Industry Trends in Transportation: Navigating Risks and Challenges

The transportation industry faces a critical driver shortage, worsened by an aging workforce, with the shortage expected to double globally by 2028 as the average driver age rises annually.

According to the International Road Transportation Union, the share of commercial drivers under age 25 remains less than 12%. In 2023 — despite the US having more than 3.05 million truck drivers — there was a shortage of approximately 60,000 drivers, according to the American Trucking Association.

If these findings have any silver lining, it's that the driver shortfall has been narrowing over the last several years; but this narrowing is due to reduced demand rather than increased supply, as total miles driven is still below pre-COVID-19 levels. We're also monitoring the adoption of autonomous trucking and other factors, including the rising costs of insurance claims and regulatory expenses, an aging workforce and a general decline in interest in the profession.

The trend in driver shortage impacts commercial insurance by increasing risks associated with an aging workforce. This risk may lead to higher premiums and stricter underwriting. Although reduced demand has temporarily narrowed the shortfall, insurers need to adapt coverage and create incentives to attract younger drivers and address workforce challenges.

Attracting young drivers also requires that trucking companies provide employees with proper training and ensure that safety protocols are in place. Less experienced drivers have the potential to increase the opportunity for catastrophic claims and the exposure to more frequent and severe claims. In addition to training and safety protocols, companies should use available technology and data to continuously evaluate and develop these practices so that drivers, warehouse workers and the public are protected.

Fuel spending in transportation remains a significant concern, down slightly in the last six months but still near historic highs, according to the U.S. Energy Information Administration. Fuel costs represent an ongoing cost to operators that affects their economic viability and eats into everyday profitability. Diesel prices, although lower, continue to strain transportation profits and present different challenges and added complexity for fleet operators that use both diesel and unleaded fuels.

Trucking remains one of the most highly regulated industries in the US, which serves as a double-edged sword; while these regulations are intended to enhance safety, they may also impose additional financial pressures on motor carriers that already operate with extremely tight margins, especially in the face of high fuel costs.

These ongoing high prices impact consumers as well as transportation companies, as these costs are typically passed down through the supply chain to end buyers. Ultimately, we all feel the impact of high fuel prices through the rising costs of all types of consumer goods, from groceries to appliances to clothing.

High fuel spending impacts commercial insurance by affecting risk assessments and coverage needs. As fuel costs strain operators' profitability, insurers must adjust premiums and offer flexible coverage to address the financial and operational challenges of managing both diesel and unleaded fuels.

Regulatory shifts can have short- and long-term impacts on the transportation industry, creating new uncertainty and risk and requiring transportation companies to stay informed and compliant to avoid penalties and disruptions.

In 2025, the trucking industry is watching several safety-related regulations, like mandates related to speed-limiting devices, automatic emergency braking systems, safety measurement system revisions and more, all scheduled to be enacted or updated in the year ahead.

On the environmental front, questions continue to surround the Environmental Protection Agency's electric trucking mandate. We'll continue to monitor several topics, as the governmental regulations are rapidly evolving on this topic.

Understanding risk profiles helps companies navigate changing regulations by identifying vulnerabilities and aligning strategies and insurance coverage with new requirements. This proactive approach mitigates penalties, ensures compliance and enhances operational stability, allowing for tailored solutions to regulatory challenges.

Historically, the transportation sector has lagged in its adoption of cybersecurity measures, but those days are rapidly fading in the rearview mirror. The industry is becoming a targeted class for a range of cyberthreats — from coordinated denial of service attacks to sophisticated phishing operations to ransomware events — pushing transportation companies of all sizes to become more vigilant in protecting their digital assets and stepping up their investments in cybersecurity.

In fact, transportation is among the top 10 targets of cyber attackers as of 2023, accounting for nearly half of all data attacks that year — a 181% annual increase and equaling the total number of cases from 2020, 2021 and 2022 combined. ¹

With the industry's reliance on digital systems for logistics, fleet management and communication, vulnerabilities can lead to significant disruptions and financial losses. Vulnerabilities in technology and data security pose a significant threat to any industry, but for transportation — as a critical part of the supply chain — a cyber-based vulnerability could be devastating for operations and the economy at large. The "usual" security concerns — sensitive data, such as inventory and customer information, employee records and banking information — make trucking companies a target, and with the rapidly changing tech landscape within the transportation industry, protecting this information becomes even more critical.

Evaluating your cyber risk and insurance program can help you stay on top of emerging threats, offering protection against data breaches, ransomware attacks and system failures. It also supports recovery efforts by covering costs related to data restoration, legal fees and customer notification.

