Skip to main content

Why is insurance so expensive?

You’re getting your authority up and running. You’ve just submitted your application with the FMCSA and now you play the waiting game to make sure your authority gets approved. You’re getting phone call after phone call from an insurance agent, compliance, UCR, ELD provider, or even worse, the factoring company… (Sorry!). Remember that the most important thing you can invest in during your start up phases is your insurance provider. We all hate insurance but it’s the only thing that protects us when the proverbial ‘you know what’ hits the fan. Why is it so expensive? What is it about the trucking industry that makes insurance rates go through the roof? Especially for a new trucking company.

OperFi Sales

If you’ve ever been in the military or know someone that’s served their time, they’ll tell you that the reason stupid rules or policies are in place is because someone else in the past screwed it up for the rest of us. What that means is that other trucking companies before us used and abused the system and now insurance companies have to remain cynical while approving new operations even though their intentions are good. The trucking industry is very unique in that the barriers to entry are very low. Virtually anyone can start up their own trucking operation and start hauling freight. That very reason is why insurance rates are through the roof for new trucking companies. Insurance companies: 1) don’t know who they’re dealing with and 2) your trucking business could be hauling freight valued at over $1M in precious cargo and they want to make sure they’re not paying out on every single claim that comes across their desk.

Experience plays a major role in insurance rates. Its no different than a 16 year old teenager getting their driver’s license. Have you ever added your child on your policy and realized that your rates almost double with adding them? Even worse is what happens to your rates if you have a premium car. They don’t have the experience and the insurance company is almost over charging based on the statistical likelihood that something will go wrong. With a new trucking company, they’re almost betting on there being a problem with a new authority and new drivers on board.

The other variable that works against applying for new insurance with a new authority is the number of chameleon carriers that reincarnate their business because they had a previous issue with another authority and another insurance provider. For example, if I have my own trucking authority and I get into an accident where I need to submit a claim and the damages on the load are approximately $30K, the next year when I go to renew my authority, my premium is going to sky rocket. My driving record shows I’m prone to damages so my premium will reflect that. However, if I shut my business down, and reincarnate my trucking authority under my wife’s name, now I can get a quote as a new trucking company as opposed to my old one where my premium reflects my prior claims.

This is something the insurance companies know about and account for when providing new quotes for new trucking companies. The FMCSA does their part to try and mitigate against this but if you have a driver that you are trying to include on your new policy, at some point their record will be included and added to your quote. Sometimes, however there are many situations where these slip through the cracks and the insurance quotes can’t find fully accurate MVR information on each driver. The insurance company assumes a level of risk, therefore they are adding other elements to your premium to account for that risk.

At the end of the day, you can’t get around getting your insurance whether its working on a renewal or starting up a new trucking company. Take your time to survey multiple agencies and look online for the best deals. Reach out to Facebook groups and trucking communities to see if there are agencies that can give you a better than market quote.

OperFi partners with some of the best and affordable insurance providers in the industry so it’s always a good idea to give your OperFi rep a call to see if there are local agents in your area or other agencies that can quote you within your state of operation.

Contact OperFi today to get a free consult and learn how to lower your insurance costs and earn more profits for your trucking company. OperFi is changing the way Trucking Entrepreneurs interact with their factoring companies. Transportation factoring and Freight Factoring shouldn’t force you to be another number. Give us a call and experience the OperFi difference and see why our carriers plan their business with OperFi service.


Sign Up Today!
Factoring and Consultation Services