Fleet carriers are different from other types of commercial transportation in that they involve large groups of vehicles, collectively owned and operated by a business that uses them internally or for outside freight carriage. Typically, fleet carriers are larger, more established enterprises with strong revenue bases to absorb ups and downs in the market.
That said, fleet carriers aren't so different from their smaller, non-fleet counterparts in that many of the same issues and concerns facing the broader commercial transportation market also affect fleets.
For instance, fleet carriers are still struggling in the wake of COVID-19, when many bought new equipment to meet demand during the pandemic boom. Over the last few years, these carriers have watched demand dry up and freight rates go down, leaving them sitting on a lot of excess equipment. Now many of these companies are shedding equipment to maintain operations, leveling off from the boom.
Financially, fleet carriers are struggling more than owner-operators and small carriers with lower freight rates because they're now sitting on so many more assets. For instance, trucks that they bought for upwards of $250,000 a few years ago when supply was tight might be worth less than $150,000 today, leaving these insureds upside down in their loans and leading to some tough conversations with underwriters at renewal time.
Eden Hancock, area senior vice president with Risk Placement Services (RPS) in Atlanta, says that the fleet market is going through a lot of changes this year, driven by reduced capacity as more recent entrants pull out of the market and cut their losses, making for what she calls a lot of "tricky renewals." The landscape for agents and insurers in fleet coverage is changing, as transportation companies are heavily shopping every account to find the best rates. On new policies as well as renewals, multiple insurance companies are looking at every deal, or multiple wholesalers are involved.
"Everyone is fighting to keep business, because rates are increasing, capacity is tightening up, and losses are getting paid out at a higher level," Hancock says. "There's a lot of fluctuation going on right now in the marketplace for fleet insurance. By the time we see a lot of insureds at renewal, they have either downsized or switched to non-fleet operations to make ends meet."
Since fleet insurance accounts are measured by total miles driven, the fact that those miles are down is forcing insurers to make adjustments in how they work with fleet carriers. Fewer miles driven means lower revenues, even though insurance rates are increasing.
As Mike Mitchell, area president with RPS in Charlotte, explains, the trucking market within Transportation breaks down into two segments: small accounts with up to 10 units such as owner-operators, and larger, 11-plus unit accounts that include smaller to mid-sized trucking companies, including fleet carriers.
The larger segment, in particular, has experienced several significant marketplace exits over the past year, resulting in an increased amount of business that needed to be re-homed with other carriers. That movement has led to a boost in new business activity coming off of a slow 2023 and helped the wholesale and retail spaces, as well as carriers, build up their transportation books in early 2024.
"Everyone is looking for rate on their insurance renewals, but the marketplace is almost not allowing that rate to be obtained just because of the amount of capacity out there," says Mitchell. "As far as the insurance market goes, I'm seeing signs of it tightening up further. I'm seeing carriers draw harder lines on needing a certain amount of rate on their renewals, and some stricter underwriting standards. I think a lot of traditional insurance carriers out there are going to be more disciplined and stick to what their metrics and regulations show."
At the same time, non-fleet and other segments of the market are seeing more capacity and more competition entering in the last year, from traditional carriers to exclusive programs and more. This change has made for a hyper-competitive market in select spaces for insurers where retention is challenging — it's difficult to grow new business with so many new markets out there. The opportunities are there, but it's becoming more difficult to win accounts.
"I do think we're getting back to some pre-COVID levels, but like everything this market is cyclical," Hancock says. "It's really impacting the entire industry now because, just as court cases related to reinsurance capacity and private capacity are hitting, everyone is starting to feel the impact of this shift. We're just maneuvering these waters to try to find the best solutions for our markets, and we're very fortunate in that we represent a lot of good carriers that have been around for a long time. So, we can access all of those markets to try to help find the best solutions for them right now, while everything is so rocky. Hopefully we can add value to try to help get them the best deal."
Learn more about what's next for the transportation insurance market in the RPS 2024 Transportation Market Outlook.
