FMCSA Set to Publish New Rule on Minimum Insurance Coverage
Editor's note: This story includes a clarification to the version that appeared in the Oct. 13 print edition of Transport Topics.
An advance notice of the proposed new rule on minimum insurance coverage for carriers is expected to be published soon, the Federal Motor Carrier Safety Administration has announced.
The agency said it sent its proposal to the Office of Management and Budget on Sept. 29 for review, with the publication date set for Oct. 22. A commentary period would last until Dec. 22, the agency said.
FMCSA announced in April it would write a new insurance rule because, since 1985 when the existing insurance minimums were set, “inflation has greatly increased medical-claims costs and related expenses.”
For most carriers, the minimum coverage requirement is $750,000. Those specializing in hazardous materials must have either $1 million or $5 million in coverage depending on what they haul.
“The effectiveness of this limit, the protection that it provides, has been eroded away by 30 years of inflation, and you would need to have a limit somewhere in the $1.5 million range to be roughly comparable with the [$750,000] limit established in the 1980s,” said Robert Hartwig, president of the Insurance Information Institute, an industry education and research group.
Doubling the required coverage, though, would not mean doubling the premiums, Hartwig added.
“What you’re doing is you’re adding protection for those claims that exceed $750,000 and up to $1.5 million. So, those are less frequent than the ones that are below that amount, the less costly claims,” he said.
“So a doubling might result in something more like a 25% increase in premiums rather than a 100% increase in premiums,” he said. “You get twice the coverage for 25% more. So you’re better protected and the public is better protected as a result of this.”
In addition, Hartwig said that vehicles and highways are getting safer; meaning the frequency and size of claims are expected to drop.
“I think that this is the reality of the American highway in the future: that accidents of every sort involving trucks, private passenger vehicles and even such things where we have, for instance, sleepy drivers, intoxication . . . will become less likely because of the technologies that are emerging in vehicles,” he said.
Technology is developing that will alert drivers if they begin to swerve, will automatically apply brakes when needed and will regulate speed and traction in emergency situations, he said.
“That slow and gradual improvement in motor vehicles, in highway safety is going to produce benefits for the trucking industry,” Hartwig said. “It’s going to produce benefits for drivers, and it’s going to produce benefits for the overall economy.”
FMCSA has not said what coverage levels it might require, but one study published on the insurance question — by the Volpe Transportation Systems Center in 2013 —showed that severe crashes today typically result in more than $1 million in damages.
The trucking industry is also being pressed on another insurance front.
President Obama’s Grow America Act — the four-year, $302 billion transportation plan unveiled in April — calls for repealing the government’s self-insurance program for carriers.
FMCSA said few carriers use the program and that it’s done little to enhance safety.
