Dive Brief:
- Knight-Swift Transportation Holdings will shut down its struggling third-party insurance service, which took a $71.7 million operating loss in Q4, prompting the carrier to decide to exit that line of business, President and CEO Dave Jackson said Wednesday on a Q4 earnings call.
- The loss leveled the carrier’s overall operating income to $18.3 million — a 91% decrease from the $202.5 million boom Knight-Swift experienced in Q4 2022, according to an earnings report.
- “We have begun canceling policies and expect to have that completed by the end of the first quarter of 2024,” Knight-Swift CFO and Swift Transportation President Adam Miller said on the earnings call. “We'll still have the outstanding claims to administer until ultimate settlement.”
Dive Insight:
Knight-Swift reported operating losses with its third-party insurance services every quarter throughout 2023 as executives noted claims were more frequent and severe than in the past.
At first, the carrier pursued a strategy of temporarily reducing exposure as an operating loss for the offering went from $22.8 million in the red in Q1 to negative $15 million in Q2 and negative $15.9 million in Q3. The company moved to raise premiums and made underwriting more stringent, but smaller carriers still also faced a harsh market.
With losses persisting, executives determined the need to exit a model that the company previously hailed as a potential for growth. Knight-Swift’s 2023 outlook previously forecast “increased customers and higher premiums.”
While third-party insurance offerings are slated to close at the end of Q1, addressing claims and closing outstanding liabilities could take time, Miller said. As part of its transition, the business had reduced the number of trucks under coverage by 75%, he said.
“Because we have to give certain notice to the insurees before we can cancel policy, there is this run out period,” he said. “It's essentially running out the claims and closing out the outstanding liabilities over the next probably year or two.”
