By DAN REYNOLDS, senior editor of Risk & Insurance®
For an industry in which so much can go wrong, a lot has been going right for trucking in the past couple of years, from a risk management perspective, at least.
Inland marine insurance rates have been low and have been held down by a stubborn soft market. Helping to keep rates low is the fact that the number of insurance carriers stepping forward to underwrite trucking risks has greatly increased.
One broker estimates that there were five times as many carriers underwriting trucking risks in 2008 as there were in 2003. As in other parts of the economy, such an increase in supply can only mean lower prices, at least for a while.
And the industry's risk management efforts, when it comes to safety initiatives at least, seem to have paid off, to a point.
According to the Federal Motor Carrier Safety Administration, there were 144,171 fatal and nonfatal trucking accidents in the U.S. in 2007, down from 147,133 accidents in 2005, a reduction of about 2 percent. In percentage terms, that's not much, but when we're talking about multiton vehicles hauling millions of dollars of product per load, any reduction in collisions is a welcome one.
Though unlikely to affect insurance coverage capacity in the short terms, two factors are making the risk management task of securing the supply chain more difficult. Thieves are more sophisticated in the way that they go about stealing cargo; and state lawmakers have slashed transportation budgets because of the recession, which means there are fewer public rest stops for drivers.
Thanks to technology and driver training, trucking industry risk managers might be getting better at what they do, but so are the thieves who make their living tracking and then stealing those multimillion dollar loads. Frequency may be down, but severity is up, way up.
The number of thefts in the category of electronics is down by almost 16 percent in the first six months of this year, for example, but the average value of a lost electronics load has skyrocketed. The average value of a lost electronics load more than doubled in the first six months of 2009 to $1.08 million, compared to $460,738 for the first six months of the previous year, according to FreightWatch International USA Inc., an Austin, Texas-based company that provides security technology and consulting to the trucking industry.
Cell phones are also at the top of thieves' lists. The average value of a lost cell phone load in the first half of 2009 was $2.12 million, according to FreightWatch, almost double the $1.15 million per load loss in the first six months of 2008.
There's a sobering reason for this, according to Dan Burges, a director of consultancy and intelligence at FreightWatch. Rather than depend on potluck or targeting trucks haphazardly, as they might have in the past, black market operators are targeting specific products and buying and selling loads of technology equipment even before the goods are stolen.
"They will put their order in and say, 'Hey, we need a certain type of smart phone and don't bring me a flip phone,'" Burges said.
Other product categories that have seen spikes in theft frequency, according to FreightWatch, include tobacco, of which there were four thefts in the first six months of 2009 compared to one in the first six months of 2008.
Food and beverages saw 58 thefts in the first six months of 2009, up from 46 in the first six months of 2008. And home and garden equipment was stolen 33 times in the first six months of 2009, up more than a third from the 20 thefts in the first six months of 2008.
Categories that have seen a decrease in frequency include alcohol, building/industrial, pharmaceuticals and clothing. One pharmaceutical theft this year topped the $37 million mark in value. The load was recovered but the chain of custody on it was temporarily broken.
Commercial thieves, it turns out, are astute at staying abreast of trends and their black market buyers, and these days it's all about making off with truckloads of iPhones, iPods and Blu-ray disks. "Whereas before they were content with anything they got, now they are being very, very specific," Burges said.
Thieves are figuring out where in-vogue electronic instruments are being warehoused, staking out the specific warehouse, following the truck and snatching the load the minute the driver or anyone else gets careless.
Problem is, according to Burges, that many, many drivers are still being careless.
"Almost never has there been a truck stolen when it's on the go. It's always stolen when it's stopped and left unattended," Burges said.
"Don't go in and take a shower and have dinner and go and visit your girlfriend and leave your load in a Target parking lot while you go and watch a movie," Burges said.
Sounds like good advice, but Burges said drivers ignore it every day. Helping to enable their sometimes poor behavior are companies that place a larger focus on getting product out the door as fast as possible instead of considering when their customer might actually be ready to receive it.
"An order comes in Monday morning, they are shifting that thing out Monday afternoon, so what you have is a 72-hour window for a 10-hour drive," Burges said.
"And what happens is that the driver picks it up, he drops its somewhere and he comes back two days later, picks it up and delivers it and they do this all the time."
"You have to be cognizant of the risk you endure by certain business practices and shipping things as quickly as possible brings an inherent risk when you are not marrying that with delivery times at the destinations," Burges said.
The trucking industry has always faced large-scale thievery, given the volumes they transport every day. But this spring, the industry started to squawk about cuts various states are making to the number of public rest stops they can afford to maintain.
Rising unemployment, with the rate cresting 10 percent in such states as California and Michigan, means less tax revenue and non-essential services like highway rest stops are facing the ax. "State budgets are in very bad shape, they are in the worst shape of my lifetime," said Clayton Boyce, the vice president of public affairs for the Arlington, Va.-based American Trucking Associations.
Fewer rest stops mean fewer secure places for truckers to pull over and nap, which the industry trade group said can eventually only make our roads less safe.
Virginia took a lot of heat from the industry this spring when it announced that it faced a $2.6 billion transportation budget shortfall and planned to close 25 out of its 42 public rest stops. But after coming under pressure from the ATA, the commonwealth's Department of Transportation later backtracked and settled for closing just 19 instead.
Jim Mahoney, a vice president of risk management for Phoenix-based Swift Transportation, called the fatigue factor because of fewer rest stops a "red herring." Professional drivers and dispatchers should still be able to plan their trips so that drivers can get enough rest and comply with federal hours of service guidelines, he said.
What's of greater concern, Mahoney thinks, and this ties in with our opening focus on theft, is the risk to driver security that fewer public rest stops creates. Not from hijackings, or "truckjackings," necessarily, as there were only nine of those out of 343 thefts in the first half of 2009, according to FreightWatch, but from loads being stolen after being left where they shouldn't have been.
Mahoney said the advantage of public rest stops on major highways is that drivers traditionally gather there in packs. There's a reason for that, Mahoney said. "The biggest issue for the truckers themselves is their personal security," he said. "There's safety in numbers."
Truckers who can't find a parking space in a public rest stop might have to pull over on a ramp or find what Mahoney referred to as some "down in the mouth" commercial area to rest. Idling or resting in such a location alone, without the company of other truckers to support and watch over them, makes a driver and his cargo vulnerable.
The danger level varies according to where you are hauling. Mahoney described Atlanta, parts of Florida and Southern California as "real problems." According to the FreightWatch report, cities where gangs are most active in stealing truck loads from private sector truck stops are Los Angeles, Dallas, Chicago and Miami.
With unemployment predicted to remain high through 2010 and into 2011, revenues and transportation budgets will likely stay depressed, which is going to put more pressure on drivers to park somewhere they shouldn't or seek out private sector truck stops which are specifically targeted by thieves.
"Their guys are going to have to find a place to park the truck and we're going to have either people parking in places that they shouldn't be parked or drivers trying to get somewhere where they can park the truck and risk being over hours," said Todd Reiser, a Kansas City-based vice president with Lockton Insurance Brokers.
If a truck or a load does end up getting stolen because the diver parked somewhere he shouldn't have or left his truck in front of his house for a couple of days, companies like FreightWatch make tracking devices that can be embedded in cargo.
Burges said his company has had a 100 percent success rate with that technology in the last two to three years, though the best medicine for securing cargo once its left the warehouse is driver training. "The main issue is driver behavior," said Burges, "that is the No. 1 issue. If you can get drivers to quit leaving loads unattended your over-the-road thefts go down."
September 1, 2009
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