MANY Canadian carriers from across the country have begun to complain about massive increases in liability insurance premiums, even where the carrier believes it has maintained an excellent loss ratio, according to the Canadian Truck Alliance (CTA). Increases of 40% to 50% are common and 100% to 200% increases are not unheard of.
The number of insurance companies willing to write truck liability insurance has shrunk in those markets that rely upon private insurers. This is being felt particularly in the United States, and insurance costs for Canadian carriers operating into the US are increasing significantly.
In addition, insurance payouts from the September 11 terrorist attacks in the United States are expected to be in the several tens of billions of dollars. It is estimated that the reserves of the entire insurance industry have been dramatically reduced and will have to be rebuilt. This has severely constrained the reinsurance market, pushing up premiums, according to CTA. With interest rates low and stocks showing the impact of a bear market for the past year or so, revenue generated from insurance industry investments are down.
“Like the escalating cost of fuel, there is no quick solution to this problem,” says David Bradley, CTA chief executive officer. “Ultimately, carriers will have to deal with their insurance providers and their customers. Our job is simply to make shippers and carriers aware of the situation.”
He says that ultimately the increased cost should be reflected in freight rates. There is some talk of insurance surcharges being applied, although it is not clear how that would be calculated. “It would be tough to develop a general formula for the entire industry. Things really need to be examined on a case-by-case basis — every carrier's claims and loss experience, deductible, and level of self-insurance will be different. All CTA is attempting to do is to raise awareness and continue to push for meaningful safety measures and incentives for the responsible, safe operators.”
Bradley concedes there may also be some positive impact from the insurance increases. “We are told that some carriers with poor safety performance are learning they cannot even find anyone to write them an insurance policy. The sooner those carriers are out of the industry the better it will be for everyone.”