By Mike Birge and Steve Bojan
For trucking, it’s the best and worst of times all at once. Too much freight and not enough drivers to haul it means the U.S. economy is still very healthy. Next year will be another boon for the well-run trucking company. For smaller fleet carriers that struggle to recruit and retain quality drivers, it will be frustrating.
Here’s what’s on the horizon for the trucking industry in 2019:
- Driver shortage continues As the critical truck driver shortage persists into 2019, new consequences will surface. For one, good drivers will see salary increases of as much as 20 to 50 percent over what they were paid just five years ago – plus new, added benefits. The shortage will drive significant growth for last mile carriers to the point that Amazon will begin hiring their own dedicated fleet. Driver recruiting efforts will ramp up to include a push for ex-military personnel as well as government lobbying to lower the commercial driving age to 18. Fleet carriers will put pressure on insurance companies to take a risk on these non-traditional, younger recruits. And, truck lines will continue to entertain the idea of driverless vehicles in hopes that innovation will relieve some of the demand soon.
- Increase in severe crash litigation. While fatalities per mile driven have decreased by 20% in the last decade, there’s been an increase in the amount of severe crashes over the same period.1 This contradictory data can be attributed to increased speed limits and use of safety equipment in vehicles. This has in turn led to more litigation, which has caused severe bodily injury settlements to rise from an average of $1.2M to approximately $2.8M per claim. Having taken the insurance industry somewhat by surprise in 2018, these increased costs will be passed onto the fleet operator in the form of higher premiums and deductibles in 2019.
- The case for compliance. Rising industry insurance and litigation costs will put increased pressure on fleet carriers to reduce crash frequency, avoid litigation and improve DOT compliance. The result? ISS scores, drivers, maintenance and ELD equipment will be a major focus for insurance carriers in 2019. Best-in-class fleet carriers that champion compliance will turn to alternatives like member-owned insurance captives and risk retention groups, which can put the brakes on premium costs.
- Independent Contractor Status. The use of independent contractors as truck drivers across the United States has come under an increasing level of public scrutiny and legal threats. Ironically this is the only area of trucking that has seen an increase in driver population over the last few years. The California State Supreme Court ruled that any independent contractor must be able to pass an “ABC Test,” that sets an incredibly high bar to avoid an employee-employer relationship. Other states and the federal government are also looking closely at employee misclassification with several claims resulting in multi-million dollar settlements. Additionally, the U.S. Supreme Court case New Prime vs. Oliveira may have huge implications nationally on independent contractor status depending on not only on how the court rules, but how they word their decision. The case was heard prior to Justice Gorsuch being seated on the court. It will remain critical that independent contractor relationships are carefully set up and that professional guidance from legal and insurance vendors be used to protect truckers from this huge exposure.
2019 Growth and Beyond
Eventually the current freight capacity crunch will resolve itself. Will it be in 2019 or beyond? That remains unknown. But, what is certain is that when supply and demand converge, the profitability of the trucking industry will slow, and there will be a real conflict between insurance underwriting and the ability of fleet operators to pay increased premiums. At that time, trucking lines that have failed to control their CSA scores and manage drivers appropriately will face significant insurance cost increases without the additional revenue from increased rates. Until then, the industry will enjoy continued growth.