Are trucking physical damage rates in the United States as we know it on the verge of imploding?
If you ask yourself that question, then you would consider a YES answer.
London markets are the primary go-to for physical damage coverage providers in the domestic market. In the last five years, the domestic market has withdrawn from writing trucking physical damage (insurance to repair/replace the owned tractor trailer).
It’s quite a site to ascend the escalators to Lloyds of London insurance providers. At the top of the escalator, you see encased in glass the log of the sinking of the Titanic. There are multiple floors of companies at a desk to write the insurance. Typically, no one company takes the entire risk of loss. For example, a Lloyds underwriter will approach several companies to see what percent of the total 100% each company will take. London is a go-to-market with rates increase for physical damage and cargo for the trucking industry.
Ten years ago, we could provide physical damage coverage to the trucking industry to insure the tractor and the trailer for as low as 2% with a $1,000 deductible. This seems a long way away now.
For single owners of trucks, the rates to insure coverage for the tractor and trailer can range from 5% to 13%, with deductibles changing from $1,000 to $2,000. The insurance providers take a tremendous hit on lower-valued tractors to replace lower-value tractors. For example, if an insurance provider rated a $20,000 valued tractor at 10% for an annual premium, that cost would be $2,000 per year. A total loss of $20,000 would cost the insurance provider $18,000 in losses. Some salvage value may be possible, but more is needed to bridge the gap for a significant loss.
If London pulls out of the domestic market, be prepared for carriers that remain in the United States to raise the rates again. This could be detrimental to the trucking industry on a short-term or long-term basis.