Trucking recommendations emerge in report on ‘hard market’ for insurance

Insurance companies have been paying out more in trucking-related claims than they collect in premiums. But a new insurance industry report makes a series of recommendations to help address rising costs and the struggles to secure insurance in the midst of today’s “hard market“. “Between 2015 and 2019, in the trucking sector, commercial insurers paid out £1.04, £1.12 and £1.06 in Ontario, Alberta and Atlantic Canada, respectively, for every £1 earned in premiums on a per vehicle basis,” notes the final report on a national commercial insurance task force, issued by the Insurance Bureau of Canada.

(Photo: istock)

“In some years, the losses were much higher, with insurers paying more than £1.25.

Losses exceeding premiums for a consecutive number of years is unsustainable. These unsustainable losses have led to necessary premium increases.” Some private insurers have been re-evaluating their underwriting decisions in the face of large liability settlements in the U.S., and Canadian losses such as the Saskatchewan truck-bus crash that killed and injured members of the Humboldt Broncos hockey team, the report notes.

The trucking industry isn’t the only one to face challenges. The task force looked at issues that are driving costs higher in the transportation, condominium, hospitality, and non-profit sectors. “There is no one silver bullet that will solve the challenges facing the Canadian commercial insurance market,” writes IBC president and CEO Don Forgeron. “Over the last five years, commercial insurance claims have become more frequent and costlier, and this has caused insurers to re-evaluate how much risk they are prepared to support.”

CTA guidance

The trucking-specific insights came through meetings with the Canadian Trucking Alliance (CTA) and related associations.

CTA representatives raised several issues during an October 2020 roundtable, including struggles that young and new drivers face when obtaining insurance, and the lack of available insurance in the excess liability or umbrella market. Included in the list of recommendations is a call for incentives for fleets that deploy safety technology such as collision avoidance systems, but also the need to reduce insurance fraud within the trucking industry. Facility Association – an insurer of last resort in many provinces – recently found that some trucking businesses falsely claimed head offices in Atlantic Canada just to secure lower premiums.

It has since drawn documentation requirements in line with those used by private insurers. Insurers are also being encouraged to share information on their current rating systems, including the details on how a carrier’s performance contributes to premiums. And provincial governments are being called on to implement a database to verify insurance when issuing or renewing plates.

Fighting fraud

“The recommendations put forward in IBC’s report with respect to trucking reflect many of the key issues our members are focused on addressing.  We support and applaud IBC and the insurance sector for taking the initiative to tackle issues that can be solved through partnership with our membership,” said CTA president Stephen Laskowski.

“One of the more topical recommendations deals with insurance fraud in our sector. We believe there is a strong correlation between fraud and the Driver Inc. problem, which is yet another reason for all levels of government to make the enforcement of Driver Inc. a top priority.” Driver Inc. refers to businesses that misclassify employees as independent contractors to avoid compliance costs. 

CTA also says it plans to raise issues about indemnification clauses in shipper contracts and addressing loss-transfer provisions where necessary. “By partnering with the trucking industry, IBC and the insurance sector can move forward on issues that will make a real difference from the consumer’s perspective, further improve road safety, continue to level the playing field and significantly make the trucking industry more attractive for younger generations looking for an earlier start to their professional driving career,” said Geoff Wood, CTA’s senior vice-president – policy. Forgeron said his association will “play a lead role in advocating for the implementation of the recommendations.”

“There is no one silver bullet that will solve the challenges facing the Canadian commercial insurance market,” he added.