Transportation Industry Outlook 2024: A Year of Continued Challenges
This post is part of a series sponsored by IAT Insurance Group.
More challenges are coming to the transportation sector in 2024.
The U.S. economy continues to be the number one worry for drivers and fleet carriers alike. Factors like inflation (2023’s top industry concern), rising interest rates and higher diesel prices are causing a ripple effect throughout the transportation industry.[1] While it’s true that inflation has stabilized, it has done so from a higher plateau and shows no signs of coming down. Prices continue to climb and a higher cost baseline is expected for repairs, maintenance and new vehicles.
These same inflationary pressures are also impacting the insurance industry through increased claim costs and settlements. Premiums will need to continue to increase to keep pace with inflation-driven increases in the cost of settling claims.
In addition to economic pressures, government regulation at the state and national level will also be of concern.
5 considerations for fleet carriers in 2024
With so much uncertainty stemming from issues flowing over from the previous year, the best defense is to be informed and proactive. Here are five trends fleet carriers should be cognizant of to bolster their success in 2024:
1. Maintenance delays
As margins continue to shrink, companies may be tempted to hold back on routine maintenance and inspections to save money in the short term. This workaround leads to costly long-term risks like service violations, expensive repairs resulting in downtime and an increased likelihood of accidents.
Take action: Resist the urge to reduce maintenance practices below the manufacturer’s standard requirements and continue to complete pre- and post-trip inspections. DOT Roadside inspections resulting in increased CSA scores or an increase in a carrier’s accident frequency due to maintenance issues will have an adverse impact on insurance premiums. Look for other opportunities to tighten the budget and keep your maintenance schedule on track.
2. Increase in theft
Theft claims are on the rise and this trend shows no signs of slowing down. Last year there was a 20% jump in reported cargo theft incidents, which range from stealing the cargo to stealing the entire vehicle and occur most often in parking lots and truck stops as thieves take advantage of drivers’ need to sleep or take a break. Brokerage cargo theft increased by 600% in 2022, making the commandeering or misdirecting of shipments the number one cargo theft method.
Take action: Be proactive in your efforts to stave off theft and its adverse impact on the cost of doing business. Here are five simple ways to get ahead of the problem:
Pre-plan routes to pinpoint safe locations for drivers to stop, eat and rest.
The lack of truck parking has been an issue for decades and a top-five concern since 2015.1 Consider reserving paid private parking spots. Private parking often includes perimeter fencing, adequate lighting, security cameras and onsite personnel 24/7.
Attach portable tracking devices to your vehicles, chassis and cargo to make them easy to locate in the event that they are stolen or go missing.
Pay close attention to how you are managing hours of service and securing loads.
Discuss high-value/high-target theft loads with the driver during dispatch providing them with safety measures to use while loading and transporting such loads.
3. DOT rule changes
Seven high-level DOT rule changes introduced in 2022-2023 are expected to be released in 2024. While there’s currently no confirmation on what the final rule updates will entail, keep your eye out for these rules coming down the road:
FMCSA Safety Management System update
Mandatory speed limiters
Auto emergency braking systems
Crash preventability determination program
CDL drug and alcohol clearinghouse return to duty process
Competency and skills testing
Oral fluids as well as urine samples for drug/alcohol testing
Take action: Keep abreast of what’s happening. Stay current on industry news and get involved in your state associations for useful information and support.
4. New California electric vehicle rules
Regulatory pressure across the country is pushing the transition to electric vehicles (EVs), and California’s truck emission standards are leading the charge in the trucking industry. California’s higher compliance regulations don’t just affect the California-domiciled carrier; any carriers that drive into the state are impacted, causing significant hurdles for many companies nationwide.
In fact, zero-emission vehicles were identified as a critical issue in the trucking industry for the first time in 2023.1 In the wake of the new rules, businesses are grappling with the financial viability of continuing California-based operations and contracts. In addition, distribution centers are popping up just outside of the California border to accommodate non-compliant trucks that will no longer cross state lines.
Take action: Transitioning to an EV fleet is no simple feat; consider all of the variables at play before deciding whether this is a practical option for your business in 2024. These costly vehicles present challenges with charging capacity, and the increased weight of batteries reduces cargo capacity. Further complicating matters, mechanics that work on electrical vehicles aren’t readily available, which could make route planning a challenge since plans must account for charging stations and repairs if the need arises. There’s also a lack of clarity around how insurance companies will cover EVs due to uncertainty surrounding costs to repair or replace equipment.
5. Driver retention and hiring
Many economists project the freight market to continue to soften in the first and second quarters of 2024 before rebounding in late 2024, so companies should remain focused on retaining their best employees. With turnover in some trucking industry segments as high as 85% to 90%, fleets have invested in retention bonuses to keep their best drivers. In fact, the average retention bonus has climbed almost 90% over the past four years to $1,272.1
Take action: Whether your focus is on retention or hiring, prioritize quality above all else. The benefits of good drivers are far-reaching, even impacting insurance costs — better drivers mean better rates. Consider using in-cab telematics to get an informed view of your drivers’ safety habits and efficiency on the road. This GPS-based technology can provide insights into driver performance including speed, hard braking and more.
When load volumes return later in Q3 or Q4 this year, be prepared if you need to start hiring again. Do your due diligence and adhere to best practices, regulations and your guiding principles and maintain your commitment to hiring the best drivers available for the job.
Looking ahead
The year 2024 is shaping up to be a year of change already, so stay informed on new rules and regulations, plan to minimize the likelihood of theft, and be flexible around the fluctuating market growth.
For guidance on how to manage your fleet’s risk in 2024, reach out to IAT Insurance.
By Tom MacCallum, Peter Matthews and Nick Martin
[1] American Transportation Research Institute “Critical Issues in the Trucking Industry – 2023,” October 2023.
Topics
California
Trends
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