Insurance Rate Increases

As with many costs in Canada, we are seeing noticeable increases specifically when it comes to insurance over the last few years. The Insurance Corporation of British Columbia (ICBC) announced rate increases of 13-15% on average for commercial vehicles, including trucks, in late 2023[1]. This indicates a significant upward trend in insurance costs for truckers.

Accident Costs

The financial impact of trucking accidents can be substantial:

The average cost of a trucking accident with one injured person is $148,279[2].
If a fatality occurs, the cost can escalate to around $7 million[2].

These high potential costs contribute to increased insurance premiums for trucking companies.

Claim Frequency

Insurance claims for commercial vehicles across Canada have been increasing at a rate significantly faster than the growth in the number of commercial vehicles on the road between 2016 and 2022[4]. This trend puts upward pressure on insurance rates.

Regional Variations

Third-party liability claims frequency varies by region:

Alberta has the highest frequency, followed by Ontario and the Atlantic provinces[4].
Alberta's claim frequency per 100 vehicles was decreasing before the pandemic, while Ontario and Atlantic Provinces saw an increase in collision claims frequency in 2021 compared to 2020[4].

Check out the table below for more insurance info on each Canadian province.

Factors Affecting Premiums

Several factors influence insurance costs for truckers:

Driver experience: Less experienced drivers, especially those with less than three years of experience, have a higher chance of getting into accidents, leading to higher premiums[4].
Cargo type: Transporting heavy loads or dangerous goods typically requires higher liability coverage, affecting premiums[4].
Cross-border trips: Traveling outside of Canada can significantly increase premiums due to exposure to potentially large jury verdicts in the United States[4].

Overall Industry Premiums

While not specific to truckers, the total net premiums written for auto insurance across Canada amounted to almost 24 billion Canadian dollars in 2018[5]. This figure provides context for the scale of the auto insurance industry in Canada, which includes commercial trucking.

These statistics highlight the significant costs and increasing trends in insurance for truckers in Canada, emphasizing the importance of risk management and safety measures in the industry.

Why understanding insurance costs is crucial for Canadian trucking businesses

As an accountant for trucking businesses, I can assure you that truckers pay their fair share of insurance expenses. There is a lot of liability that comes with driving a massive machine down the road. Here are some reasons why understanding these insurance costs is a must for anyone in the Canadian trucking industry:

Financial Stability: Helps in budgeting and avoiding unexpected expenses related to premiums and claims.
Cost Management: Enables identification of cost-saving opportunities and efficient insurance coverage.
Compliance and Risk Management: Ensures compliance with regulations and effective management of risks to protect against financial losses.
Impact on Profit Margins: Directly affects profit margins and supports accurate pricing and financial planning.
Informed Decision-Making: Facilitates better decisions on fleet management, safety investments, and insurance negotiations.

How Insurance Costs Affect the Finances of Trucking Businesses in Canada

Insurance costs have a big impact on the finances of Canadian freight haulers. Many truckers will have some of their insurance costs deducted from their gross revenue by the logistics coordinator, so their driver’s statements will show the insurance deductions once a month, or based on the frequency of the insurance policy payment.

Strategies to Manage Rising Business Insurance Costs

Here are some ideas on how to manage rising insurance costs as a trucking company. Talking with your insurance agent to see if these ideas would reduce the cost of insurance is the best way to get started.

Operational Strategies

Strategy	Description
Comparison Price Shop	Regularly review your policy and get competitors’ quotes to make sure you are getting the best deal
Implement Safety Technologies	Install dashcams, forward collision warning systems, and other safety-related instruments to monitor and improve driver behavior.
Prioritize Vehicle Maintenance	Conduct regular preventative maintenance to avoid breakdowns and accidents.
Run Dedicated Routes	Operate on familiar routes to reduce risk and have preferred vendors pre-selected along those routes.
Combat Distracted Driving	Use driver-facing cameras and conduct regular awareness training programs.
Improve Communication	Hold frequent sessions between drivers and company officials to address concerns.
Utilize Telematics Data	Monitor driver behaviors like lane departures and hard braking, and use this information for targeted training.

Financial and Risk Management Strategies

Strategy	Description
Consider Higher Deductibles	Evaluate the feasibility of higher deductibles to reduce premiums while maintaining adequate coverage.
Invest in Cyber Security	Look for insurance providers that aid in establishing good cyber security practices.
Explore Self-Insurance Options	Consider alternative solutions such as self-insurance for larger fleets.
Leverage Safety Records	Communicate safety improvements and technology usage to insurers to potentially lower premiums.
Cargo Theft Prevention	Consider insurance with value-added services for cargo theft prevention.
Reward Safe Drivers	Implement programs to recognize and reward drivers with good safety records.

