As Q3 2022 comes to a close, Risk’s transportation team took a look back over the summer and its challenges. Several key problem areas, such as labor retention, are ongoing hurdles that have been prominent for some time. New topics of concern are seen in the effects of climate change, as well as the financial consequences of businesses incorporating newer technologies into their fleets. How these obstacles affect the industry, as well as the insurance marketplace, are explored below.
Driver Challenges on the Road
The safety of drivers continues to be a major concern. Nearly one out of every five drivers have experienced injuries while on the job. Amazon drivers specifically suffer two-and-a-half times more injuries than non-Amazon drivers. Even worse, one out of seven were injured so severely that they were unable to continue performing their regular duties. Amazon’s approach to the rapid delivery model comes at a high cost for the people tasked with meeting its goals.
Road fatalities remained on an upward trajectory, reaching a 16-year high. As many transportation businesses focus on chasing near-term profit over long-term growth, the hiring of inexperienced labor to meet unrelenting daily delivery goals only exacerbates the industry’s issues.
Operational policies and procedures are adopted to mitigate risks for both employees and other drivers on the road. Neglecting these policies and procedures only causes harm for individual businesses and industry. It is up to businesses to ensure they and their employees are living by their rules for both hiring and training.
In the emerging hazard category is extended exposure to record-breaking high temperatures. This year’s summer saw heat records broken around the United States daily. Many drivers are without air conditioning over their eight hours shifts, which can cause serious physical harm. In July, a doorbell camera captured footage of a UPS driver collapsing from the heat in Arizona. The viral video caused outrage and further criticism of lax employee safety efforts.
Gig-Worker Statuses Hurting Labor Retention
Beyond safety concerns, attracting and retaining talent is an ongoing problem. While there is a surplus of job openings in general, workers seem to be hopping from one company to another in search of better pay and benefits. Revolving door hiring models like Amazon employs, which use a loose contractual, gig-based structure are escalating the problem.
California governor Newsom’s Assembly Bill 5 is seen as a step forward in attempting to protect employee rights from exploitive contractual hiring practices. It is only a matter of time before other states begin to follow. To avoid legal action on a state or federal level, and bring stability to their operations, it is possible companies will transition from contractual hiring to full employment, which would greatly increase hiring and retention.
Swelling Payouts from Litigation
Claims cases going to full jury trial is swelling the costs of settlements. Many attention-grabbing cases are trending due to their egregious nature and high payouts. Following on higher rates of deadly accidents and labor difficulties, the costs incurred from a lengthy trial give underwriters reason for maintaining the hard market.
Costly Vehicle Repair
As transportation companies begin incorporating new vehicle materials and technology that allow for optimization of fuel and driver efficiency, the cost of repair is becoming more significant. Standard safety systems like cameras, GPS, blind-spot detection, and advanced braking systems all add up to an expensive liability. Beyond the replacement cost these components, they often require specially trained technicians for calibration, further inflating the repair costs.
Eyes on the Road Ahead
As the industry faces new and evolving challenges directly affecting business and the insurance market, Risk Strategies continues to stay abreast of these bumps in the road for deeper analysis as we learn more. Follow along in the Risk Knowledge Center for the latest.
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