New regulations governing the hours commercial truck drivers can spend on the road are unlikely to accelerate softer pricing in the trucking liability market.
Aimed at improving safety on America’s roads, the new hours-of-service regulations enacted by the Federal Motor Carrier Safety Administration limit the time truckers can spend behind the wheel. In some cases, the new rules-which are the first substantial reworking of the regulations since 1939-reduce the number of hours truckers can work.
The new rules took effect Jan. 4, but enforcement did not begin until early March so that trucking companies had additional time for driver education and training.
But insurance industry sources say it will take time to evaluate whether the regulations make the nation’s highways safer. Until then, trucking insurers are not expected to lower rates for coverage.
The FMCSA contends that the new rules will save 75 lives, prevent 1,326 fatigue-related injuries and prevent 6,900 property-damage-only crashes each year. That would save the U.S. economy $628 million per year, the agency estimates.
The regulations increase the required off-duty time for truckers to 10 consecutive hours from eight. In addition, they impose a duty period of 14 continuous hours. That is a change from the previous 15-hour period, which could stop and start according to the task the driver was performing.
Unchanged is a requirement that truckers must stop driving after 60 hours on duty over seven consecutive days or 70 hours on duty over eight consecutive days. The restart time has been simplified, though. After mandatory breaks, drivers can take the wheel again after 34 hours of rest, as opposed to the variable calculation under the old rules, which depended on various factors.
An insurance company trade group says the changes are weaker than they could have been because the FMCSA doesn’t require electronic monitoring of compliance with the regulations.
“The technology is there, and it’s relatively cheap. It would have been a simple, cost-effective measure,” said Dave Snyder, vp and assistant general counsel with the American Insurance Assn. in Washington.
Instead, the requirements continue to call for truckers to keep written logs, which “basically are a joke,” Mr. Snyder said. Given the lack of monitoring equipment, “enforcement is anything but effective,” he said.
A spokesman for the FMCSA did not respond to questions regarding the regulations.
The government’s motivation was “obviously to bring about change that would make for a safer environment,” said Daniel Bancroft, Philadelphia-based managing director and transportation practice leader for Marsh Inc. “It’s too soon to tell whether that will happen.”
The new regulations, he said, are just a part of “10 or 20 areas that drive the safety performance” of trucking companies.
He said Marsh’s large trucking company clients are mostly concerned that the new regulations will drive up costs as their drivers wait for shippers to load cargo, while the clock ticks away on-duty hours and limits drivers’ time on the road.
Fred Burns, president of Burns Motor Freight Inc., a 100-truck operation in Marlinton, W.Va., confirmed that his costs have risen because of such loading delays. “It counts against the 14 hours and has hurt productivity.”
Insurance industry sources say the new regulations probably won’t bring about enough change in driver safety to affect rates for commercial trucking liability risks, which were already softening before the rules were passed.
Joe Hutelmyer, president of Seaboard Underwriters Inc., a trucking managing general agent in Burlington, N.C., said the rules are an improvement over the old regulations but probably won’t have enough impact to encourage insurers to lower rates.
Truckers considered “better risks” have seen some relief from high liability rates since the third quarter of 2003, Mr. Hutelmyer noted. “There’s plenty of availability,” he said, and in most cases, “rates are steady.”
Mr. Bancroft said the trucking liability market had been tight for about three years, “but it’s very apparent that the tide has turned.” And the market for truckers’ physical damage coverage “is following the same trend,” he added.
“Underwriters are still maintaining a great degree of underwriting discipline,” according to Mr. Bancroft. “Truckers are rated on their claims record, safety performance, ability to retain drivers” and other factors that affect insurance rates, he said.
Liability insurance prices are falling partly because new capacity has entered the marketplace, Mr. Bancroft explained. Bermuda startups and other new underwriters are offering capacity as more established insurers ramp up their appetite for trucking risks, he said.
“If you are a good trucking company and manage your risk proficiently,” there is an opportunity to create competition among underwriters vying for the account, said Bill Prester, president and managing director of Aon Corp.’s Aon Truck Group in Schaumburg, Ill.
He warned, though, that buyers shouldn’t assume just because there is more capacity available that their problems are over in the trucking market. Some of the new players “haven’t really made a commitment” to the marketplace, he said. In addition, not enough reinsurers are participating in the trucking liability market to make it as healthy as it should be, he said.
Mr. Burns said that his trucking company’s renewals last fall did not bear out the notion that the market was stabilizing. His coverage costs rose 8% on both liability and physical damage insurance, despite a decision to reduce limits on both risks to $5 million from $11 million. In addition, the company decided to retain $50,000 per accident and $300,000 annually on the liability side and increase the physical damage deductible from $5,000 to $25,000.
The rate hikes were imposed even though the company’s claims and safety record is “excellent,” Mr. Burns said.