Regulations that can Make it Harder for Freight Brokers to Get Loads


Back in October 2014, the FMCSA submitted an Advance Notice of Proposed Rulemaking that recommends raising the limit of insurance required from carriers and, though it doesn’t specify a dollar amount, if the minimum is raised, it would have far-reaching effects across the entire freight brokerage industry, affecting all aspects of logistics.

As a broker, you should be aware of such changes that affect the industry, even if it does not seem to affect you. Such changes may start small but they will still undoubtedly affect your business one way or another.

Such changes in any existing regulations, if replicated today, will surely impact not just those directly involved, but all players in the industry.

Below are 2 reasons why such regulations should concern you as a businessman:

1.Higher Costs

The current minimums of $750,000 for general freight and $1 million for hazardous material have been in place since 1985. According to the FMCSA, had those amounts kept pace with inflation, the minimum would be anywhere from $1.6 million to $3.2 million, depending on whether you use the consumer price index or the medical consumer price index.

Trucking companies consider insurance as one of their biggest fixed costs. It is estimated that any increase in the required insurance minimum would raise premiums about 25%. For many carriers, the cost of doing business would increase dramatically, and in turn, will increase their prices to cover such expenses. Brokers such as yourself will have a hard time finding capacity that would not cut too deeply into your own expenses.

2.Tighter Capacity

A 25% increase in insurance expenses is enough to put a number of owner-operators and small carriers out of business. Such situations can further tighten the already tight truckload capacity. These expenses are tied to equipment rather than the business as a whole, meaning some carriers won’t be able to maintain the same number of trucks to support their business. Insurance premiums also tend to be highest in the first three years of coverage and could discourage any new players from entering the business.

Insurance is but one of the many factors that affect the industry as a whole. As a freight broker and as a businessman, you need to be aware of any changes in the industry, as these could either break or make your industry depending on how and how fast you can react.

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