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Brokers Have Until Feb 26th to Contact the FMCSA & Influence Proposed Carrier Liability Insurance Increase

carrier liability insurance

The frustrating feeling, that government regulators aren't listening to you, is a common one within the freight industry. But there are cases when new proposed regulations have specially allotted periods for public comment, and we’re in the midst of one right now. The FMCSA is aiming to increase minimum carrier liability insurance levels in 2016, and is asking for input from both carriers and brokers. Changes here could have a major impact on the market. The higher the minimums go, the more difficult it may be for small and medium sized carriers to survive, especially since the industry was already hit hard by last year’s freight broker bond increase. And because carriers and brokers rely on each other to function, anything that affects one affects the other. So, whether you’re a broker or a carrier, read on to find out why you need to take advantage of the comment period and how you can make your voice heard.

What Is Carrier Liability Insurance and Why Is It Increasing?

To begin, because so many carriers are also in the freight broker business, it’s important to understand the relationship between freight broker bonds and carrier liability insurance. Raising the minimum levels for each one affects the industry differently. For brokers, there’s a universal bond requirement designed to protect customers from unethical practices. The amount doesn’t change with company size. This requirement saw a more-than-sevenfold increase in 2013, something that pushed many brokers out of the industry. Carrier liability insurance, on the other hand, is not one-size-fits-all. It’s a minimum level of insurance required per vehicle. While the bond is designed to protect others, this insurance is designed to protect the carriers and owner-operators from liabilities arising from lawsuits and claims resulting from incidents, such as road accidents. But why are minimums set to increase at all?

Industry Laws Are Modernizing

The current minimum level of carrier liability insurance per truck is $750,000. But this was set all the way back in 1986 and would be around $1.62 million if adjusted for inflation. But, of course, inflation isn’t the only thing that’s changed since 1986. As the FMCSA points out, “If the number had kept up with the medical consumer price index, which measures the increase annually in medical costs, carriers would be required to have $3.18 million in liability insurance.” So while the precise number is being deliberated, it seems clear that almost 30 years of changes necessitate a definite increase in the minimum insurance level. This is a familiar story for those who have been keeping close track of the aforementioned freight broker bond increase. There we saw the same issue — a legal minimum was set decades ago, leading to inadequate coverage and a shock to the industry when the amount was finally modernized.

How Can Carriers and Brokers Submit Their Feedback to the FMCSA?

The FMCSA is accepting comments about the proposed carrier insurance increase until February 26th, 2015 through the Regulations.gov website. The required form contains a list of 26 questions about every aspect of the current set of carrier regulations. While the time commitment to adequately fill out this survey is serious and will likely make it more difficult for small and medium sized brokers and forwarders to commit to filling it out, the level of detail is an encouraging sign that the FMCSA is serious about making sure the changes reflect the realities of the industry. What’s important is that the Trucker Alliance (TA), a lobbying group comprised of larger companies in the industry, is already making its opinions known on the subject by releasing an extensive study. This is sparking some controversy within the industry, with some accusing the TA of using their study to press for changes that will negatively affect its smaller competitors.

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Eric Halsey
Eric Halsey is a historian by training and disposition who’s been interested in US small businesses since working at the House Committee on Small Business in 2006. Coming from a family with a history of working on industry policy, he has a particular interest in the Surety Bonding and Freight Industries and Professional Certification; he loves sharing his knowledge of the industry for JW Surety Bonds.
Eric Halsey
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