Why You Should Care About the Truck Driver Shortage

A longstanding underwriting consideration for trucking insurance is who’s behind the wheel of the insured vehicle. And for many years, one of the biggest challenges in the industry has been the driver shortage.

Bob Costello, chief economist for the American Trucking Association (ATA), recently cited data from the U.S. Department of Labor to estimate that the industry is short 50,000 drivers on a base of 500,000 over-the-road truck drivers currently operating in the country.

Autonomous trucks are on the horizon, and the new technology they entail will hopefully improve safety. But a majority of trucks not operated by a driver won’t happen any time soon—and certainly not soon enough to provide any relief to the current driver shortage crisis.

What’s Happening?

But a key consideration in insuring a motor carrier is their operating radius, which refers to the furthest a driver travels from where they start. If the radius is 300 miles or more, that means the driver has to stay out overnight due to the Federal Motor Carrier Safety Administration’s Hours-of-Service Rule where after driving 11 hours, the driver must be off-duty for 10 hours.

Would you want to be away from your home and family five days a week? What level of pay would it take for you to maintain that lifestyle?

Additionally, according to the American Transportation Research Institute, 56% of truck drivers are over the age of 45—compared to 46% of the general workforce. Meanwhile, only 4.9% of truck drivers are under the age of 24—perhaps not surprising considering the federal requirement that you must be at least 21 to hold an interstate commercial driver’s license and drive an 18-wheeler. That three-year gap post-high school precludes many new entrants to the workforce from considering a career in truck driving.

Congress has considered lowering the age to 18 several times, but such bills have never passed into law. Even if this happens, the insurance consequences would not likely be positive, anyway; the motor carriers that would benefit would most likely be larger companies whose insurance programs have a large retention.

Other age-related institutional limitations apply to certain sectors of the industry as well, such as hazmat or long-haul trucking, where 25 years of age is a common insurance-based expectation.

Why It Matters

The driver shortage has several implications on trucking insurance agents and companies. First, do you know how your insured is screening their potential new hires? Are they using the Pre-Employment Screening Program, which provides details about a commercial driver’s past on-road activities to a potential new employer?

Second, what is your insured doing to retain their current drivers? How many of their drivers have been working with your insured longer than a year? The higher that percentage, the better the risk. Most trucking insurers consider a 45-65% driver retention rate to be good.

Third, what is your insured doing to improve driver retention? Bose seats, automatic transmissions, stabilization systems, lane departure systems, event recorders, GPS tracking and anti-collision systems help boost a driver’s comfort, confidence and safety behind the wheel.

But the most obvious option for improving driver retention is increasing their pay. The ATA reports that an average over-the-road truck driver’s pay increased 15% over the past year, pushing average pay past $53,000 annually.

The problem, of course, is where the motor carrier will find the money to pay drivers more. Until the last 12-18 months, they probably managed because the cost of fuel was down. But fuel costs are now on the rise—and for every 50 cents a gallon, a motor carrier’s expense increases about $145 a week, $625 a month and $7,500 a year.

Translation: The top two expenses a motor carrier incurs—the cost of fuel and driver pay/benefits—are both increasing, alongside trucking insurance premiums. Are your trucking clients able to increase their revenue enough to cover these rising costs?

The only upside of the driver shortage is that it means there’s a greater demand for moving freight, which points to a strong economy—and offers motor carriers more opportunities to work. For now, at least, most motor carriers in the U.S. should be getting more money for what they’re hauling.

Tommy Ruke, TRS, CIC, co-founded the Motor Carrier Insurance Education Foundation in 2013 to provide face-to-face presentations, web-based education and other resources for insurance professionals who work with motor carriers.