THERE are many ways in which losses to motor truck cargo can occur accidentally. Goods may be damaged in a collision. They also can be lost to rough handling, water, spoilage, contamination and other perils. Perhaps the primary causes of cargo losses, however, are deliberate: theft and pilferage.
The size of the problem is indicated by FBI statistics, which show that cargo-theft losses amount to billions of dollars a year. Nor are they likely to decrease. From a criminal perspective, the economics simply are too good. The rewards are high, while the penalties for cargo theft are significantly lower than for other thefts with the same monetary potential.
While insurance is a vital part of any risk management program for cargo losses, so is loss control and prevention--particularly when it comes to dealing with the theft exposure. In this article I'll offer some suggestions that agents and brokers can share not only with their trucking-company clients but also with manufacturers, importers and other businesses with shipping operations.
Before discussing steps that trucking companies can take to prevent losses, it might be instructive to consider how losses occur and what sort of cargo is being targeted. In 2005, we produced a report covering cargo losses for the prior 12 months, based on our own data as well as on information obtained from such groups as the International Cargo Security Council and the Inland Marine Underwriters Association.
In all, the report covered 214 events--enough, we felt, to draw some reasonable conclusions. The most commonly stolen goods in our study were food products, apparel, consumer electronics (DVDs, TVs, computers, etc.), pharmaceuticals, and wine and spirits. Baby formula also appeared to be a target. So was scrap, given the high prices that metals are now fetching on the world market.
The potential severity of losses is illustrated by just one theft: a load of pharmaceuticals worth more than $20 million. The shipper in this case even had paid for a team of drivers--the idea, of course, being that one would always stay with the truck. But the two had dinner together at a truck stop. When they came out 45 minutes later, the truck was gone.
The location for that theft, incidentally, came as no surprise. In our report, 61% of the heists were made at truck stops or highway rest stops. A significant percentage of thefts also were made from "unsecured locations." These include streets, drop lots and even shopping centers. Sometimes as I drive past malls, I see parked trailers--usually well off to the side. In most cases, they've been left by truckers who can find nowhere else to leave them overnight--or even over a weekend.
Drop lots are essentially transfer points. A long-haul trucker may leave a trailer on a drop lot, where it later will be picked up by a short-haul trucker, who will take it to its final destination. Our report included six thefts from one drop lot over a one-week period. About a month later, five more thefts were reported from the same location. It later was determined that at least a dozen drivers had the combination for the lock on the lot's gate.
That points to the potential for driver complicity in thefts. In fact, some law-enforcement officials estimate that such complicity is a factor in anywhere from 50% to 80% of such thefts. Complicity can take the form of providing information to thieves or failing to follow standard operating procedures, like neglecting to lock the tractor at a truck stop.
Thefts also occur from unsecured trucking company yards. Such lots should have closed-circuit TV cameras--and those cameras need to be monitored. One loss report-not one of our claims--contained photos showing a suspect entering the lot and then stealing a truck and its cargo without being impeded. If you have cameras, but no one is watching them, how useful are they?
In another claim, a trucking company picked up a load of perfume. The hijackers were waiting outside the perfume company's distribution facility. They followed the truck as it pulled out. Not long after, when the driver pulled over at a truck stop, they stole the rig.
Among other things, this incident demonstrates that security at shippers' distribution centers is as important as it is at a trucking company's premises. Shippers should engage in counter-surveillance. In other words, they should be watching whoever is watching them. Cargo thieves are savvy. They know where shipments of high-value merchandise originate--e.g., a warehouse for DVDs--so they hang around waiting for a truck to leave. Then when the driver stops, they hit.
There are many other common scenarios or factors that can lead to cargo losses. Here are several:
--Problematic business practices: Sometimes clients' business practices can conflict with good cargo security. For example, many businesses require "just in time" delivery of products or raw materials, so they don't have to store them until they need them. Such a business may tell a trucking company that it wants a load of imported goods delivered at 9:00 on a Monday morning. But truckers literally cannot obtain cargo from most ports on a Monday in time to deliver it by 9 a.m. Instead, they have to pick it up on a Friday and then store it somewhere over the weekend. That greatly increases the chance for theft. In such situations, it may be wise for a trucking company to ask the client if a noon or 1 p.m. delivery is acceptable. If the client can wait a few hours, their goods stand a much better chance of making it to their warehouse.
--"Hub and spoke" trucking operations: These operations can experience high theft losses because cargo is frequently transferred in such trucking companies. It may spend a lot of time being handled, or it may sit in a trucking terminal or a parked trailer overnight. All these things increase the opportunities for theft.
--Explicit package markings: Thieves have been known to break open a number of trailers before deciding which one to steal. They "go shopping," in a sense. If goods are packed in plain packages--with no markings, logos, labels, etc.--it's more difficult for thieves to determine what's worth taking.