The rapid evolution and adoption of transportation tech, including telematics and autonomous vehicles, presents operators across the industry with a range of opportunities and challenges. Artificial intelligence (AI), electric drivetrains and telematics are no longer future enhancements but applications with a real impact on the transportation industry today. The adoption of this tech will accelerate over the next 10 to 15 years and change the way the industry operates.

Advancing technology will lead to significant improvements in operational efficiency through real-time data analysis and predictive maintenance, reducing downtime and costs. These technologies will enhance safety by enabling advanced driver assistance systems and autonomous vehicle capabilities, thereby minimizing human error and accidents. Additionally, telematics and AI will facilitate better route optimization and fuel management, contributing to more sustainable and environmentally friendly transportation solutions. However, it also introduces risks like cybersecurity threats and system failures, requiring comprehensive insurance solutions to mitigate liabilities.

Developing technology can help prevent accidents and also respond effectively to them, enabling a safety-centric management system that promotes trucking as a proactive, safety-focused industry dedicated to protecting the motoring public. This approach enhances safety and accident prevention while also providing real-time monitoring for evidence in liability cases and facilitating proactive incident responses, such as immediate dispatch of field representatives and emergency services in the event of major accidents.

The industry has opportunities to attract drivers by rebranding and highlighting the sophistication of modern trucks, equipped with cutting-edge technologies for safety and accident prevention, including autonomous and semi-autonomous features. This strategy addresses the driver shortage and underscores the need for robust cyber insurance to protect these advanced systems from cyberthreats.

The cost of operating a transportation company continues to increase, despite nearly flat freight demand across the industry, driven by factors such as increased litigation, nuclear verdicts, infrastructure for electric vehicles and rising operational costs. Insurance premiums remain a factor as well, with 44 consecutive quarters of increased auto liability premiums continuing to impact those in asset-based businesses.

Underpinning the increase is the continued prevalence of so-called nuclear verdicts — jury awards of more than $10 million — in transportation-related cases. The industry saw more than $165 million worth of these judgments in 2023 alone, with no end in sight according to a 2024 Marathon Strategies report. The escalating social inflation may continue to impact liability risks and insurance premiums.

Prioritizing the reduction of total risk cost is crucial, and a strong post-incident plan is vital. Swiftly mobilizing stakeholders to provide real-time information to decision-makers helps preserve evidence integrity, investigation quality and integrity, and confidentiality, safeguarding business reputation.

Every investigation requires the appropriate experts in place to preserve evidence and protect information. Investing in the right multidisciplinary team — including experienced claims professionals, lawyers who understand the context of similar claims, independent adjusters and public relations representatives — can be the difference between resolution and a drawn-out, far more expensive settlement. But the best defense against litigation is the prompt and accurate handling of claims by experienced industry professionals.

Telematics and First Notice of Loss (FNOL) approaches enable proactive evidence gathering at the time of an incident, allowing immediate response to address the situation, take statements, interview witnesses and review the scene. Mobile FNOL empowers drivers to capture photos and videos of the area and involved vehicles, providing enhanced evidence for potential legal issues. Rapid incident response, facilitated by telematics and safety monitoring, not only reduces claim costs but also serves as positive reinforcement of the industry's commitment to safety. Ultimately, the public is concerned with how the industry ensures the safety of other drivers sharing the road with trucks.

Despite the prevalence of large, multinational carriers, the transportation industry remains largely focused on small, local businesses and owner-operators. According to the U.S. Department of Transportation, 95.5% of those registered operate 10 or fewer vehicles.

However, these small operators are facing increasing challenges. State regulations related to the treatment of independent contractors are making it increasingly difficult to operate under these models. What's more, reduced freight rates and rising costs have disproportionately impacted these types of carriers, pushing many out of the market in 2024.²

Risk and insurance programs can support small transportation businesses by offering tailored solutions that address regulatory compliance and financial loss protection. These programs provide liability coverage and risk management strategies to mitigate the impact of state regulations and economic pressures. Additionally, they offer guidance on navigating complex regulatory environments, helping small operators remain compliant and competitive. Overall, these programs enhance financial stability and resilience, enabling small carriers to continue operating despite challenges.

Implementing risk and safety programs enhanced by cutting-edge technology and data-driven solutions can help the industry overcome obstacles by improving accident avoidance and promoting industry opportunities.

Although inflation and general economic conditions will always be factors in transportation, trade policies are of increasing concern to the industry entering 2025. We continue to monitor changes in governmental and economic policy to assist in mitigating geopolitical conflicts, particularly for those with international clients, as these add another layer of complexity.

In the US, economics and trade could have a rapid and significant impact on the transportation sector, impacting costs and operational decisions and calling on companies to remain agile and responsive to external events. Increased nearshoring and domestic production, for example, could reduce demand for international transport, further tamping down short-term demand for long-haul freight.