The Impact of Double Brokering: How It Happens and How to Mitigate It
Double brokering has always been an issue in the freight industry but it has taken an alarming upward turn in the past year. It’s vital to assess exactly what’s causing the surge in double brokering, and what the implications are for shippers.
Double brokering happens when an entity bids on a load posted by a broker, and then brokers it out to a third-party carrier. In the past, there have been instances where this has happened by necessity such as the last-minute replacement of a carrier that doesn’t have the right credentials or equipment.
With criminal double brokering, a freight broker awards the job to a fraudulent motor carrier, who could be posing as a 3PL. This motor carrier then re-brokers the load to a second carrier, who they either underpay or fail to pay at all, so they can pocket the difference.
It happens without the knowledge of the shipper, the original freight broker, and sometimes even the secondary carrier, who could end up shipping the load for free.
Neither the shipper nor the original freight broker has any idea of the conditions the load is being transported in, who’s driving it, or whether it’ll arrive at its destination, which causes all kinds of supply chain complications.
Within double brokering, a type of straight-up theft called load phishing has also emerged. With load phishing, it’s the carrier moving the goods that’s fraudulent, usually impersonating an established trucking company with an almost-identical name, to fool shippers that need to get their goods out ASAP. The carrier picks up the load, flashes their fake credentials, and drives off into the distance with the cargo.
Inflation is contributing to the steep increase in cargo fraud more generally. As the value of certain goods increases, they become more attractive to criminals, who are getting more resourceful and ingenious.
Allowing Cargo Fraud to Thrive
A huge number of variables are at play in freight and logistics, all operating in a platform economy. That means shippers are navigating digital marketplaces, TMS boards and more, which minimizes visibility between organizations in the supply chain, allowing double brokering and other types of cargo fraud to thrive.
This crime is dually profitable. Not only does the fraudulent entity get the fee for being awarded the load in question, but the shipment could be stolen and resold too—meaning they would profit from the value of the load itself. This series of events is a nightmare for shippers, who are left to deal with a range of difficult consequences, such as goods being damaged in transit or being stolen for resale.
With so many shipments in transit uninsured, these risks wreak havoc on the supply chain and profits of small and mid-sized enterprises. Even if a shipment is insured, there’s no guarantee it’ll be covered for loss or damages caused by double brokering.
There are big implications for cargo insurance providers too. Inevitably, a spike in double brokering means a higher number of claims for brokers to deal with, which can cause a backlog for companies without efficient automated claims processes.
Equally, when insurers pay out, they can often recoup some of the settlement from the carrier (if they’re liable). With claims resulting from double brokering, the carrier might be completely unknown, so underwriters swallow more of the loss than they would normally, which isn’t sustainable over the long term.
Procuring the correct type of freight insurance is among the essential steps shippers can take to minimize the impact of cargo fraud—in all its evolving forms—on their business.