition. In general, incumbents are still seeking rate bumps. The price increases are just smaller than in the past for preferred accounts. While significant price decreases also remain uncommon for small to mid-size accounts, brokers are seeing more flat rates than they would otherwise. In 2021, pricing often wasn’t up for negotiation, but in some cases, carriers will attempt to keep accounts through more aggressive pricing. Most carriers servicing small to mid-size accounts are still limiting their capacity to $1M — $2M, which means multiple layers are often needed to achieve a $5M limit. None of the new entrants to the space are offering a full $5M or higher. However, underwriters are more willing to price aggressively when agents are seeking $3M in excess of $5M or less. It’s also easier for accounts to transition to new carriers when the lead layer has already been split up.
Accounts with losses or CAB alerts will find the market more challenging. This is mainly because commercial auto results have yet to demonstrate sustained improvement, which highlights the extent of the line’s prior rate inadequacy and the fact that large losses continue to outpace price hikes and corrective underwriting action. While it’s anticipated that prices will continue to rise in the near term, increases won’t hit evenly across the board. Insureds with a large fleet or poor loss history should expect more significant price hikes.4 Southern states, from Florida to Georgia, on west to Texas, have recently seen harsh court results along with urban areas such as New York City, Chicago, and Miami. Coverage can still be placed in these areas, but agents and insureds should expect higher premiums. Other adverse underwriting actions such as reduced limits, increased attachment points, and non-renewals are typically happening on an account basis versus applying to an entire book.
FACTORS IMPACTING THE MARKETPLACE
The trucking industry is still trying to recover from more than a decade of unprofitability as well as a tight market for drivers that results in some companies putting new employees behind the wheel that may lack experience or adequate training, which increases the likelihood of commercial trucking accidents. Distracted driving, combined with an increase in vehicles on the road in 2021, is also playing a role in the frequency of accidents. Supply chain pressures put added stress on drivers, making driver fatigue a continuing concern. The strong economic need to keep trucks on the road also raises the potential for compromised fleet maintenance. In addition, social inflation and third-party litigation funding have supported extended legal battles resulting in nuclear verdicts that further upend loss ratios.4 As courts resume normal operations post-pandemic, it’s unknown what the judgments of pending cases will be and how they will impact prior years’ results.
Underwriters continue to pay very close attention to projected and historical exposures, driver experience/ages, and safety alerts on CAB or the Safety and Fitness Electronic Records (SAFER) System. Agents and insureds working to get their submission to the top of the underwriter’s stack should include information about power units, revenue, the radius of operations, commodities hauled, comprehensive driver lists, and at least five years of currently valued loss history on the auto and general liability. This is especially vital because of fluctuations due to COVID. Some carriers will require up to 7 — 10 years of loss history (especially on large accounts) and details of any significant claims. Any loss activity is a factor in pricing, so agents should share details of losses on the primary and the excess.
A strong submission will also include telematics/equipment information, such as details about cameras on trucks or collision avoidance/lane departure technology, as well as driver hiring practices, maintenance program details, IFTAs, and financials. As the driver shortage continues, underwriters need to feel comfortable with an insured’s hiring, training, and supervision practices. Providing copies of those manuals or procedures is very helpful. Because new safety technology is more readily available, those who fail to utilize it to monitor their fleet are often seeing much higher rates.
HOW RETAIL AGENTS CAN HELP
Agents can help ensure clients benefit from the best possible deal by getting to know the insured’s operation. Knowing where a client’s trucks are primarily operating is an excellent place to start because accounts will be priced differently based on whether or not they operate in high-hazard areas such as Texas or Georgia. If CAB/SAFER scores are not ideal, agents can proactively advise insureds that excess pricing will be higher. If an account is in a warning state or over the acceptable range in any category, including out of service, hours of service, or vehicle maintenance, that particular risk will be viewed more unfavorably. Understanding the details of an account’s scores can also equip agents to engage in realistic pricing conversations with brokers and manage client expectations.
It can also be helpful to begin the renewal process earlier. Agents who start obtaining loss runs 90 days before the effective date will be more prepared to go to market. It can take 4 to 6 weeks to complete the marketing process on large excess placements with multiple layers, especially in a transitioning market. It’s helpful if agents begin obtaining the underlying quotes two months out, as some carriers won’t start work on the file until they receive the lower-layer pricing information. This approach allows enough time to complete the placement 30 days before the effective date. Larger accounts will require more time and a solid strategy to manage structure placement, get everyone involved, and monitor layers relative to price as they go up.
The best agents also help insureds tell their story by enlisting clients to gather the necessary information about losses, business practices, and what the company is doing to improve its SAFER scores. Emphasizing risk management, loss control activities that focus on drivers — from hiring, monitoring, or terminating them for violating safety procedures — and implementation of technology solutions are important considerations for all trucking firms.
While more capacity is available and prices are stabilizing, it’s unclear how long the pricing stability will last as claims on hold during the pandemic move through the courts over the next few years. Trucking firms must be proactive when seeking excess liability coverage because it still takes good marketing to achieve price goals. Retail agents would be wise to employ a clear marketing strategy and partner with a specialist wholesaler with the experience, expertise, data analytics, and market relationships to secure creative solutions.
CRC Group’s transportation casualty practice has extensive experience in serving the insurance needs of trucking firms of all sizes, along with proprietary benchmarking resources. We specialize in bringing attention to accounts based on our history, volume of business in the markets, and deep expertise. CRC Group brokers partner very well with national retailers in concert with their partners in London and Bermuda to ensure that we can aggressively market placements. Constantly monitoring conditions in the marketplace enables CRC Group to develop innovative insurance solutions specific to trucking risks and facilitate productive meetings with underwriting. We know what the market will bear and what underwriting needs to make a deal work. Contact your CRC Group producer today for more information about excess trucking liability coverage.
- Tim Stone is a Vice President and Senior Broker with CRC’s Norcross, GA office and a member of the Casualty Transportation Practice.
- Susan Malatt is a Senior Vice President in CRC’s Chicago, IL office and a member of the Casualty Transportation Practice.
- Blake Bartnick is the Office President of CRC’s Dallas, TX office and a Casualty Transportation Practice Advisory Committee member.
- Terry Winkler is a Senior Vice President in CRC’s Chicago, IL office and a member of the Casualty Transportation Practice.
- Craig Nettles is a Vice President in CRC’s Norcross, GA office and a member of the Casualty Transportation Practice.
- Rise in ‘Nuclear Verdicts’ in Lawsuits Threatens Trucking Industry, CNBC, March 24, 2021. https://www.cnbc.com/2021/03/24/rise-in-nuclear-verdicts-in-lawsuits-threatens-trucking-industry.html
- Motor Vehicle Fatalities, Vehicle-Miles, and Associated Rates by Highway Functional System, Bureau of Transportation Statistics, https://www.bts.gov/content/motor-vehicle-fatalities-vehicle-miles-and-associated-rates-highway-functional-system
- Industry Remained Dominant Freight Mode According to New Report, American Trucking Associations. https://www.trucking.org/news-insights/trucking-moved-1184-billion-tons-freight-2019
- CommercialVehicleInsuranceMarketsWentFromBadtoLessBad:AMBest,FreightWaves,November16,2021. https://www.freightwaves.com/news/commercial-vehicle-insurance-markets-went-from-bad-to-less-bad-am-best