As Intermodal Traffic Booms, Truck Companies Cope With Increased Risk

With a big boom in business, intermodal carriers seemingly have the wind at their back, but not all is perfect: Even with an abundance of freight, issues like equipment and chronic labor shortages are causing havoc.

Volume rose 2.6% for the first quarter of 2021 compared with the first quarter of 2020,¹ but labor force participation in the trucking industry dropped 38%.²

The consequences of these issues can be severe. Congested ports increase the time required for unloading containers and create backlogs for intermodal carriers that potentially could affect the bottom line. In fact, loads could be delayed for months due to the cumulative effect of backlogged freight.

Chronic problems rear their heads

For years, the trucking industry has faced a shrinking labor force due to driver retirements and strong competition from other blue-collar jobs that offer higher pay and more work-life balance.

For intermodal carriers, the business model itself is problematic for labor: Because of the shorter distances needed to transport goods from ports to warehouses and local distribution centers, intermodal drivers typically earn less money than their long-distance trucking counterparts.

This not only results in lower wages, but intermodal drivers having less money to spend on newer equipment and maintenance expenses, which increases risk in several ways.

Problems with equipment and containers have only compounded the industry’s problems. Empty containers are often left where shipped and are not returned. Containers are being used as mobile storage. And then there’s a scarcity of chasses to haul the containers, exacerbating shortages.³

Reducing and transferring risk

Regardless of the boom, insurance premiums have risen, often for a decreasing amount of coverage. Trucking companies and independent truck owner-operators are seeing higher liability coverage costs due to an increased number of nuclear verdicts, staged accidents and catastrophic claims within the industry.

In this environment, intermodal carriers need to first reduce risk and then transfer existing risk through insurance when possible. Here’s a breakdown:

• Risk management. Intermodal transportation companies need to demonstrate they are managing operations at a high level. As many intermodal operations consist of independent contractors, this can be a steep hill to climb, but it is scalable. Implementing risk management best practices is the first step.
  
  For example, consider vehicle safety. Drivers need encouragement to regularly maintain their vehicles; many trucking companies have increased the number of inspections. Motor carriers can help identify items that cause the most violations, and remind drivers to have the necessary equipment (such as extra bulbs and fuses for lights) before hitting the road. Even a small step like wiping down lights before inspections can help.
  
  Driver safety and compliance is just as important as vehicle safety. Carriers can remind drivers about expiring licenses, medical check-ups and other compliance issues, but sometimes things can be overlooked. Motor Vehicle Report (MVR) monitoring services help trucking companies detect when a license is suspended or expires, allowing carriers to focus on their daily business.

• Insurance coverage. At its most basic, intermodal companies need auto liability and general liability coverage. They also need cargo insurance to cover the freight being hauled and trailer interchange to insure the container and chassis in their possession. Cargo premiums and limits will vary depending on the contents of the containers and trucks — for instance, it’s more expensive to insure chemical tankers than trucks shipping boxes of toothpaste.
  
  Intermodal transportation companies that use independent contractors expect the drivers to purchase worker’s compensation or occupational accident coverage to cover them if injured on the job. In many cases, the intermodal carrier can help find affordable coverage for contractors. Your broker can help in driver hiring and onboarding, while assisting them with insurance and settlements.

Contact your HUB Transportation expert for more information on reducing risks for your intermodal transportation business. You can also learn more about HUB’s commercial trucking insurance services here.

¹ Heavy Duty Trucking, “Intermodal Woes Challenge Logistics and Supply Chains,” April 27, 2021

² Coyote, “What’s Driving the Truck Driver Shortage in 2021?”, accessed May 18, 2021.

³ C.H. Robinson, “North American Freight Market Insights,” May 13, 2021.