70% of for-hire carriers in the US own just a single power unit. Further, 91.5% of all carriers operate with six or fewer trucks. Without these small fleets, it’s hard to imagine how America would function; packages wouldn’t arrive at our doorsteps, food wouldn’t reach grocery store shelves, and gasoline wouldn’t make it to the pumps. Owner-operators and small carriers are the hidden heroes behind our day-to-day conveniences.

For many experienced owner-operators, starting their own authority becomes an attractive career progression, especially as legislation like AB5 in California changes requirements on independent contracting. But, starting a new authority and making the leap from owner-operator to independent motor carrier authority comes with new challenges. One of the biggest and earliest challenges that new authorities face is acquiring insurance. Here, legislation can serve as a helping hand or create more problems to navigate.

If you’re an owner-operator starting a new authority – or an experienced carrier looking to reevaluate your insurance policy – understanding the trucking insurance landscape will help you navigate the challenges of running your business.

The State of Trucking Insurance in 2023

Whether your fleet includes one truck or six, insuring your vehicle is a non-negotiable – some types of insurance are legally mandated while others will be required by any potential business partner. In either case, you’ll be looking at purchasing multiple types of insurance to give your business adequate coverage.

It can be tempting to “set it and forget it” when it comes to your annual insurance policy, but the reality is, the insurance industry is undergoing a lot of change right now. Those changes then create a ripple effect on trucking fleets. While some legislation might be a tiny splash for the big carriers, small carriers might find their business drastically impacted in the wake.

If you’re thinking of becoming a small business owner by starting your own authority – or if you already are – here are a few pieces of recent legislation that you should be aware of.

The Hidden Costs of Going Green: California’s EV Legislation

Out of California comes a rollout of sustainability measures that will hit independent trucking businesses the hardest. Earlier this year, California banned diesel trucks with engines older than 2010, and more clean energy bills are fast approaching. By 2035, half of all heavy vehicles sold in the Golden State must be electric with the eventual goal of reaching 100% electric trucks by 2045. Setting aside questions of EV charging and feasibility, let’s focus on what this means for small, independent carriers buying trucking insurance.

Imagine that, like 350,000 other truck drivers in the US, you’re an independent owner-operator. Three types of insurance will be crucial for setting your business up successfully. First, there’s auto liability coverage, which all trucks are legally required to have. Then, there’s cargo coverage, which any business partner you work with will expect you to have in order to protect their freight. Lastly, there’s physical damage insurance, which is the type of insurance that will be most impacted by electric vehicle mandates.

Physical damage insurance costs go up as the cost of your vehicle goes up, meaning that if you’re forced to buy a newer – and much more expensive – electric vehicle, you’ll also need to buy more expensive insurance coverage along with it. If you have a high enough cash flow, you could offset some of that cost by taking a higher deductible, but for the vast majority of new authorities, this option is too costly.

Another option is that you opt not to purchase physical damage insurance at all if you own your vehicle outright. But, if you get in an accident or there’s any type of natural disaster that damages your vehicle, you – the independent motor carrier – will be out the full cost of replacing or fixing the vehicle.

California’s electric vehicle push creates a snowball effect on insurance that arguably comes down on independent carriers the hardest. By forcing small businesses to either shoulder the steep costs of insuring a newer electric vehicle or take on a troubling amount of risk, mandates such as these could discourage owner-operators from starting their own business.

Tort Reform a Courtroom Win for Independent Carriers

Meanwhile on the East Coast, Florida’s recent tort reform gives much-needed relief to small trucking companies by significantly reducing the likelihood of nuclear verdicts in liability cases, which encourages more insurance companies to offer coverage in the state.

Florida’s tort reform shortens the statute of limitations on negligence lawsuits, revises admissability standards for medical evidence, and modifies negligence standards so that if a plaintiff is more than 50% at fault for their injury, they cannot recover damages. Together, this tort reform revamps the state’s lawsuit standards to reign in the impact of nuclear verdicts.

Nuclear verdicts happen when a trucking company is found liable for $10 million or more in a lawsuit, with the highest verdicts reaching well into the hundreds of millions. After making their way through the courts, some cases unfold so that insurance companies end up being held responsible to pay some – or all – of the verdict amount.

Of course, costly verdicts can sometimes be justified or even necessary to hold trucking and insurance companies accountable. But, in jurisdictions where nuclear verdicts become excessively common, insurance companies become less willing to provide insurance in these areas or raise prices to protect themselves. It’s basic supply and demand from there. Fewer insurance providers means higher insurance costs to consumers. Once again, independent carriers and small trucking fleets bear the brunt of high insurance costs.

Tort reforms, like we’ve seen recently in Florida, put a ring fence around what types of cases and evidence can qualify for nuclear verdicts. These limitations and guidelines stabilize the insurance business, which then helps stabilize trucking and the larger economy.

For you as the independent carrier, tort reform creates a more balanced business environment and better insurance choices.

Two Roads: The Future of Independent Carriers

Florida and California have some of the newest legislation affecting trucking insurance, but change is the norm in this industry anywhere in the country. Goods get to their final destinations thanks to the many small, independent carriers and their ability to meet challenges with flexibility. Legislation can either clear the way for them – or become a roadblock. When it comes to insurance legislation, the unseen impacts these laws have on the small carriers down the line should never be pushed to the background.

Joe Nibley is the Vice President of Milepost Insurance Agency LLC, a commercial auto and trucking insurance agency. For more information, visit (company website).