--Descriptive documentation: Bills of lading usually contain specific information about what a truck is hauling. At many trucking companies, these documents are not secured. A driver can walk into a dispatch office, pick up his bill of lading--and also see what all his buddies are hauling that day. In an "inside job," such a driver could inform thieves of a desirable shipment. He could also tell them when it will leave and the number of the trailer in which it will be packed.
--Mobile billboards: I'd estimate that anyone can tell what's inside about 15% of the trucks on the road. That's because the name of the product, or the company that makes it, is right on the trailer. For instance, one often sees trailers bearing the names of consumer electronics stores. I've even seen a trailer emblazoned with the name of a well-known chain of jewelry stores. While marketing people may see the sides of trucks as opportunities to promote their companies, they should be cognizant that their potential audience includes cargo thieves.
Even subtle markings on trailers or cargo containers can tip off thieves. For example, there was a rash of lobster-tail thefts from trucks picking up refrigerated containers at the Port of Miami. Law enforcement couldn't figure out how the thieves were picking them out. As it turned out, the thieves were aware that South Africa exports a lot of lobster tails to the U.S. On the refrigerated cargo containers, they could see the initials of a South African steamship line, so they put two and two together.
Controls and countermeasures
There is no silver bullet for preventing cargo thefts, but trucking companies can purchase devices and implement procedures that can make losses less likely. Some of these steps are self-evident from the cases and scenarios I've presented. But allow me to elaborate on a few of them and to mention some others.
--Physical controls: Premises of trucking companies (and the warehouses of their clients, for that matter) should be fully fenced. There should be cameras, alarm systems and guards. A reformed cargo thief said that fences alone, or even fences and cameras, were not significant deterrents. "But if a yard has cameras and a manned monitoring station, we'll go elsewhere."
--Equipment security: If thieves do break into a lot, you want to make stealing a load as difficult and time-consuming for them as possible. High-security locks on trailer doors, as well as on air-brake lines, can make a difference.
--Technology: Trucking companies are increasingly using GPS systems and other technology to track conveyances and cargo. Such devices alone are of little help in thwarting cargo thefts, but they can be when coupled with an effective response system.
For instance, a $1.5 million shipment of cigarettes recently was stolen from one of our insureds. A security company, however, covertly had placed an assisted-GPS tracking device within the shipment. A short time after the load was reported stolen, the driver contacted the security company, which in turn contacted local police in northern Florida, where the thief was stopped and arrested. The shipment was then delivered to the rightful owner, on time and intact.
This was the first incident involving one of our insureds in which a covert GPS tracking device led directly to the recovery of a stolen load. What set this case apart was that the security vendor not only sold a tracking device but also provided an effective 24/7 tracking service and had the capability to immediately contact local law enforcement authorities anywhere in the U.S.
--Personnel selection: Driver selection is critical. A driver can be a trucking company's most valuable asset or its worst enemy. Companies should check both driving records and criminal backgrounds as part of a thorough screening process. (The rule of thumb is that drivers with less than two years of experience have the greatest number of accidents.) Unfortunately, there is a severe shortage of truck drivers, and the turnover rate is extremely high. In such a market, the necessity to hire drivers can conflict with the necessity to make sure they're all safe and honest.
--Routes: Trucking companies can develop routes with low cargo-theft probabilities. Often, their insurers can help with this task. From our loss data, we've identified "no-stop" zones for trucking companies. We also can pinpoint a truck stop where there has been a high incidence of theft.
--Stops: There's a saying in this business: "Cargo at rest is cargo at risk." So one of the best pieces of loss-control advice I can give a trucker is to simply keep moving. We advise trucking companies to require their drivers to drive at least 200 miles (or about 4 hours) from the time they pick up their loads until they first stop. As previously mentioned, thieves will follow loads and wait for truckers to pull over. But their patience lasts only so long. If a trucker drives at least four hours after picking up a load, the thieves may peel off and go looking elsewhere.
Before truckers do stop, they should notify their home base or dispatcher. After they pull over, they should switch off their engines. When it's quite cold (or hot), however, drivers often leave their trucks running unattended at truck stops. When they return, the trucks are gone. While higher fuel prices have been hurting truckers, perhaps they've at least led more of them to shut off their engines at stops. By doing so, they may save a lot more than fuel.
Trucking companies should consider entering into reciprocal agreements that would enable their drivers to park their loaded trucks at secured facilities of clients or even other trucking companies. That's certainly preferable to having drivers leave loads unattended in unsecured areas for several hours or days.
Cargo theft is a problem that is not going to go away. That doesn't mean it has to be accepted as a cost of doing business, however. By encouraging their trucking-company clients to implement some of the loss-control practices outlined in this article, agents and brokers can help them significantly reduce claims, which can lead to lower premiums.
