US carriers might soon see a spike in their liability insurance minimum because the Federal Motor Carrier Safety Administration (FMCSA) said the current $750,000 minimum is too low.
In a report to Congress, the FMCSA said current minimums need to be re-evaluated and that the agency is looking to create a rule to increase those minimums.
Right now, the minimum is $750,000 for general freight, $ 1 million for the less harmful dangerous goods and $5 million for the most harmful dangerous goods. These minimums were last updated in '85.
The FMCSA's initiative is in response to a study ordered by Congress in 2012 that looks at the increasing cost of crashes. At the time, Congress was drafting the MAP-21 law and considered upping insurance minimums from 750K to $1 million, but decided to have the FMCSA study the effects of changes and conduct reviews ever four years.
The agency found that catastrophic crashes whose costs exceed current minimums are rare – just one percent of crashes, but even so, when they do happen, the costs can exceed the current minimums.
Why? The main reason is increased medical costs.
If the minimums were pegged to the medical CPI, general freight would require $3.2 million, the most harmful of dangerous goods would require $21.3 million and other dangerous goods would require $4.3 million.
Even if the minimums were pegged to the lesser standard of core CPI, they still would be significantly higher: $1.6 million for general freight, $10.8 million for the most dangerous goods and $2.2 million for other dangerous goods.
