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This post is part of a series sponsored by IAT Insurance Group.
Historically high inflation, a growing recession and severe supply chain struggles continue to affect fleet owners and owner-operators, the backbone of our economy, moving 72% of the nation’s cargo.
Consumer spending is showing signs of slowing and an economic downturn or full-blown recession could significantly impact inventory demand and margins.[1] While that lower demand will help ease the pressure of fleet driver shortages, smaller fleets may feel the brunt of the pain.
While large fleets, with shipper contracts, typically weather the economic storm, some will be forced to lay off trucks and cut staff. There is an estimated shortage of 80,000 drivers.[2] With less competition for quality drivers, few fleets will have the opportunity to expand.
Although significant, these strong economic interventions represent only some of the challenges the industry will face heading into 2023. Fleet carriers should be aware of the following four trends:
1. California Assembly Bill 5 (AB 5)
California’s route of AB 5 The game-changer for many industries threatened to reclassify drivers across the state from independent contractors (ICs) to employees. Unfortunately for commercial fleets and moving and storage companies, California is the first state to adopt such a law. The National Labor Relations Board supported the provision, so other states are considering similar laws.[3] Although the potential consequences are not ideal, fleet operators must understand the law and adapt their business model to comply with the new law.
Take action! Fleets and moving and storage operators of all sizes need to be aware of and anticipate changes occurring at the federal and state level. Joining your state trucking or moving and storage associations is a great way to stay active and challenge any laws that emerge. Operators wishing to retain the IC model should consult with a knowledgeable attorney to discuss options.
2. Constantly increasing cost of claims
Personal injury lawyers continue to attack the trucking industry, with advertisements everywhere trying to convince injured people to sue, especially against commercial fleets. With average verdicts rising from roughly $2.3 million in 2010 to $22.3 million in 2018, juries are increasingly siding with plaintiffs.[4] The severity of the disruptive environment has also led to higher insurance costs.
Inflation will continue to put pressure on freight costs, third-party property damage, labor and repair costs, appraisers and medical costs, driving up premium rates. In addition, equipment theft is a growing threat, costing fleets money and time to repair or replace telematics. Other equipment taken from carts Left at designated locations on hazardous routes.
Take action! Emerging technology can help mariners submit claims faster and provide evidence and data during an incident. Cameras and telematics have had a positive impact on the speed at which claims are settled and the outcome of determining who is at fault for an accident.
However, mariners may not allow a camera to be placed in the truck to record it. They must regularly analyze data and use it to train drivers on bad behavior and encourage them to engage and retain high-quality drivers. Additionally, route management can be sharpened to keep drivers and equipment safe and at the disposal of the fleet.
3. Tight market for new and used equipment
Operators shouldn’t expect any relief from a tight market for new and used fleet equipment. California’s truck emissions regulations Heavy equipment weighing 26,000 pounds or more with an engine model year of 2007-2009 must be upgraded to a 2010 or newer model year. .
Meanwhile, the used car market is still reeling from the pandemic, while fewer vehicles are being produced. A recession could extend equipment supply shortages, and even as the economy returns to better times, the market is expected to remain tight with fewer used vehicles to buy.
Take action! Be regular with maintenance to extend the life of your equipment. Protect trucks, trailers, and moving and storage equipment, as losing vehicles or equipment can cost more to repair or replace than in the past.
Also, check your coverages and make sure the equipment is insured for current values to protect against those losses. If the recession causes fleet reductions, operators may find a strong seller’s market and get good resale values for used vehicles.
4. Maintaining security in light of fiscal belt tightening
Regardless of economic trends, safety should always be a priority. However, when margins are squeezed and cash flow is tight, fleets may be prompted to reduce or reduce safety programs, training, maintenance and more. The pressure to run hard and fast to get revenue pushes hard against being safe, but there are long-term implications if you’re considered an unsafe carrier.
Take action! Take foresight and maintain safety plans and operations despite economic pressures. Shippers and brokers avoid carriers without good safety records, which leads to lost revenue. Plaintiff attorneys will use publicly available survey data against a trucking company in court. Neglecting safety during tough times can affect a fleet’s ability to earn business and lead to hidden, high costs.
Looking to the future
The evolution of autonomous vehicles and the development of electric trucks are two fantastic ideas that may not be over the horizon as some might think. Questions about insurance pricing for autonomous trucks will be a major hurdle to overcome on the road. Insurance coverage and exposure issues must be addressed if the industry is to reach the point where fully automated, driverless trucks are on the road. For example, if an accident occurs, who is responsible for the accident since no driver is involved? Is the trucking company liable if the navigation system malfunctions and causes an accident? There are many hurdles to overcome before the use of electric trucks can hit the road. Battery life and reliability in cold weather poses an interesting roadblock that is currently being analyzed.
Nevertheless, these future trends should be on the long-term radar of any fleet operator looking to stay ahead of the ever-changing economy and weather the industry’s most challenging times in 2023.
For guidance on how to manage your fleet’s risk in 2023, Access IAT Insurance.
By Peter Matthews and Tom McCullum
[1] Reuters, “Analysis: US trucking decline signals potential economic gloom” April 25, 2022
[2] ATA, “ADA Chief Economist Raises Driver Shortage to All-Time High” October 2022.
[3] Motor Transport Association of Connecticut”Proposed state bills that would classify gig workers as employees could affect independent contract employment in the trucking industry,” March 3, 2022.
[4] American Transportation Research Institute”Understanding the Impact of Nuclear Rulings on the Trucking IndustryJune 2020.
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