By Joe Tracy, Rich DeSimone and ScottCornell

Technology has made moving cargo from Point A to Point B so muchfaster and easier that few people are nostalgic for the bygone erawhen shipping freight meant manhandling boxes and checking ladinglists with a clipboard. Today, cargo is often containerized,microchipped and seamlessly tracked from one shipper to itsdestination, across oceans and land masses.

Sometimes overlooked, however, is that the same technology thatstreamlines the process for shippers also has provided thieves withunprecedented opportunities to use technology for their ulteriormotives. Containerization has made it easier for criminals to stealmillions of dollars' worth of goods at once. In a limited number ofinstances, satellite tracking capability has enabled hijackers toplan how to move in quickly when a load is most vulnerable.

Related: Read “Cargo insurance: 10 questions to help coverclients.”

To stay ahead of the thieves who target cargo, those who own thegoods and those who take custody of them in transit need to beaware of crime trends and security innovations. These subjects areoften far from their own areas of expertise, and they should lookfor assistance as needed. The independent insurance agent or brokerwho can connect them with the proper resources to help improvecargo security practices will provide a valuable service thatstrengthens customer relationships. The key is to take advantage ofthe liaisons that insurance carriers have formed with industryexperts to combat cargo theft.

Whether the need is for inland marine or ocean marine coverage,the following information about trends and industry alliances canhelp agents become knowledgeable risk managers for theircustomers.

By the numbers

Walk into a local big-box store and the variety of goodsgathered in one spot is a tangible reminder of how the movement ofcargo affects our daily lives. Products may come from a differentpart of the state, across the country or around the world.

In a 2010 report on freight transportation, the U.S. Dept. ofTransportation reported that freight exports totaled $16 trillionworldwide in 2008, the most recent year for which statistics areavailable. More than 200 countries shipped 13 percent of thosegoods–$2.1 trillion worth–to the U.S., with 55 percent arriving bysea, 20 percent by air and 25 percent over land. In the same year,the U.S. exported $1.3 trillion worth of goods to othercountries.

The Journal of Commerce reports that about 250,000 U.S.companies are involved in importing or exporting goods. Hundreds ofthousands more ship or receive cargo within the country.

Related: Read “Transportation insurance market is levelingoff.”

Of all of the world's countries, the U.S. has the most extensivenetwork of infrastructure to move goods, according to the U.S.Dept. of Transportation. The network includes 4 million miles ofpublic roads, 25,000 miles of navigable waterways, and 9,800coastal and inland waterway facilities.

Because cargo theft can be reported in various ways, it's hardto get a handle on exactly how prevalent it is. Although next yearthe FBI will begin gathering data as part of its Uniform CriminalReporting system, the full story may still not emerge, as manyhaulers fail to report lost loads to avoid damaging theirreputations. Currently, the impact of cargo theft in the U.S. isestimated as being between $15 billion and $30 billionannually.

Freight Watch International reports that thieves often targethigh-value loads, such as electronics (TVs, computers, cell phones)and pharmaceuticals. Seechart. They also target goods that can be sold easily, such asfood and clothing. Sometimes they are opportunistic, takingwhatever they find and hoping they hit pay dirt. One Californiacase involved a stolen truck trailer that was abandoned by thethieves when they realized it contained steam cleaner solution.

Even without a firm statistic on losses, the ripple effect onthe economy is evident. When a container of goods en route to astore is stolen, the store does not have the goods available forsale, the producer must manufacture goods to resupply the store,the shipper loses business, the insurer pays a loss claim andconsumers face higher prices to cover the hidden costs. Inaddition, the goods typically are sold outside of regular commerceat discounted rates, undercutting legitimate businesses anddepriving governments of tax revenue.

Cargo theft clearly is a tremendous drain on the economy thatneeds to be fought at every level. By leveraging the alliances thatinsurers have created, independent insurance agents and brokers canprovide their customers with the best defense against crime.

Make it tough forthieves

Because the conditions under which cargo are moved vary, inlandmarine and ocean marine coverage is designed to be flexible. Whilethis is a strength when someone is insuring shipments that may movenot only from country to country, but from train to truck to cargoship, it also means that businesses need insurers that see issuingextensive coverage not as just a quick sale of a standardizedproduct, but as a key part of the value they can offer. Cargoowners and shippers also benefit from their insurer's assistancenot just after the fact, when the cargo is missing and a claim isfiled, but before a loss ever occurs.

This means independent insurance agents and brokers have a roleto play that goes beyond finding the cut-rate premium, the lowestdeductibles or the highest coverage limits. Agents can guide theircustomers not only to policies that fit their needs, but also tothe insurers most likely to open the door to resources that canprotect cargo. The following are insurance carrier services thatprovide high value to cargo owners and shippers.

Risk management expertise

Most insurance carriers offer some level of risk mitigationservices. Some may provide handouts with general guidelines andtips for improving security; others may suggest outside vendorsthat sell security devices. The best value, however, is riskmanagement advice that is customized to a customer's specificcircumstances. Working together, they can improve the culture ofsecurity that is so important to a business.

For example, a cargo owner or freight forwarder may need toimprove his security practices and insist upon similar practiceswhen deciding which trucking company used to haul goods for whichhe is liable. Has he checked the shipper's reputation with othercustomers, its financial well-being and its safety history (whichis largely provided on the Federal Motor Carrier SafetyAdministration's website)? Does he ask to see the truckingcompany's security plan to make sure appropriate precautions are inplace? Has he verified the trucking company's insurance coveragefor adequate limits? Or reviewed contracts for limitations?

