Insurers, Companies Look to Stem the Tide of Cargo Theft

Staying one step ahead of criminals is a challenge for both the companies that transport cargo and the insurers who provide coverage for them. As the criminal gets smarter and comes up with new ways to steal, insurers…

must work with both the transporting companies and law enforcement to develop effective methods and technologies for combating the crimes.

According to a recent Los Angeles Times article, thieves operating out of Los Angeles and several surrounding counties are having a major financial impact on merchants—stealing around $2 million worth of various goods each day.

Peter Moraga, a spokesperson for the Insurance Information Network of California, noted that insurance companies, especially those dealing primarily in inland marine cargo coverage, are exploring a number of alternatives for reducing the problem—a problem that reaches into the billions of dollars on a yearly basis.

“There has been a sharp increase in the number and size of cargo thefts since 1996,” Moraga said. “The primary targets for theft include computer components, designer clothes, cigarettes and liquor.”

He pointed out that insurers often have no choice but to raise rates for those they insure. “Whenever you have a higher risk, your insurance premiums are going to go up,” Moraga said.

“Most companies are reluctant to divulge this information for two reasons: one, that they are targets; and two, their stock prices will go down because they’re seen as not doing anything about it. In the area of risk management, most major commercial insurance companies will have big risk management departments to work with the client in order to mitigate losses. They’ll go in and do major assessments so the client can have a better opportunity to mitigate their own losses.”

According to Moraga, a number of options are being put to the test to prevent cargo theft. Among the security measures being implemented are increased use of video and digital cameras; trailer and shipping container GPS/tracking systems; temperature and door monitoring; electronic seals and locks on trailers; tamper indicating tape for use on cartons and pallets, pallet brands and seals; and trailer/chasis anti-theft devices that disarm the ignition or lock the brakes.

The Global Positioning System (GPS), now optional equipment in private autos, is being used to track trucks involved in commerce; it can pinpoint when a truck has been hijacked and taken off its normal course.

“Changes in temperatures of loads in transit can signal problems with the cargo,” Moraga added. “An example would be cargo in a temperature-controlled warehouse, that all of a sudden, shows a rise in the temperature, meaning it has been moved to a different location.”

Catching the criminal is one thing, but prosecuting them is another. According to Moraga, tougher penalties need to be instituted. “Part of the problem has been a lot of these people get arrested, but the penalties are small and they don’t get prosecuted,” Moraga said.

Insurers are tested by cargo theft
Chuck Crandell, president of U.S. Transportation Risks Inc. in Carrollton, Texas, commented that insurers are being put to the test with cargo theft. “Insurance companies have kind of taken a position on target commodities where they’re restricting theft coverage to a sub-limit of $25,000 to $50,000 for the higher deductible,” Crandell said.

Don Griffin, assistant vice president of business and personal lines for the National Association of Independent Insurers (NAII), said companies are being impacted by a lot of things now with the way the market has changed in relation to 9/11, but added that the cargo line was changing prior to that.

“Pricing was certainly firming up in recent times,” Griffin said. “The cargo area is one that is getting a lot more scrutiny these days just because of the potential losses due to shipping… or however you’re transporting cargo… To help fight the problem, some parts of the country are turning to specialists. One avenue being explored is that some states require special investigative units—a lot of companies turned to them when they saw a higher rate of fraud in the late ’90s. I’m sure they’ll be geared up again.”

According to Griffin, one of the better things related to 9/11 as far as the industry is concerned is beefed-up security measures. However, he added that how long those measures will be in place is a major concern.

“Keeping the practices in place for the long term is a concern, not only for our industry… government and law officials have a short memory of this,” Griffin said. “It is something we can’t relax on. The problem becomes determining what kind of risks those companies have, and do they have the target items, and can that cargo or cargo container be used to hide something else like biological or bombs within something that looks like a normal component? The industry has already done more in the underwriting phase as to what these companies are doing, and are monitoring it a lot more closely.”

Additionally, Griffin said the NAII has been working with the National Insurance Crime Bureau, the FBI and others to help eliminate fraud.

Both Griffin and Crandell pointed out that one of the top security measures is an obvious one that is sometimes brushed aside—better screening of drivers. “They need to be more conscious of where they are picking up and dropping off cargo (and) what kind of security they have in those areas. We’re not just talking about trucks, we’re also looking at rail,” Griffin said.

Crandell noted that even the highest forms of technology to combat cargo theft will not help if carriers of cargo do not do the obvious when moving their loads. “As for security, it’s more the trucker trying to control his loss, not leaving the vehicles unattended or putting them into a secure area,” Crandell said. “There’s still a lot of small companies out there that will hire a guy and for some reason without much of a background check, put him into a $70,000 tractor trailer and put him in charge of a load of meat worth $100,000. Next thing you know, the guy disappears.”

And, according to Crandell, modern technology has in some ways helped promote a boom in cargo theft. “With the advent of computers… theft on target commodities is up,” Crandell commented. “The adjusters on the losses investigating the claims work very closely and continue working with the federal government and local authorities on interstate trips. The criminals seem to know what shipments to get.”

Crandell added, “The big thing is—how quickly can you move the commodity? Clothing is always a hot item, easy to move. With the price of cigarettes up, they’re also a popular item for thieves.”

By land or by sea?
While ocean marine cargo is often a target, Crandell noted that criminals find moving inland cargo is easier because of the many options available for transporting goods overland as opposed to moving things on the ocean.

“It is not so much of a problem in Texas as some other areas of the country,” Crandell said. “Some of the areas like New York City, New Jersey, Philadelphia are a target for theft. It’s easy for thieves to move the commodities quickly in those areas.”

Griffin said the scrutiny companies receive largely depends on what they are hauling and where they are hauling it. “If it is a fairly local business and you’re doing local hauling, if they know their suppliers, and the company is good, it is a little less likely a target and less likely to cause a problem than a general hauler.”

One of the greatest fears in the area of cargo theft is that the criminal will stay a step ahead—of law enforcement, of technology, of security measures. “It is an ongoing concern, certainly in this age of high-speed, inexpensive computer systems, that things are advancing at an alarming rate which makes companies have to keep on top of technology that is developing,” Griffin said. He added that when companies are asked to rate cargo theft as a problem, on a scale from 1 (low) to 10 (high) it usually falls in the middle.

Crandell agreed that cargo theft is a concern for insurers, and said his company is keeping busy with inland marine insurance traffic. “The markets are restricted right now—we’re fortunate we have some markets and the people we use are good and our claims handling is good,” Crandell said. “As for trends, the further hardening of the premium is likely.”

He added, “If you have a major claim, it will be turned in, but the smaller ones may go unreported. The cargo rates are firming up; overall, cargo should hopefully improve.”

Topics Carriers Fraud Trucking