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HUB International 2022 Outlook

Transportation Industry

 

Stability, Creativity and Growth

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Open Roads With Persistent Potholes Ahead

Last-mile delivery will flourish and the pervasive driver shortage may get worse. But shipping rates and demand will remain high, while digital and analog solutions will help alleviate the industry’s most persistent problems.

Booming business with caveats

As the pandemic enters its third year, long-term problems will continue, but with a strong market and new ideas for solving persistent issues, transportation operations can succeed in 2022.

The best-prepared transportation operations will find 2022 to be rewarding indeed.

The industry’s struggle to attract drivers while adhering to safety will define 2022

In transportation, old problems never seem to go away.

COVID-19 and its subsequent shocks to the supply chain has forced trucking fleet operators to rethink their business model. But nothing may define 2022 as much as the industry’s ongoing struggle to attract drivers while maintaining strict adherence to safety. Trucking companies have no difficulty finding business opportunities but may not have the personnel to take advantage of them.

The transportation industry is trying to get its arms around the seemingly unceasing labor shortage through improving working conditions, raising wages, aggressively recruiting drivers and offering enhanced benefits.

And to expand safely, fleet operators will leverage telematics to monitor drivers, engage in mock audits with tabletop exercises and implement enhanced driver training and retention programs.

The goal will be to stave off policy rate increases. Insurers are still recovering from nuclear verdicts and catastrophic weather during the last few years, and rates are expected to rise as much as 10% in 2022. Underwriters will closely scrutinize transportation companies’ risk exposure and mitigation plans — and deny coverage for operations that don’t pass muster.

Here’s what to expect from the transportation industry in 2022:

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As last-mile delivery has exploded, the driver shortage has grown worse

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Recruiting and retention efforts have accelerated through higher pay, better benefits and improved working conditions

1. We may see pinpricks of light at the end of the driver shortage tunnel

Pre-pandemic, the driver shortage was expected to swell to 100,000 by 2023.1 But since consumers started shopping online en masse in response to COVID-19, last-mile delivery exploded. And the gap between available truckers and demand got even wider.

The good news? Fleet operators have options to alleviate the problem. Proposed legislative and regulatory changes could lower the Commercial Drivers License (CDL) eligibility age to 18 from 21.2 In 2022, more driver training will take place at the community college level and through private organizations committed to vocational training.

Retention efforts have accelerated too, with higher pay, better benefits, working conditions, security for female drivers and more. Such changes are likely to be permanent (economic conditions notwithstanding). Fleet operators are also instituting safety bonus programs in order to encourage safe behavior and reward their best drivers.3

Balancing the urgent need for drivers with a culture of safety is incredibly important. Those that are innovative in their hiring and retention while making safety a priority — think safety bonus programs, improved benefits and better training — not only will have a greater opportunity to expand but reduce the risk of a catastrophic lawsuit.

1 American Trucking Associations, “Truck Driver Analysis 2019,” July 2019.
2 The National Law Review, Federal Regulators Consider Dropping Long-Haul Trucking Age Requirement to 18, January 12, 2021.
3 Tread, “Truck driver safety incentive program: 5 key practices,” accessed September 29, 2021. 

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Explosive online sales will continue to create explosive growth in last-mile delivery

2. Last-mile delivery will occupy the passing lane in 2022

It's become a truism that COVID-19 transformed e-commerce, which, in turn, transformed delivery and trucking.

Online sales reached $792 billion in 2020, a 32% increase from 2019. And 2021 is bringing more of the same — first-quarter 2021 online sales were up 39% year-over-year.4

Consumers and businesses expect fast delivery for their online purchases, putting a premium on hiring last-mile delivery drivers. While the pay for last-mile delivery is less than for long-haul truckers, many have switched so they can sleep in their own beds every night.

The challenges for last-mile fleet operators are not insignificant: continued supply chain problems, driver behavioral issues and managing logistics in order to deliver thousands of packages daily. This comes on top of the fact that many of these delivery companies are new to trucking.

Last-mile intrastate operators rely heavily on independent contractors. But these operations are subject to state laws, which often threaten the independent contractor operating model. The federal infrastructure bill that was making its way through Congress in late 2021 also challenges the independent contractor driver status.

The legislation calls for huge fines for misclassification on last mile and long-haul carriers

However, last-mile delivery has also led to new auto coverage options. As telematics becomes cheaper and easier to use, premiums will be based on mileage and driver behavior. It's possible that insurers may soon demand in-cab technology for last-mile delivery operations; those that do opt for telematics in 2022 should consider themselves ahead of the curve for risk management as well as business growth.

4 Digital Commerce 360, “Coronavirus adds $105 billion to US ecommerce in 2020,” June 16, 2021.

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2022 US Transportation Insurance Market and Rate Report

Understand what to expect in advance of your next renewal.

Telematics offers a unique opportunity to reduce risks and insurance rates

3. ELD to come of age in 2022

Electronic logging device (ELD) technology, or in-cab telematics, has been mandated for long-haul commercial drivers since 2017 to help enforce laws prohibiting drivers to work more than 11 hours in a 14-hour window.5

The expectation is that as ELD proliferates, insurers will increase the use of mobile driver data and dashboard cameras for immediate crash notification, to underwrite risk, gather crash data, recreate a crash and for claims remediation. Underwriters will want in-cab data reports before quoting coverage.

The investment in ELD can be significant. But for trucking operations, telematics offers a unique opportunity to reduce risks and ultimately, insurance rates. For those that invest in ELD, working with an experienced partner on implementation will get the most out of telematics.

5 Business Insider, “A safety law that truckers hate is driving up prices for consumers on everything from groceries to Amazon Prime. Here's what you need to know about it,” December 28, 2018. 

Working conditions for intermodal drivers has hurt hiring and retention

4. Global supply chain woes will hamper intermodal carriers

COVID-19 has put a hurt on intermodal carriers.

The supply chain backups resulting from the pandemic are a major problem for short-haul drivers that move product from coastal ports to inland distribution centers like rail yards.

Worse, getting containers loaded and finding drivers to move them inland will be even more difficult in 2022. Global supply chain issues are still unresolved, cargo boxes are in short supply and often, simply getting out of a port with cargo can be an administrative and bureaucratic nightmare.6

Inland ports and rail centers like Chicago, Salt Lake City and Greer, S.C. are trying to alleviate the pressures on intermodal, bringing more rail, trucks and even aviation to relieve the pressure on intermodal truckers.

However, working conditions for intermodal drivers remain a serious challenge to hiring and retention. States are also pushing for clean energy vehicles for intermodal operators that often sit and wait in port lines for hours to fill their trucks.

Driverless vehicles are also a future solution to this intermodal equation, though it's unclear how underwriters will insure them.

6 Bloomberg Businessweek, “‘Just Get Me a Box’: Inside the Brutal Realities of Supply Chain Hell,” September 15, 2021. 

Read our 2022 Employee Benefits Outlook and learn how benefits can support recruitment and retention.

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Moving Forward in 2022

Whether it’s traditional long-haul, last mile or growing intermodal, fleet operators that emphasize risk management will find themselves more profitable and with lower insurance rates in 2022 and beyond. While the high demand for shipping and relatively stable economic conditions have buoyed the industry the last two years, those conditions aren’t a given — but strong risk management delivering results always will be.

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