In the vast landscape of the insurance industry, one trend looms large on the horizon, impacting claims and frequency like never before: labor shortages. The United States finds itself grappling with a workforce crisis that extends its tendrils into diverse sectors, from hospitality to manufacturing. Among the industries bearing the brunt of this shortage are trucking and logistics, where the situation is particularly dire. As we delve deeper into the heart of this issue, we uncover the multifaceted reasons behind it and explore the ripple effect it creates within the insurance claims space.
Labor Shortages: A Growing Challenge
As seasoned drivers retire from the field, companies must recruit new talent to fill the gap
The labor shortage dilemma is multifaceted and holds consequences for multiple industries. In the realm of trucking and logistics, the shortage has intensified due to several intertwined factors. The first among these is the high demand for new drivers. As seasoned drivers retire from the field, companies must recruit new talent to fill the gap. However, this high demand has not translated into equitable compensation, leading to high driver turnover.
Pay inconsistencies and lack of benefits in the trucking industry discourage many potential drivers from pursuing a career in this sector. This bleak outlook deters new entrants, compounding the shortage crisis. According to the American Trucking Association, the shortage is expected to escalate, with approximately 160,000 commercial driver positions forecasted to go unfilled in the next decade.
The Consequences: Claims and Frequency
The shortage of experienced drivers in the transportation industry has dire consequences for insurance claims and frequency. Companies are often forced to hire less skilled drivers due to the scarcity of experienced ones. As a result, the likelihood of accidents and subsequent insurance claims increases. The following factors contribute to the elevated claims frequency and severity:
1. Social Inflation: A rising trend in lawsuits and inflated jury verdicts has inflated the cost of insurance claims. This social inflation extends to auto insurance, where the impact is acutely felt.
2. Litigation: Legal battles can be protracted and costly, further driving up the cost of claims.
3. Repair Costs: The expense of repairing commercial vehicles, especially in accidents involving less experienced drivers, is a significant factor contributing to claims severity.
4. Distracted Driving: In an age of smartphones and constant connectivity, distracted driving is a pervasive issue. It leads to an increased frequency of accidents and claims.
5. Lack of Medical Advancements: The absence of substantial advancements in medical treatments can result in prolonged recovery times and higher medical costs.
6. Economic Factors and Inflation: The economic climate, marked by inflation and other factors, can significantly affect the cost of claims.
The Way Forward
If the severity and frequency of claims remain elevated at pre-COVID levels, it will continue to have a negative impact on commercial auto insurance lines for U.S. carriers. To navigate these challenges successfully, a multi-pronged approach is required.
First, insurance professionals must grasp the intricacies of the evolving landscape of auto claims, including social inflation, litigation funding, distracted driving, and the cost of medical care. Second, clients, individuals, and businesses must collaborate with agents and risk management professionals to institute and enforce safety measures. This includes continuous training for all drivers, not just new recruits. Telematics and safe driving practices should be integral to this training. Finally, insureds and fleet/safety managers should periodically review drivers' motor vehicle records and backgrounds. This practice not only reduces claims but also ensures a safe and accountable driving workforce.
One80 Claims Expertise
At One80, our claims capabilities are among our greatest assets. The organization has been recognized over the past two years, garnering industry awards for our deep expertise in the Transportation industry, as well as the Marine, Environmental, Warranty, Travel, and Public Entity sectors. To that end, and in the face of labor shortages and their far-reaching implications, One80 continues to adapt, evolve, and innovate. By understanding the root causes of increased claims frequency and severity and by implementing effective risk management strategies, One80 provides a safer and more secure future for all stakeholders in the transportation and logistics industries and beyond.