A warehouse operator may benefit from a theft vulnerabilityassessment conducted by experienced cargo theft preventionadvisors. The assessment can determine if adequate access controlsexist at the loading docks, bays, doors and at the entrance to theparking area. Advice may include recommending camera systems withsufficient resolution to capture useable images, as well asplacement so they cannot be easily disabled. Theft preventionadvisors also can recommend procedures that ensure warehouseworkers and truck drivers have separate responsibilities, whichacts as a disincentive for criminal collaboration.

Trucking companies often operate on tight margins, which canmake them leery of costly security measures. Working with aninsurer's risk management consultant means they can consider arange of service options and practices. These begin with cost-freepractices such as “red zone policies” (driving 200-250 miles beforea first stop to discourage thieves who follow trucks from thewarehouse or port), include mid-price alternatives such ashigh-security locks and air cuff locks, and range up tosophisticated electronic tracking devices embedded in cargocontainers.

Law enforcement relationships

The conventional wisdom about cargo theft is that the more timepasses, the less likely it is that the cargo will be recovered.Unfortunately, law enforcement too often is overburdened andunder-resourced to quickly tackle cases of cargo theft.

Therefore, it's important to work with the right insurer. Keepin mind that not all investigative services are of the samequality. Some insurers simply outsource cases to vendors. Othersmay have in-house staff but are limited in their responses becauseof geography or lack of expertise in the logistics industry.Experienced cargo insurers that maintain strong investigativeservices capabilities recognize the importance of maintaining theirclients' reputations in executing a cargo shipment successfully. Ifa theft does take place, these high-quality investigation groupsalso are available to help their clients track down the stolencargo.

The most effective investigative services come from insurersthat have formed dedicated cargo theft investigation units andstrong relationships with regional cargo theft task forces and lawenforcement agencies over a wide range of jurisdictions. This helpsthem quickly connect to the right people with the most helpfulinformation when a crime occurs. Investigative units typically haveaccess to claims information that helps them identify common trendsin crime, as well as “hot spots” where criminal enterprises may beoperating.

Worldwide connections

Whether goods are moving from Chicago to New York or fromSingapore to Los Angeles, having someone on the ground who knowsabout local conditions can be of vital assistance to cargo owners,shippers and purchasers. This ensures that insurers who havenetworks of contacts around the world are a valuable resource.

This may be particularly important overseas, wherenontraditional modes of transportation–from donkey carts to basketsbalanced on a person's head–may form part of the chain of transit.Many insurance companies maintain worldwide networks of settlingagents and claim correspondents who also can assist with lossprevention. A local settling agent will know where road hijackingsare common, what kinds of goods are targeted and which haulers aremore reliable.

For example, a shipment of raw cashmere from the interior ofMongolia can be brought to the U.S. by a number of differentroutes. A local claims correspondent knows the risks involved andcan recommend a particular itinerary to avoid problems, such asrouting the shipment over the Trans-Mongolian Railway, connectingto the Trans-Siberian Railway, on to a port in the Russian FarEast, and finally by ocean vessel to the U.S.

Local experts are in a good position to know that expensiveshoes are a target for thieves in Italy, while in the Far Easthigh-tech cargoes are particularly vulnerable. Closer to home,locals can assess current conditions when goods travel throughMexico, where 10,000 cargo thefts occurred in 2009 at a cost tobusinesses of $9 billion, according to Mexico's National Chamber ofCargo Transport.

In addition to providing insight about cargo safety and transitoptions, local contacts can be invaluable when goods need to beinspected for damage at faraway ports, or disputes arise that needto be settled in person.

Underwriting expertise

The more often goods change hands to reach a destination, themore opportunities there are for things to go wrong, for coverageto have unexpected gaps, or for the transfer of risk to others tocreate a gray area on liability. Working with insurers that havestrong underwriting expertise in cargo transit can help avert theseproblems.

For example, an exporter of wedding gowns from Italy had piecesbrought in from various parts of the country to a warehouse nearthe Italian port for consolidation into the overseas shipment. Whena trucker drove off the road, the wedding dresses en route to theconsolidation facility were destroyed. Although many ocean marinepolicies normally would not cover such losses, in this case thepolicy had been written to include transit prior to theconsolidation point.

In another example, a U.S. exporter sold a cargo destined forthe Russian interior. As the insurer advised the exporter thattrucks were frequently hijacked along the route from the port tothe inland destination, the exporter was able to negotiate terms ofsale so that ownership of the cargo changed hands after it reachedthe Russian port. As a result, the risk of hijacking within Russiawas shifted to the purchaser, and the seller's risk of loss wassubstantially reduced.

By relying on the expertise of insurance underwriters, thoseinvolved in shipping goods can arrange terms and conditions totheir own advantage, shifting risk to others whenever possible.They also can control costs by setting deductibles and limits atlevels they are comfortable with financially.

At the end of the day, the best cargo shippers, warehouseoperators and logistics providers know they have to focus onsecurity because their reputation and future business contractsdepend on it. Cargo owners and cargo buyers want to use companiesthat reliably deliver and store their goods, not ones that arefrequent targets for theft.

In addition, cargo handlers soon learn that crime has along-term impact on their expenses. There is the immediate businessdisruption that a robbery causes, as well as future insurancepremiums that typically are driven higher by loss claimrecords.

By helping their customers understand the resources thatinsurers provide, through both their expertise and partnerships,agents and brokers can play a key role in making sure cargo getsfrom Point A to Point B safely and securely.

Related: Read “Cargo insurance: 10 questions to help coverclients.”

Related: Read “Transportation insurance market is levelingoff.”

Joe Tracy is the president forTravelers Inland and can be reached at [email protected]or 860-277-1433.

Richard DeSimone is the presidentfor Travelers Ocean Marine and can be reached at [email protected]or 917-778-6404.

Scott Cornell is the nationalmanager for Travelers Specialty Investigations Group and can bereached at [email protected]or 585-321-8226.