With the upcoming ELD rule rapidly approaching, many carriers may be surprised what the impact of these devices will have on their insurance rates
Unless you are a large motor carrier, the chances are you have some reservations about the upcoming electronic logging device (ELD) mandate.
As of Dec. 18, 2017, ELDs will be required for the majority of drivers. The ELD rule applies to most motor carriers and drivers who are currently required to maintain records of duty status (RODS) per Part 395, 49 CFR 395.8(a). The ELD rule allows limited exceptions to the ELD mandate, including:
- Drivers who operate under the short-haul exceptions may continue using timecards.
- Drivers who use paper RODS for not more than 8 days out of every 30-day period.
- Drivers who conduct drive-away-tow-away operations, in which the vehicle being driven is the commodity being delivered.
- Drivers of vehicles manufactured before 2000.
Many larger carriers already require their drivers to use ELDs, but for smaller carriers that make up the majority of the industry - by many estimates as many as 97% of all trucking companies have fewer than 20 trucks, and 90% have 6 or fewer – the implementation of ELDs and their associated cost could be a game-changer. The Federal Motor Carrier Safety Administration estimates the cost to install an ELD to be at least $166 per truck for a basic model with an average cost of $419 per unit, depending on features and functionality.
There is some speculation that their may be more mergers and acquisitions due to this rule. But that is only one part of the ELD fallout that could affect the finances of carriers. Another issue that doesn’t receive much attention but could potentially become a larger concern – especially for smaller carriers – is the insurance impact.
“If you’re doing everything right, controlling your [safety] scores, you will be okay,” Andrew Ladebauche, CEO of commercial insurance provider Reliance Partners, told FreightWaves. “We have a lot of carriers who get just as favorable rates who run paper logs as those who run electronic logs.”
The hiccup in this is the belief by some that many drivers are not running within specified hours of service. Because ELDs will record hours accurately and are supposed to be tamper-proof, a more accurate recording of driver hours will happen, potentially leading to a productivity decline of about 4%, and perhaps as high as 20% in some segments, says Noel Perry, Trucking and Transportation Expert with FTR Intel.
“Fudging” of hours will disappear. How much that occurs now in the industry is difficult to know, but Perry says that there is anecdotal evidence that it happens even within larger carriers who use paper logs and certainly among smaller carriers and owner-operators.
“The negative is even the disciplined fleets have been cutting corners,” he says. “If you believe the availability of precise records will cause people to stop cutting corners, productivity will fall.”
Ladebauche says that the insurance industry is expecting the implementation of ELDs industry-wide will lead to safer roads, fewer accidents and “force drivers and companies to comply with the law.” That, he adds, should lower insurance payouts.
Another impact could be a decline in large financial awards in lawsuits, which have been increasing in recent years, Ladebauche says, due to fewer drivers exceeding drive times. Also, evidence suggests that longer driving hours increase crash risk.
“Logbook violations occur for reasons other than long driving hours, but having driven more than 12 hours since the last main sleep, as reported by drivers, was associated with an 86% increase in crash risk, relative to less than 8 hours,” according to an Insurance Institute for Highway Safety report issued last week. “Having driven more than 5 hours since stopping prior to the inspection (defined as having gotten out of the driver seat) more than doubled the risk of crashing.”
The report studied approximately 190 truck-involved crashes in North Carolina.
Ladebauche says the implementation of ELDs, in addition to providing an expected drop in crashes, will also clean up other problem areas for drivers.
“It will greatly eliminate driver [logbook] errors,” he says, which affects a carrier’s CSA score. “Logbook errors are a big area that regulators look at. Hopefully, that gets resolved permanently.”
Ladebauche says one solution that some fleets may choose to employ is increasing the use of slip-seating drivers. “Insurance companies tend to look at that – a fresh driver – favorably,” he says.
Those fleets that decide to deploy more full-featured ELDs beyond basic HOS reporting might see other benefits, including lower maintenance costs and better insurance rates.
“Some of the ELDs do other things and there are other programs” fleets can take advantage of, Ladebauche notes, pointing out that some systems provide GPS tracking and engine data reporting that can be used for improved asset utilization and more preventive maintenance, both of which have insurance benefits. “You will see more and more programs [from fleets] and from an insurance standpoint, that helps.”
In sum, Ladebauche says that those fleets currently complying with HOS regulations – whether they are using ELDs or paper logs – shouldn’t see any financial impact either from loss of productivity or increased insurance rates. Those that have drivers pushing and exceeding the limits, though, may see both a productivity hit and a rise in their insurance rates.