Author: Chris Demetroulis
We've identified the top risks the transportation industry needs to be aware of and actionable ways you can help mitigate them. By addressing these trends, you can give your business new opportunities to grow and expand.
1. Supply chain and inflation
As we continue to adjust to the new normal post-pandemic, supply chain and inflation continue to cause disruption. The global supply chain continues to create ripples in various areas, adding stress to an already fragile economy. Add to that stress a conflict in a key area of the world that provides energy, and prices will continue to be unstable. Although fuel prices have begun to decrease for the regular U.S. consumer, diesel prices have not decreased and are causing continued inflation in the transportation supply chain.
To best weather these problems, consider some alternative strategies:
- Diversify shippers to provide relief.
- Partner with motor carriers that are struggling to keep pace with their shipments.
- Have flexible contracts.
It's most effective to develop forward-looking strategies to secure a more consistent business flow. Since all areas of the supply chain are affected, continue to communicate with your customers to maintain a manageable rating structure for all.
2. Labor shortage, driver hiring and retention
As the average age of drivers continues to increase, the transportation industry continues to struggle with finding qualified drivers. The pandemic exacerbated the already difficult driver shortage, and the work-from-home mentality has accentuated the discussion of work/life balance.
The transportation industry is far from widespread implementation of driverless vehicles, so it's incumbent upon companies to develop strategies to combat this continuing labor problem. Here are some steps you can take to address the labor shortage, driver hiring and retention:
- Consult with risk control experts to concentrate on solid retention strategies for employees and drivers. Although incentive and referral programs have been around for decades, integrate ideas and strategies that keep pace with the current employment market.
- Consider alternative routing and delivery that allow for more time at home for drivers.
- Develop an internship/apprentice program for prospective drivers that promotes a culture within the company for continuous learning. Employees gain a sense of responsibility and appreciate the opportunity to advance to a driving position when appropriate.
This difficult problem has no clear solution, but making some changes and showing your employees that they have a clear path to success can help.
3. Increased cost of insurance
We've seen almost all lines of insurance for transportation companies increase for several years. Core coverages such as auto liability and physical damage continue to rise quarterly due to continued targeting of litigation and the increased cost to repair vehicles. Cargo insurance has increased because of disruption in the global supply chain, as well as inflation. Cyber continues to be difficult due to rising ransomware demands and ever-increasing activity.
Moving forward, marketing insurance coverage will most likely require qualifying for coverage rather than just obtaining a quote.
Demonstrate solid risk management and a culture of safety that will more readily be rewarded with better insurance rates by:
- Increasing best practices and implementing risk management training modules. Concentrate on high-priority areas first.
- Reviewing contracts and transferring risk wherever possible to limit exposure.
- Consulting with a cyber professional to assist in best practices and investing in infrastructure to help you qualify for coverage.
4. Nuclear verdicts and litigation
Over the past six years, excess liability has experienced double-digit increases due to litigation tied to transportation companies. We've seen a slowdown in those increases over the past two quarters, but companies who have implemented sound risk management programs have seen the smallest increases. To qualify for the best pricing possible, we can suggest a few strategies:
- Review loss mitigation strategies to determine the problem areas to focus on for driver training.
- Implement strict adherence to driver hiring criteria.
- Develop an accident review committee and driver re-training to prevent similar situations.
- Instill and support a culture of zero tolerance for at-fault accidents.
The transportation industry will continue to be a target for litigation. The best way to better insulate your company from a nuclear verdict is to reduce your risk through solid risk management and implementing a culture of safety.
Because of the highly nuanced nature of this market, it's imperative that you're working with an insurance broker who specializes in your particular industry or line of coverage. Due to the variability that we're seeing in this market and specific account characteristics, your individual situation may vary from others. Gallagher has a vast network of transportation specialists who understand your industry and business, along with the best solutions in the marketplace for your specific challenges.