As 2025 approaches, nearshoring is set to reshape North American supply chains, offering new opportunities for the U.S. transportation sector. However, significant challenges remain, including evolving independent contractor regulations, persistent driver shortages and rising sustainability costs. Fleet operators that leverage data analytics and technology to enhance their business strategies will be best equipped to steer these challenges and thrive in the year ahead.
NAVIGATING PROFITABILITY CHALLENGES AMID RISING COSTS
Inflation is stabilizing and gas prices are dipping, offering some relief, yet the road to profitability remains challenging.
Insurance costs present a significant financial challenge. A recent market survey highlights how commercial auto insurance premiums rose by nine percent in Q2 2024, with many carriers exiting the market or limiting coverage due to profitability concerns. With 74 percent of respondents in HUB International’s Executive Outlook Survey indicating inadequate insurance coverage, fleet operators need to prioritize risk management and analytics tools to assess optimal coverage levels rather than cutting back on protection.
To further safeguard profitability, companies can benefit from technology that enhances operational efficiency and minimizes expenses related to regulatory compliance, emissions and employee health.
BALANCING SUSTAINABILITY AND EFFICIENCY IN FLEET MANAGEMENT
Sustainability is becoming central to trucking business strategy, especially as regulatory bodies tighten emissions standards. In 2024, the EPA announced stringent emission regulations for heavy-duty vehicles produced from 2027 onward, pushing fleet owners and operators to adopt cleaner technologies, including hybrid and electric trucks. While these investments entail upfront costs, they promise long-term savings through lower fuel expenditures and improved efficiency.
For companies involved in last-mile delivery, sustainability is more than a compliance issue; it’s a market differentiator. Many customers now expect transportation providers to show a commitment to reducing their carbon footprint, which can increase competitiveness in contract bids. By integrating telematics and other data analytics tools, fleets can optimize fuel use and identify opportunities for conservation, meeting both regulatory requirements and customer expectations.
CROSS-BORDER TRANSPORT CHALLENGES AND OPPORTUNITIES WITH NEARSHORING
One of the standout trends moving into 2025 is nearshoring, where U.S. companies bring manufacturing closer to home, primarily to Mexico. This shift is creating significant opportunities for the U.S. trucking industry, increasing demand for cross-border transport.
However, nearshoring isn’t without challenges. Transporting goods across borders introduces new regulatory requirements, and issues related to customs, driver security and insurance. Cross-border activities can expose freight businesses to additional risks if insurance policies don’t extend coverage internationally. Fleet operators entering this market need to understand the legal and insurance requirements of cross-border transport and consult with brokers specializing in cross-border operations.
ADDRESSING WORKFORCE CHALLENGES IN A SHIFTING LANDSCAPE
The trucking industry’s workforce issues remain critical. In 2023, there were over three million unfilled truck driver positions worldwide, and this shortage is expected to worsen. Retaining skilled drivers is challenging, particularly with rising health insurance costs that constrain fleet operators’ ability to provide competitive benefits.
Fleets that personalize benefits using data analytics are likely to have an edge in recruitment and retention. Offering alternatives to traditional plans, like health captives, enables freight businesses to provide robust coverage without inflating costs. Retirement benefits are essential for retention as well as financial wellness programs.
With independent contractor regulations evolving, flexibility is essential for transportation companies. The Department of Labor’s 2024 policy shift reclassifies many independent contractors as employees, posing significant cost implications for fleet owners and operators. Many contractors may prefer to exit rather than relinquish their autonomy, and companies may need to overhaul business models or engage contract carriers to maintain capacity.
STAYING ON COURSE FOR SUCCESS IN 2025
With the complexities of 2025 in sight, fleet operators should prioritize strategic planning and data-driven decision-making. Here are three strategies to strengthen profitability and resiliency.
Invest in telematics and technology. Leveraging telematics and data analytics helps reduce risk, improve safety and streamline operations. Companies that integrate these technologies with claims data will likely experience significant gains in efficiency and safety.
Prioritize workforce needs. Personalized benefits packages and financial wellness programs can help attract and retain drivers. Consider exploring options beyond standard health insurance and offer reward programs to foster engagement.
Maintain transparency with brokers. Regular communication with brokers, including sharing data and analytics, ensures that coverage aligns with evolving business needs. Reviewing exposures and insurance needs at least 90 days before policy renewal allows for optimized coverage, better terms and minimized risk.
As the industry navigates a changing landscape, businesses that prioritize technological innovation, strategic insurance planning and employee engagement will be well-equipped to tackle the challenges and seize the opportunities that 2025 will bring.
ABOUT THE AUTHOR
Lisa R. Paul, CPCU, is chief strategy officer for transportation at global insurance brokerage Hub International. Creating, planning and strategizing for success in transportation relative to the cost of risk, margin objectives and driving organic growth through the digitalization of data for transportation clients and insurance brokerage operations and their insurance risk partners. She has over 30 years in commercial auto underwriting, program and product development, including MGA Transportation and Specialty Auto Underwriting and SaaS Transportation Management.
