Answer extracted from the Hit The Brakes: The Can't Miss Topics in the Logistics Industry podcast — listen to the full episode below.
Why are cargo insurance losses pushing up carrier operating costs?
The cargo insurance market is experiencing persistent year-over-year losses that consistently outpace premium increases, forcing insurers to raise rates repeatedly to cover their underwriting shortfall. This cascading pressure directly flows through to carriers, adding a structural cost burden on top of rising liability policies driven by nuclear verdicts.
A Broken Insurance Economics Cycle
Insurers are caught in a math problem: they are paying out more in claims than they collect in premiums, even after raising rates. As Brett Leifert explains in the episode, this creates an endless loop where rate increases become the only lever insurers can pull to restore profitability. Yet because the underlying claims frequency or severity remains elevated, the gap between premiums and losses never truly closes.
Carriers absorb these rate hikes as a fixed cost component of their operating expenses. Unlike fuel or labor, which can be negotiated or offset, insurance is mandatory and largely non-negotiable. Each year's rate increase tightens carrier margins, particularly for smaller fleets with less leverage in the insurance marketplace.
The Liability Verdict Effect
The pressure doesn't stop at cargo coverage. Nuclear verdicts in liability lawsuits have exploded damages expectations, making general liability and auto liability policies far more expensive. These two cost vectors—cargo losses and verdict-driven liability claims—are hitting carriers simultaneously, compounding the effect on their bottom line.
A point detailed in this podcast episode, the market is still in the early stages of adjusting to higher risk expectations. As claims data matures and verdicts continue to set new benchmarks, further rate increases are likely.
"The cargo insurance market has continued to experience losses year-over-year, with premium increases not covering the losses insurers are experiencing."
Brett Leifert — Director of Innovation and Strategy at Fetch Freight, where he analyzes supply chain market trends, capacity dynamics, and freight demand patterns. Leifert provides regular market forecasts and webinar analyses on trucking industry conditions, tracking how regulatory changes, insurance pressures, and macro forces reshape carrier economics.
The broader implication is that carriers cannot rely on volume or efficiency gains alone to offset insurance cost growth. They must either raise rates to shippers, reduce coverage (creating risk), or absorb the hit to profit. Most are choosing the first path, which cascades the cost forward through the supply chain—ultimately borne by shippers.
For shippers managing freight budgets, the lesson is clear: insurance cost inflation is not a temporary blip. It reflects structural claims trends that will take years to stabilize. Discussing these cost pressures with your freight partners upfront is essential to avoiding surprise rate escalations mid-contract.
See also
What impact did recent DOT Blitz Week enforcement activity have on spot market rates and shipper behavior?
DOT Blitz Week was described as an absolute bloodbath, with rates doubling and tripling on some lanes. The effects were so severe that shippers questioned their ability to move freight under any conditions.
How are contract freight rates responding to the spot market inflation, and what percentage increases are typical?
Contract rates are resetting this cycle with increases roughly between 5% to 10%, with an average increase around 7.5% observed. However, tender rejections indicate carriers are testing higher boundaries on some lanes.
What inventory dynamics are emerging in U.S. retail, and what freight demand implications do they signal?
Inventory-to-sales ratios in the U.S. are now at their lowest point since early COVID around 2021, which is setting up an inventory super cycle of significant demand lift ahead.