June 2009 | Commentary | Viewpoint

Does Your Cargo Insurance Deliver?

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Cargo theft amounts to $25 billion in direct merchandise losses each year, estimates the National Cargo Security Council. Full truckload theft in 2008 increased 13 percent over the prior year, reports FreightWatch International. Considering that 675,000 registered interstate motor carriers move 65 percent of the freight in the United States, the odds are good that many businesses may experience cargo theft at some point.

Statistics like these signal that corporate logistics managers should make thoughtful decisions about their insurance coverage and insist that the carriers they use do the same. A smart choice is to team up with an insurer based on the overall value it delivers, moving beyond the basic pledge to make payments when losses occur.

WHAT TO SHOP FOR

Someone in the market for a new vehicle typically will visit several car lots before making a purchase. If two dealers offer competitive pricing, but one throws in an extended warranty, roadside coverage, and undercoating, the buyer undoubtedly will take the offer that includes the free extras.

When it comes to insurance, however, decision makers often stop after conducting only rudimentary research. They may simply compare coverage terms, limits, and premiums without investigating any of the possible extras that an insurance company offers.

That can be a costly mistake. Insurance companies differ greatly in how they view and respond to customers. Businesses can choose an insurance provider who solely collects premiums and pays losses, or they can choose to be part of an independent agent and insurer's team, where the relationship goes beyond paying the claim and focuses on reducing risk.

To find an insurance company that will go the distance for you, look for:

1. Risk control services. Business managers juggle multiple priorities, but a thief has only one focus: stealing valuable goods. That puts a business at a disadvantage unless it can tap into resources that provide expertise to help with theft prevention. An insurer that offers risk control services gives businesses a trustworthy source of information.

Look for an insurer that will send cargo specialists to your sites to review procedures and training regarding cargo loss prevention and mitigation, with a specific focus on theft deterrence. This expertise means they can offer advice tailored to your operations. Ask about the insurer's knowledge of companies that specialize in cargo theft prevention devices, and confirm that the insurer has lab-tested these devices for effectiveness.

2. Specialty investigative units. All insurers employ investigators or contract with outside vendors for loss investigation across the broad span of insurance claims. A specialist who solely focuses on cargo theft, however, has an advantage that provides value to customers. These specialists study and understand the latest crime trends, and can spot patterns in the details of a loss that may solve a case or lead to more effective prevention measures. They have developed relationships with local law enforcement to move cargo theft investigations along quickly.

Find an insurer with an investigative team experienced in cargo theft and criminal conduct. They'll provide additional advice regarding the cargo industry. The insurer should deliver customer updates on local crime conditions, such as recent thefts, gang activity in the area, new scams, and other techniques being utilized by thieves.

3. Underwriting expertise. Good insurance service begins with agents who know the expert underwriters for the cargo industry. Their knowledge is helpful in crafting coverage that addresses exposures related to the operations of truckers, logistics providers, warehousemen, or freight brokers and forwarders.

Look for an insurer that has experience with the type of contractual liability agreements that are part of a logistics manager's daily life. It's easier to review coverage for potential gaps when your agent or broker and the underwriter all understand the logistics segment and your role in it. Making sure there are no coverage gaps is only possible with knowledgeable assistance from your underwriter.

4. Specialized claims handling. An insurer's claims staff may be expert at reading the policy's fine print and filling out the paperwork that starts the payment on its way. But if they are handling workers compensation cases, automotive liability, and personal injury claims all on the same day, they may not have developed the specific knowledge and insight necessary to deliver the best service when cargo disappears.

Choose an insurer that routes all cargo theft claims to specialized claims professionals. They understand the complex liability exposures and contracts associated with shipping goods. They know the right questions to ask when a crime occurs and the best resources to tap for each claim.

All cargo losses are a hit on the balance sheet that few businesses can afford. Even with insurance coverage in place, businesses suffer from deductibles they must absorb, the unavoidable disruption claims cause, the lost goodwill of customers who do not have the revenue-generating goods they were expecting, and the impact that losses may have on insurance premiums in the future.

Good agents can help risk managers compare coverages and services. They can help decide which insurer can make a difference. A corporate risk manager wants an insurance carrier who is actively involved with reviewing risk management exposures and offers input as business operations and needs change.

This difference is vital, and the payoff is real. Getting the most for your insurance dollars can come long before a claim is made.

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