On November 28, the Federal Motor Carrier Safety Administration (FMCSA) posted an advance notice about a proposed rulemaking that’s going to be big news for motor carriers, freight brokers and forwarders. The most important point is the FMCSA's suggestion to "increase the minimum levels of financial responsibility for motor carriers, including liability coverage for bodily injury or property damage."
As of November 28, a 90-day comment period on the proposed rulemaking began, allowing anyone to leave comments in response to a list of 26 questions that the agency posed. There was a big response because the implications for the industry could be huge.
Financial Responsibility for Motor Carriers, Freight Forwarders and Brokers
In 2012, the FMCSA was directed to report on the current minimum financial responsibility requirements for the transportation of passengers and property. It was also ordered to assess "the current bond and insurance requirements for freight forwarders and brokers, as well as brokers for motor carriers of passengers."
In April 2014, the FMCSA delivered its findings. The group concluded that financial responsibility minimums are not enough to cover the costs of some crashes. The report's results are based on a study conducted by the Department of Transportation's (DOT) John A. Volpe Transportation Systems Center (Volpe). The report also included findings from a series of other studies performed by the Pacific Institute for Research and Evaluation (PIRE), the Alliance for Driver Safety and Security, Inc. (Trucking Alliance) and the American Trucking Associations (ATA).
The FMCSA is careful to note that there are no clear-cut findings that would definitively warrant an increase of financial responsibility minimums. Some of the highlights from the studies conclude that catastrophic motor-carrier incidents are rather rare. Furthermore, claims related to events that exceed the current minimums comprise less than 1 percent of all such incidents.
Yet the FMCSA report also claims that current minimums can’t adequately cover such crashes, due to the increase in medical costs over the years. Insurance levels did not keep up with the growth of the medical consumer price index over the years. This created a gap that the report claims must be filled.
PIRE's and Trucking Alliance's findings also suggest that minimums should be raised. But to further complicate matters, ATA's findings show that, currently, the bulk (about 83 percent) of insurance policies for trucks over 26,000 pounds are written higher than the minimum $750,000—at $1 million. Only 6.5 percent of all such trucks are insured at limits under $1 million and 10.5 percent are insured at a limit higher than $1 million.
On the other hand, FMCSA's report on whether to raise financial responsibility for motor carriers, freight forwarders and brokers also has its blinds spots. FMCSA couldn’t get useful data concerning the pricing of insurance premiums and the underwriting process. Due to high competition in the insurance industry, these were not made available so FMCSA had to base its assessment on limited data.
As a result, the agency now opened the proposal for comments from the public. Comments can be left and read at the Federal eRulemaking Portal's website under the Docket Number FMCSA-2014-0211. The agency is listening, so what are motor carriers, freight forwarders and brokers saying?
Did the FMCSA Proposal Run into a Wall?
Sentiments across the industry, especially among small and medium businesses, were so far unambiguous. In a Land Line magazine article from November 5, opposition was firm.
The article, titled “Logic and facts aside, FMCSA pushes ahead to up insurance requirements,” claimed that there wasn’t solid enough justification for raising premiums. It further claimed that the rulemaking process was introduced in a skewed and biased way. Additionally, the article also challenged some of the findings of the studies quoted above, such as Volpe's, by quoting dissenting specialists from within the industry.
So far, the responses in the Federal eRulemaking Portal to the agency's 26 questions mirror those sentiments. Carriers, forwarders and brokers claim that raising minimums don’t make roads safer and reduce crashes. Some even argue that it will lead to more crashes, since many carriers would be forced to cut costs elsewhere once their premium is raised.
Others feel that this is an attempt by lobbyists to drive small- and medium-sized businesses out of the industry. These comprise about 90 percent of it and many think that smaller firms are effectively being shown the door with such an increase.
Many of the comments are left by people claiming to have been around for decades. According to them, there are plenty of better options for making the road safer, including greater emphasis on training, better regulations on new and inexperienced drivers, and more.
Join the Discussion!
What would such an increase mean for your business? Would a higher insurance premium be a burden? Fortunately, if you have an opinion on these changes, your voice can have an impact. We'd love to hear from you, but make sure to also leave your comment under the docket because that's what really counts!