Overview of Insurance Types in Trucking

A trucking company in Canada is likely going to be carrying several different insurance policies for different purposes. Here are the most common types of insurance policies that we see as accountants:

Commercial Truck Insurance

Liability Insurance: Covers costs if the truck causes injury to others or damages their property. This is legally required and helps protect the business from costly lawsuits and settlements.

Cargo Insurance: Protects against loss or damage to the goods being transported. This ensures that the business is financially protected if the cargo is damaged or lost.

Physical Damage Insurance: Covers repair or replacement costs for the truck itself in the event of an accident, theft, or vandalism.

Comprehensive Insurance: Offers broader protection against non-collision incidents such as natural disasters, fire, or theft.

Liability Insurance

Liability insurance is important for truckers to carry.

Firstly, it covers legal protection when legal claims arise from accidents that involve injuries or damage to property.

Secondly, liability insurance offers financial security. Without liability insurance, one accident could put a freight hauler out of business.

Thirdly, liability insurance is mandatory for truck drivers in Canada. You would likely get a hefty fine if you were driving a semi truck without it.

Finally, carrying liability insurance shows those whom you work with that you are responsible and professional, which enhance your business’s reputation.

Liability insurance is typically going to cover:

Bodily Injury Liability: Covers medical expenses, lost wages, and other costs for individuals injured in an accident caused by the truck. It also includes legal fees if the business is sued for the injury.
Property Damage Liability: Pays for repairs or replacement of property damaged in an accident involving the truck, such as other vehicles or structures. It also covers legal expenses if the business faces a lawsuit over property damage.
Uninsured/Underinsured Motorist Coverage: Provides protection if the truck is involved in an accident with a driver who lacks sufficient insurance to cover the damages.
Contingent Liability Coverage: Covers the business for liabilities that might arise from leased or rented trucks that are not covered under the primary insurance policy.

Cargo Insurance

Cargo Insurance for Truckers is a type of insurance specifically designed to protect the goods being transported by a truck. It covers financial losses or damages to cargo that occurs during transit. Here’s a brief overview:

Coverage Scope

Cargo insurance provides compensation for various types of damage or loss, including theft, fire, accidents, and weather-related incidents. It ensures that the value of the goods being transported is protected, minimizing financial risk for both the trucking company and its clients.

Types of Coverage

All-Risk Coverage: Offers broad protection against most risks except those explicitly excluded in the policy, such as damage due to poor packaging or inherent defects in the goods.
Named Perils Coverage: Covers only specific risks listed in the policy, such as theft, fire, or collision. This type of coverage is generally less comprehensive than all-risk coverage.

Fleet Insurance

Fleet Insurance for trucking businesses is a specialized type of commercial auto insurance designed to cover multiple vehicles under a single policy. This approach simplifies insurance management by providing comprehensive coverage for all the vehicles in a fleet, including liability, physical damage, and additional options like cargo or uninsured motorist protection. Fleet insurance often results in cost savings through bulk discounts and administrative efficiencies, as businesses benefit from a streamlined policy and reduced paperwork. It also allows for customized coverage tailored to the specific needs of the fleet, helping to manage risks effectively across the entire operation.

Key Features of Fleet Insurance

Comprehensive Coverage: Includes liability, physical damage, and optional coverages like cargo and uninsured motorist protection.
Cost Efficiency: Often results in lower premiums and bulk discounts compared to individual policies.
Administrative Simplicity: Consolidates multiple vehicle coverages into one policy, reducing paperwork and management effort.
Customization: Allows tailored coverage limits and options based on the fleet's specific needs and risk profile.
Streamlined Claims Handling: Simplifies the claims process across all vehicles, expediting resolution and minimizing operational disruptions.

Additional Insurances that Truckers may Carry

Roadside Assistance

Roadside assistance insurance can be important for truckers as it provides essential support during unexpected vehicle breakdowns or emergencies on the road. This type of insurance offers immediate help with services such as towing, tire changes, fuel delivery, and battery jump-starts, which can minimize downtime and keep trucks operational. Given the remote and often unpredictable nature of trucking routes, roadside assistance ensures that drivers receive prompt help, reducing the risk of extended delays and additional expenses. It enhances safety and reliability, allowing truckers to focus on their routes without the added stress of managing roadside emergencies on their own.

