How a $1.25 million insurance liability hike may affect owner-operators


A push by lawmakers to raise truck liability insurance for the first time in 40 years has advanced further than ever in Congress and the resulting rate increases would hit small trucking companies the hardest, according to an insurance expert.

The provision included in the Moving Forward Act, which the U.S. House of Representatives passed on July 1, raises the minimum coverage level for general freight from $750,000 per accident to $2 million. It would be adjusted every five years to account for inflation based on Bureau of Labor Statistics data.

The minimum coverage cap is $2.9 million less than what was proposed in a standalone bill introduced last year, known as the INSURANCE Act, which called for hiking minimum coverage to $4.9 million. But it still represents a $1.25 million jump in coverage — or 166% — that many owner-operators would not be able to afford, according to Thom Albrecht, CFO and chief revenue officer at Reliance Partners Insurance.

“It would be a huge financial obstacle to overcome,” Albrecht told FreightWaves. He explained that fleets in general can take steps to help lower insurance premiums, such as investing in technologies like lane departure warning systems, collision avoidance, active braking and forward-looking cameras.

“However, in terms of micro fleets [10 or fewer trucks], their lack of scale, along with cash flow issues, will keep most of them from the aforementioned investments. So the 166% increase in minimum liability coverage will disproportionately hit them, along with many fleets with 11 to even 200 or 300 trucks.”

In a 2013 report on carrier liability responsibility, the Federal Motor Carrier Safety Administration (FMCSA) asserted that doubling the level of liability does not imply a doubling of the dollar value of the risk. “It depends upon how frequently the higher cost events occur, relative to the frequency of the lower value,” FMCSA stated.

Read more: FreightWaves