There is a long standing balance on whether to raise the minimum insurance requirement of carriers or not. However, there are 5 main reasons that could make this a huge problem for brokers.
- Regulation is unnecessary. The main reason for this is that there were only 1 percent of those settled claims that amounted to more than $750,000. With this fact, many groups and companies think that an increase in insurance cost is not apt for the situation.
- The costs are higher. Since 1985, hazardous materials minimum insurable costs has been $1 million US dollars wile for general freight it has been $750,000. If the new costs are to be followed, there will be a dramatic increase in the prices of their services which might affect their business. The ideal way of doing things in this aspect is to do it gradually. If the drastic change in prices is to be followed, general freight insurance would cost $1.6 million and
- Capacity is tighter. A drastic 25 percent increase in the costs of insurance will definitely see a good number of business companies go out. The effect will be that the surviving truck companies will feel the brunt of too many customers due to the closing of the others. The thing is that it is the trucks that are usually insured and not the whole business. So just imagine the financial crunch if the company folds up. Then there is the fact that insurance costs are the highest in its first three years which could discourage new players from entering the industry.
- Adjusted rates for today will take place. High rates have been enforced on all kinds of equipment. Then for a good part of the year, a $2/mile rate has been in place. The business has seen an increase between 9.2 percent and 11 percent compared to the same time last year. Rates could go higher next year.
- Competition may be lessened. Small carriers will be covered by their insurances. It is the larger equipments that may experience problem since they compensate for their liabilities with credit, bonds or other financial sources. The problem is enhanced by the fact that larger equipments do not carry freight cargos that are brokered.
A sudden change in the law for new carriers would definitely have a terrible effect on them.