Reasons Truckers Should Consider Roadside Assistance Insurance

Immediate Help: Provides prompt assistance for common issues like flat tires, dead batteries, or running out of fuel, minimizing downtime.
Towing Services: Covers the cost of towing if the truck is disabled, preventing costly out-of-pocket expenses.
Emergency Repairs: Includes minor repairs and services on-site to get the truck back on the road quickly.
Safety and Peace of Mind: Enhances driver safety by ensuring help is available during breakdowns or emergencies, reducing stress and improving overall confidence.
Cost Savings: Helps avoid potentially high costs associated with emergency roadside repairs and towing, offering financial protection and budget stability.

Factors Influencing Insurance Costs

Vehicle Type and Age

The type and age of a semi-truck significantly impact insurance premiums and coverage. Newer and more advanced trucks generally incur higher premiums due to their higher value and advanced technology, which could be expensive to repair or replace. Conversely, older trucks may have lower premiums but could face higher rates for repairs and maintenance, as well as higher risk of breakdowns. Additionally, the type of truck—such as a standard freight truck versus a specialized vehicle—affects insurance costs based on its intended use and associated risks. Insurance providers consider these factors to assess the risk level and determine appropriate coverage and premiums.

Impact of Truck Type and Age on Insurance

Here’s how new trucks vs old trucks compare when it comes to insurance premium costs:

Premium Costs: Newer trucks often result in higher premiums due to their higher value and advanced technology.
Repair Costs: Older trucks may have lower premiums but can incur higher repair costs and may be considered higher risk for breakdowns.
Risk Assessment: Specialized trucks may attract different premiums based on their specific use and associated risks.
Coverage Adjustments: The type and age of the truck influence the extent of coverage needed and the associated costs.
Claims History: Older or specialized trucks may affect the frequency and cost of claims, impacting overall insurance rates.

Driver’s Record

Here’s a table illustrating how a driver’s safety records and experience impact insurance rates for truckers:

Factor	Impact on Insurance Rates
Clean Safety Record	Lower Rates: Drivers with a clean safety record are considered lower risk, leading to reduced insurance premiums. Insurers view them as less likely to be involved in accidents or claims.
History of Accidents	Higher rates: Drivers with a history of accidents or violations are seen as higher risk, which typically results in increased premiums due to the likelihood of future claims.
Years of Experience	Lower Rates: More experienced drivers are often rewarded with lower insurance rates because they are perceived as more skilled and less likely to cause accidents.
Recent Experience	Varied Rates: Recent drivers may face higher rates if they lack extensive driving experience or have a limited track record, as they are considered higher risk.
Type of Violations	Higher Rates: Specific violations, such as DUIs or major traffic offenses, can significantly increase insurance rates due to the higher perceived risk associated with such behaviors.

This table shows how different aspects of a driver’s safety record and experience can affect their insurance rates, influencing both cost and coverage decisions.

Differences in how Commercial Truck Insurance Operates in Each Canadian Province

Province	Insurance System	Mandatory Coverage	Unique Features
Ontario	Private	Third-party liability Accident benefits Direct compensation property damage (DCPD) Uninsured motorist	No-fault insurance system Victims cannot sue for pain and suffering
Alberta	Private	Third-party liability ($200,000 minimum) Accident benefits DCPD	Uninsured auto insurance not mandatory SEF 44 endorsement recommended Victims can sue for pain and suffering
British Columbia	Public (ICBC)	Basic coverage through ICBC Additional coverage available from private insurerS	Recently transitioned to a no-fault system
Quebec	Mixed	Public plan for bodily injury Private insurers for property damage	Unique hybrid system
Manitoba	Public (MPI)	Basic coverage through MPI Additional coverage available from private insurers	Complete no-fault insurance system
Saskatchewan	Public (SGI)	Basic coverage through SGI Additional coverage available from private insurers	Option to choose between no-fault and tort systems
Atlantic Provinces	Private	Third-party liability Accident benefits DCPD (in NB, NS, PEI)	Specific requirements may vary by province

This table provides a general overview of the main differences in commercial truck insurance across Canadian provinces. It's important to note that specific coverage requirements and limits may vary, and trucking companies should consult with local insurance providers or brokers for detailed information tailored to their specific needs and locations.

