The U.S. transportation system moves approximately 53.6 million tons of freight daily, playing a crucial role in the economy. Recent reports suggest the sector generates $940 billion in annual revenue. However, challenges such as driver shortages, social inflation issues and economic concerns are emerging risks that could impact this success.  

Discover forecasted risks for the transportation industry in 2024 and how your business can mitigate these exposures.

Transportation Industry Economic Uncertainty

Heightened interest rates, inflation and rising operational expenses have reduced consumer demand for goods, narrowing the transportation sector’s profit margins. Respondents to the 2023 American Transportation Research Institute(ATRI) survey still indicate the economy as their primary concern.

Harsh economic conditions force consumers to reduce costs and finance fewer projects, sinking the demand and business for the transportation sector. Companies without substantial revenues, excess reserves and capital to offset extended periods of loss could face difficult financial decisions.

Planning for a Slow-Growth Economy

Transportation companies can proactively respond to economic insecurity by:

Transportation Industry Driver Shortages

The American Trucking Association reported a shortage of tens of thousands of drivers in 2023, with projections expected to increase. Compounding matters, a growing proportion of drivers are approaching retirement age. This will generate even more job vacancies as more employees exit the industry.

Attraction & Retention Strategies

The sector could address labor challenges with driverless commercial motor vehicles (CMVs). However, the technology isn’t expected to become widely available soon. Therefore, transportation businesses should invest in their drivers and adopt effective attraction and retention strategies including:

• Competitive wages & benefits
• Workplace policies that foster a positive and inclusive culture
• Flexible work arrangements (if possible)
• Digital platforms in the recruitment process
• Professional development resources (e.g., training, mentorship programs).
• Exploring unrepresented demographics (e.g., women) to help expand their talent pools.

Transportation Industry & Social Inflation

Social inflation is linked to societal trends that influence the increasing costs of insurance claims and lawsuits above the overall inflation rate. The rise in nuclear verdicts (jury awards exceeding $10 million) is a primary factor driving up social inflation issues.      

Heightened Claims

These verdicts are becoming increasingly frequent as commercial drivers and fleets are held accountable for property damage, injuries or fatalities on the road. ATRI reports show a 51.7% annual increase in verdict awards from 2010 to 2018. Additionally, a recent Insurance Information Institute study revealed that social inflation led to $20 billion in commercial auto liability claims from 2010 and 2019.

Underwriters are imposing stricter risk management demands and heightened requirements. The trucking sector is experiencing a rise in commercial auto claim expenses, resulting in elevated insurance premiums and reduced insurance options.

Safety Pays Off

Transportation businesses must make safety a top priority among their commercial drivers and fleets. Taking initiatives to prevent on-the-road accidents can lower the likelihood of nuclear verdicts and heightened insurance costs. Valuable accident prevention measures may include:

• Routine fleet inspection protocols
• Strict driver hiring criteria
• Driver safety training programs
• Vehicle technology (e.g., telematics) to monitor drivers’ habits
• Incentives for safe driving practices
• Accident reporting & response procedures
• Review processes to address remaining exposures

Interested in more safety resources and information for your fleet and drivers? Download our Fleet Safety Guide to protect your business.

Transportation Industry Electric Vehicle (EV) Compliance & Risks

Governments are implementing regulations to reduce carbon dioxide emissions from roadways. Trucking companies must comply with these rules, such as stricter clean air standards by the U.S. EPA for heavy-duty trucks starting in 2027. This update is over 80% more stringent than existing standards, the first major update in 20 years. It’s estimated these regulations will lead to:

• 2,900 fewer premature deaths
• 6,700 less hospital admissions & ER visits
• 18,000 fewer cases of childhood asthma
• 3.1 million lower cases of asthma & allergic rhinitis symptoms
• 1 million fewer lost school days for children
• 78,000 less lost workdays
• $29 billion annual net benefits

The adoption of EVs will have a significant impact on the trucking industry as companies aim to meet sustainability and compliance goals. For example, the EPA has authorized California to mandate that 50% of all heavy-duty trucks sold must be fully electric by 2035.

Cyberthreats

EVs provide environmental and health advantages, yet trucking companies must address potential risks. Features such as Wi-Fi, data sharing and semi-autonomous systems are vulnerable to cyberthreats. Public charging stations are also exposed to malware attacks, data theft, system outages, bugs and glitches.

Parts & Repair Challenges

Defective EV battery manufacturing can lead to large-scale vehicle recalls, causing business delays. Lithium-ion batteries can present safety risks like fires and emission of toxins. Challenges also arise from limited EV repair shops, scarcity of parts, quieter vehicle operations that pose risks to pedestrians, costlier repairs, weather impacting battery performance and hazards from the high-voltage electric cables in EVs.

A Successful Transition

To prepare for the transition to EVs, trucking businesses should assess their operations and applicable regulations including:

• Proper planning to ensure financial stability through this change
• Regular training to safely operate &maintain EVs
• Evaluate routes to ensure sufficient battery life
• Proper insurance to cover potential liabilities and vehicle damage

We’re Here to Help the Transportation Industry Avoid Risks

Overall, there are several trends currently impacting the trucking sector. By staying on top of these developments and taking steps to mitigate their associated exposures, trucking businesses can effectively position themselves to maintain long-term growth and operational success. Connect with a member of our team for additional industry-specific risk management guidance.