State of the Insurance Market:
2025 Outlook

Transportation

The commercial transportation sector faces challenges such as labor shortages, rising costs, settlement creep, and increased claim severity due to less experienced drivers. The hard insurance market continues to see significant premium increases across key coverage lines, driven by inflation, supply chain issues, and nuclear verdicts.

To address these challenges, businesses are encouraged to adopt advanced safety technologies, maintain rigorous hiring practices, and explore alternative risk management strategies. Proactive risk management is essential for navigating these industry challenges and ensuring operational resilience.

Market Conditions

 

The commercial transportation sector continues to expand, fueled by a sustained demand for last-mile deliveries driven by e-commerce growth and evolving consumer purchasing habits. However, the industry is still grappling with persistent labor shortages, compounding its challenges.

To meet customer expectations, some businesses have opted to prioritize immediate operational needs over long-term strategic goals, including safety regulations. This has led to instances where less qualified drivers are placed on the road, which raises risks related to claim frequency and severity. Such decisions have contributed to increased exposure to nuclear verdicts, complex litigation, and escalating medical expenses. Additionally, the rising costs of vehicles, advanced technologies, and replacement parts have further driven up the average claim cost.

Driver classification remains a crucial topic, some companies continue to favor 1099 contractual agreements as part of the gig economy model to reduce payroll costs. However, this practice often results in higher turnover and a less experienced workforce, causing operational setbacks. Emphasizing employee retention as opposed to frequent hiring and training cycles offers cost benefits and helps mitigate potential disaster-related expenses. Businesses would do well to assess whether their driver classification policies align with long-term stability and risk management goals.

Coverage Considerations

 

The transportation insurance market remains hard, with significant increases in premiums persisting across key coverage lines. Physical damage has seen premium escalations reaching 18% to 25%, while umbrella liability premiums have risen by 12% to 30%. Auto liability has increased between 7.5% and 20% due in part because of settlement creep. This relatively new phenomenon is applied when a claim ultimately costs significantly more than it should have due to mitigating factors such as delay, legal pressure, and evolving medical treatment. This has been particularly adverse for the auto liability market.

The labor gap and reliance on less experienced drivers exacerbate claims trends, with auto liability claims not only occurring more frequently but also becoming more severe. The average severity of auto claims has escalated markedly, and while specific updated figures for 2025 are pending, the market continues to reflect a trajectory similar to prior years.

Inflation and supply chain challenges drive costs for physical damage repairs, replacement parts, and vehicle purchases, alongside an uptick in theft-related losses. These factors are collectively exerting upward pressure on property damage and liability insurance rates.

Further compounding issues, nuclear verdicts are increasingly influencing liability coverage costs. The growing prevalence of high-value claims, paired with industry-wide risks, keeps umbrella liability rates on the rise. However, recent advancements in fleet technology, particularly GPS systems and telematics solutions, are beginning to offer insights that may stabilize risk trends in the future as their implementation becomes more widespread.

Transportation Rate Forecast

 
Rate Forecast
Transportation: Auto Liability +10% to +20%
Transportation: Physical Damage +20% to +25%*
* However, we are seeing increased deductibles to reduce the rate increase
Transportation: Umbrella Liability +10% to +30%*
* Mainly following the primary auto increase

Recommendations

 

To manage risks and contain rising costs, we recommend the following strategies:

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Uphold rigorous safety standards: Ensure adherence to strict hiring practices, particularly as motor vehicle records (MVRs) remain a key consideration for underwriters. Invest in advanced safety technologies such as collision avoidance systems, telematics, and in-cab cameras to enhance visibility and accountability, reducing exposure to future liabilities.

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Monitor safety and fitness electronic records (SAFER) scores: Businesses should aim to keep their Federal Motor Carrier Safety Administration (FMCSA) SAFER scores below the national average. Work closely with brokers or third-party consultants to address areas for improvement and maintain favorable ratings.

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Exercise caution when managing costs: Avoid cutting coverage as a means of cost control, which could lead to greater financial exposure. Instead, explore alternative options like captives, risk retention groups, or higher deductible programs to stabilize your organization's total cost of risk.

These strategies are vital for sustaining operations amid market headwinds while positioning businesses for resilience in the face of ongoing industry challenges. Firms that proactively address their risk and insurance needs will stand better prepared in this evolving market landscape.

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The contents of this report are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.