Usage and Mileage

Usage and mileage significantly influence commercial truck insurance rates, as they directly impact the risk profile of the vehicle. Trucks that are used more frequently or cover longer distances are exposed to higher risks of accidents, wear and tear, and breakdowns, which can lead to increased insurance premiums. High mileage indicates greater operational exposure, which insurers view as a higher risk, thus raising the cost of coverage. Conversely, trucks with lower usage and mileage generally present a lower risk to insurers, potentially resulting in lower insurance rates.

Here’s how truckers’ insurance costs might be impacted based on usage and mileage:

High Mileage: Increases premiums due to greater wear and tear, higher likelihood of accidents, and increased risk of breakdowns.
Frequent Use: Higher insurance rates because of the elevated risk associated with more time spent on the road.
Type of Usage: Trucks used for high-risk activities (e.g., hazardous materials transport) may see higher rates compared to those used for less risky cargo.
Low Mileage: Can lead to lower premiums, as less exposure to potential risks reduces the likelihood of claims.
Seasonal Use: Trucks that operate only seasonally may have lower rates, reflecting reduced risk and usage.

Claims History

Claims history plays a big role in determining commercial truck insurance premiums, as it directly influences an insurer’s assessment of risk. A history of frequent or high-value claims indicates a higher risk of future incidents, leading insurers to increase premiums to compensate for the perceived higher risk. Conversely, a clean claims history suggests lower risk and can result in reduced premiums, as it demonstrates the trucker’s reliability and lower likelihood of filing additional claims. Insurers use claims history to evaluate the likelihood of future claims and adjust premiums accordingly, making it a key factor in insurance cost calculations.

Here's how claims history impacts Insurance Premiums:

Frequent Claims: Leads to higher premiums due to the increased risk and potential for future claims.
High-Value Claims: Results in elevated premiums as insurers factor in the potential costs of substantial losses.
Clean Record: Can lower premiums, reflecting a lower risk of future claims.
Recent Claims: May temporarily increase premiums while the insurer reassesses risk based on recent incidents.
Type of Claims: Different types of claims (e.g., liability vs. cargo damage) can affect premium adjustments based on their impact and frequency.

Financial Impact of Insurance Costs

Insurance costs can be broken down into Direct Costs and Indirect costs.

Direct costs related to insurance premiums are the explicit expenses incurred for securing and maintaining insurance coverage. Direct costs are things like insurance premiums, which are paid on a regular basis such as monthly, bi-weekly, or annually, deductibles, policy fees, riders, endorsements, and coverage adjustments.

Indirect costs related to insurance premiums are the expenses that arise indirectly from holding and managing insurance policies, rather than being directly paid to the insurer. These can include administrative costs for managing insurance paperwork, time spent by staff handling insurance-related tasks, and potential operational disruptions due to insurance claims or adjustments. Indirect costs also encompass the financial impact of higher premiums on overall budget allocations, which may lead to reduced resources available for other business activities. These costs affect the broader financial management of the business beyond the direct insurance payments. - Additional financial impacts, such as downtime or increased repair costs.

Rising insurance costs can significantly impact profit margins for a trucking company in Canada by increasing operational expenses and reducing overall profitability. As insurance premiums climb, a larger portion of the company's revenue must be allocated to cover these costs, leaving less room for other essential expenditures such as fuel, maintenance, and driver wages. This increased financial burden can force the company to either raise rates to maintain margins or absorb the higher costs, both of which can affect competitive positioning and market share. Additionally, if premiums rise due to higher claims or increased risk, the compounded effect on expenses can erode profit margins and strain the company’s financial stability.

Conclusion

Since there is a lot that could go wrong with a large semi driving down the road, insurance is a big part of the expenses when it comes to commercial trucking. Managing insurance expenses with the above strategies can reduce expenses in the short-term and the long-term for your trucking business.

If you need help managing your finances, we can provide your trucking company with bookkeeping, tax preparation, and GST filing services. Click here to contact us today to find out more.

Citations:

https://www.summitcover.ca/post/commercial-truck-insurance-canada

https://www.ratehub.ca/insurance/truck-insurance

https://www.trucknews.com/transportation/canada-wide-spike-in-insurance-claims-calls-for-enhanced-training-oversight-report/1003184055/

https://www.alignedinsurance.com/truck-insurance/

https://www.zensurance.com/blog/what-is-commercial-auto-insurance-in-canada

https://www.canadianunderwriter.ca/features/rates-keep-on-trucking/

https://kaseinsurance.com/news/trucking-statistics-that-prove-you-need-insurance/

https://www.canadianunderwriter.ca/claims/why-insurers-urge-better-training-for-new-commercial-truck-drivers-1004244994/