A report from the Federal Motor Carrier Safety Administration to Congress has found that the agency’s minimum financial responsibility for motor carriers requirements have not kept pace with inflation. FMCSA requires for-hire motor carriers to have a minimum of $750,000 in liability coverage. Carriers of hazardous materials are required to have $1 million or $5 million in coverage, depending on the type of materials transported. There are no federal minimum financial responsibility requirements for private carriers (companies that operate their own trucks and do not have for-hire authority), although they are subject to State requirements.

But these minimum federal insurance requirements have not changed since they went into effect in 1985. Using an inflation index over the past 40 years, FMCSA noted medical costs have significantly outpaced the core Consumer Price Index (4.21 percent annually for medical care, compared to 2.80 percent for core).

FMCSA said a general freight carrier would need coverage of $2,192,825 to provide the same coverage as the $750,000 minimum since 1985; this rises to $3,725,822 using the medical cost index. For hazmat carriers, the $1 million coverage (which most NEFI members are required to have) would need to be $2,923,767 to meet inflation, and $4,967,762 using the medical CPI. For hazmat carriers subject to the $5 million minimum requirement, that coverage would need to be $14,618,836 to provide the same protection using the core inflation index, and $24,838,811 using the medical cost index.

The study did not assess potential insurance premium increases as a regulatory cost, however, as the insurance underwriting process is specific to individual motor carriers (based on the size of the fleet, type of operation, vehicle miles traveled, safety performance records [including previous crashes], etc.), and there are no uniform pricing practices.

FMCSA concluded, “In the infrequent but devastating occurrences of fatal and severe/critical injury crashes, the resulting damages, especially those involving fatalities, can significantly exceed the mandated minimum levels of financial responsibility.” The agency also said most of the published reports and publicly available data sources on the adequacy of current minimum insurance levels are not subject to frequent revisions, so there is limited new information or analysis for FMCSA to consider beyond what has been presented in previous reports and studies on this topic.

The report did not make any recommendations for increasing the minimum requirements, however. It asserted, “To determine the sufficiency of the financial responsibility requirements, FMCSA would need access to more granular data from the insurance industry, including anonymized claims information at the person-level.”