In 2023, the U.S. trucking industry faced a series of overwhelming challenges, leading to the closure of nearly 88,000 trucking firms—around 10% of the nation’s total. The primary drivers were rising operational costs, especially as driver salaries and legal expenses soared. These factors, in turn, pushed up trucking insurance costs, creating a difficult cycle of shrinking profit margins and higher costs for goods transported by trucks. As these increased expenses trickled down, the impact was felt in prices for everyday goods, affecting both businesses and consumers alike. (Source: Legal System Abuse Hammers Truck Insurance)

The factors driving up trucking insurance costs reveal troubling trends within the legal and insurance systems. Here are some of the major contributors to this industry-wide crisis:

1. Third-Party Litigation Financing: In recent years, third-party litigation financing has become more prevalent. In this arrangement, a funder—often a private investment group—supports a lawsuit’s costs in exchange for a share of any potential winnings. This financing often leads to prolonged and expensive litigation, increasing the overall legal costs that insurers must cover. As a result, trucking insurance costs rise, sometimes to unsustainable levels, as insurers adjust rates to keep pace with the financial risks these lawsuits entail.
2. Social Inflation: Social inflation, a phenomenon where court awards and settlements grow at a rate exceeding standard inflation, has compounded these issues. Studies suggest that the escalation of jury awards—particularly in cases involving corporate defendants—has led to a sharp increase in claims costs. This, in turn, drives up trucking insurance costs, as carriers attempt to cover these unexpected expenses. Social inflation is not merely a legal issue; it reflects broader societal trends and attitudes toward large corporations and is often influenced by juror perceptions of a defendant’s ability to pay.
3. Underwriting Losses: The insurance industry’s profitability woes are another contributor. Shockingly, insurance carriers providing coverage for trucking companies have experienced only one profitable year out of the last twelve. This troubling trend reflects the high risks and costs associated with insuring trucking operations. As these underwriting losses continue, insurers are forced to raise trucking insurance costs to recoup expenses, further burdening trucking firms with rising costs.

The Path Forward for the Trucking Industry

These challenges underscore an urgent need for reform at both state and federal levels. Without intervention, the cycle of rising premiums and operational costs may lead to further disruptions, including additional closures among trucking companies. Policymakers, industry leaders, and insurers must collaborate to create balanced reforms aimed at reducing litigation abuses, curbing social inflation, and stabilizing insurance markets.

For the trucking industry, the road ahead requires a careful balancing act to manage trucking insurance costs without sacrificing safety or quality of service. Only through a combined effort will it be possible to protect this essential industry and mitigate price increases for consumers across the country.