Spring is here and with it—storms.
And, as in springs gone by, shippers just like you may discover the hard way that carrier liability policies don’t cover Acts of God.
Of course, that’s not the extent of the exposure. Carrier liability policies also don’t cover inside theft, fire damage, improper packaging, loading and unloading damage by other parties, and more.
Straight-line winds flip the tractor-trailer hauling your palettes of wine? Your shipment of expensive electronics arrive a little lighter than when it left? Fire turn your container filled with designer denim to ash in the middle of the Pacific?
Sadly, you’re out of luck—and you’re not alone. Today, roughly 80-90% of loads are shipped under or uninsured.
So, what can an unexpected cargo loss really cost your business?
Much more than you might think right off the bat.
It’s not uncommon for shippers to see the value of the load as the extent of their loss, but other related costs must be factored in for a true understanding of the impact, including:
- Supply chain interruption costs
- Expedited replacement freight costs
- Damaged cargo storage and disposal costs
- Claims filing labor costs
And, of course, we’re just talking about the hard costs that can be fairly simple to calculate here. We haven’t even begun to factor in the impact on customer loyalty and business reputation—damage that could translate into canceled deliveries, customers switching to new suppliers, and lost revenue.
Feeling the pain
According to the National Cargo Security Council (NCSC) U.S., the global financial impact of cargo losses exceeds $50B annually. That’s a lot of pain—though it certainly isn’t felt equally.
If you operate in an industry with thin profit margins, like retail, for example, cargo losses can be a particularly tough pill to swallow.
Consider Ralph Lauren for a moment. In Q1 of 2019, they posted a net profit margin of 6.83%. If they lost a load valued at $100,000, they’d have to close an additional $1.46M in sales to cover the loss. Ouch.
Of course, the risk is highly variable, as well. Shippers moving LTL cargo, for example, are exposed to greater risk than full truckload shipments. Moved through complex networks, it’s not uncommon for this type of cargo to be loaded and unloaded four to six times on its way to the receiver—each step increasing the risk of breakage, theft, and lost items.
In light of that fact, it’s hardly a surprise that brokers and shippers file claims on 3% of all North American LTL shipments. Again, ouch.
So, how can you better protect your business?
For starters, it’s critical to understand that carrier liability policies have been written to protect the carrier—not you:
- They only cover carrier negligence—negligence you must prove
- They settle claims based on a tariff—meaning they pay out only a percentage of your load’s full invoice value
- They take, on average, 120 days to settle—from time of submission to payment
In short, if you’re relying on your carrier’s coverage alone, you’re exposed.
Now, more and more shippers are recognizing the business threat and opting to purchase shippers interest policies. Meaning, policies that place them in the first-party position, offer broader terms, and improve settlement times over carrier liability claims—from an industry average 120 days to 30.
Unfortunately, traditional, per-load, shippers’ interest coverage is getting harder to find as insurers flee the marketplace. What’s more, it can be quite expensive as underwriting and claims settlement labor costs drive up the price of insurance.
The good news: The insurance industry—whose processes have remained largely unchanged for 300 years, is undergoing a digital evolution. AI, predictive analytics, and automation are reshaping the cargo insurance market as we know it. And, by eliminating the time and labor associated with traditional insurance, cutting-edge tech is enabling the delivery of policies that offer far broader coverage, better rates, and faster claims.
What does this mean for you?
With AI-powered shippers’ interest coverage, you can quickly and easily replace the uncertainty of loss with the certainty of affordable protection. Think of it as a balance sheet stabilizer.
And, now in the first party position, you’re in control of your own destiny—you have coverage designed to protect you and your business—and you’re also in control of the speed of claims submissions.
Cutting-edge tech is changing the game—and it’s putting business-saving coverage within reach of every shipper, not just the enterprise.