Editorial: Trucking’s Treasuries Taxed by Higher Fuel, Insurance Costs

As if rising diesel fuel prices haven’t put enough of a dent in trucking’s pocketbooks in recent months, the industry can now look forward to potentially skyrocketing costs for insurance needed to maintain operations as the new year begins.

According to a story on Page 1 of this issue ("Truck Insurance Rates to Rise"), many companies’ insurance rates are likely to rise 10% to 20% during 2000, while some carriers with poor safety records may have trouble obtaining coverage at any cost.

Insurance providers cite the high cost of claims as the reason for the rate increases, saying higher driving speeds and poor driver selection are leading to more accidents and more expensive claims.

Coming at a time when diesel rates have hit a three-year high, the prospects of paying substantially more for insurance is sure to darken the holiday season for at least some carriers.

Diesel has now reached an average per-gallon price in excess of $1.30, meaning truckers are paying about 4 cents a mile more now than they were a year ago to move freight because of the more expensive fuel. For a truck that travels 100,000 miles next year, that translates into $4,000 more in fuel charges.

It’s hard to believe that diesel was at an historic low just 10 months ago, when the national average price hit 95.3 cents a gallon. The increases since then are starting to prompt a downgrading of trucking stocks by Wall Street analysts.

According to one insurance broker, the expected rise in insurance rates could send the average cost for a year’s physical damage and liability coverage from about $2,300 a truck to $4,500 a vehicle.

Thus, the typical trucker appears to be facing a $6,200 per-vehicle increase in operating costs, before factoring in any wage or benefits hikes.

Coupled with the ongoing driver shortage, these factors will put more pressure on financially strapped carriers and could lead to more failures. And there appears to be no relief in sight.

Rising costs, a tight labor market and demand fueled by a growing economy means shippers should look for more and larger rate increases from their carriers.

All in all, it seems the new millennium will quickly test trucking’s mettle.