Stolen Backhoe: Bad Luck Or Bad RM?

The low recovery rate is a clear indication of the low risk for a thief. Even if the item is recovered, an arrest might not be made. Where an arrest is made, a conviction might not be secured. Even if a conviction is secured, the penalty is likely to be light.

Although accurate national statistics do not exist, all indicators point to a huge problem that is getting worse. Insurer reports to the Insurance Services Office Inc. show an increase of up to 20 percent every year since 1996, with theft listed as the most common cause of loss for heavy equipment–more than 50 percent of all causes of loss combined.

Inland marine theft losses alone reported to Jersey City, N.J.-based ISO in 1999 were more than $120 million. Perhaps the most worrying statistic for risk managers is that as little as 10-to-15 percent of stolen equipment is recovered.

In contrast, the National Insurance Crime Bureau puts auto recovery rates at 62 percent. The difference can be attributed to "The Four Ds"–discovery, data, difficult investigations and due diligence.

A car theft, for example, is usually discovered within hours, if not minutes after the crime. An equipment theft on a Friday night might not be discovered until Monday morning.

Equipment owners with multi-site operations might not discover a theft for days, weeks or, in some cases, months–giving a thief a large window of opportunity before law enforcement can file a theft report.

Data on autos is readily available, which allows the true owner of the vehicle to be quickly determined. On the other hand, little has been done to develop a title or registration system for off-road equipment.

Other problems occur after a theft has been discovered. There are a number of hurdles to a "successful" loss report unique to heavy equipment. Without registration documents, the owner might not have a record of the Product Identification Number, and consequently might have a shortened, and therefore not unique, version on a warranty card.

Since there is no standard format for numbering, data entry error is common, and there might be confusion as to whether the loss should be filed as an "article" or a "vehicle" in police computers. These hurdles all result in a "Dead On Arrival" loss report.

To add to the difficulties, identifying a piece of equipment requires a degree of expertise that increases with the type of equipment. Even equipment that has not been disguised might have the PIN in any of hundreds of places, some harder to find than others. By contrast, location of VINs on autos is standard.

Officers are under less pressure to investigate what is considered a "victimless" crime and are reluctant to get involved in complex, time-consuming equipment investigations.

The lack of due diligence in the used-equipment market is in stark contrast to that for autos. When buying a used car, title documents are exchanged and various online services offer full vehicle histories. Until this year, nothing like this existed in the used equipment market.

Although it is nearly impossible to stop a determined thief from stealing a piece of equipment, especially one that is left in an unprotected, remote location overnight, there is still much that risk managers can do.

In broad terms, risk managers can make deterrence part of a business plan. Take simple, low-cost theft prevention measures. Make use of data and technology advancements.

It's important to align theft deterrence with a business plan, because whether insured or self-insured, the cost of risk is reflected by an organization's theft experience. The cost of theft, like any other costs, should be measured.

Employees need to be made aware that their company's bottom line is affected–which has an indirect impact on them. This impact can be made even more direct by linking employee incentives to theft reduction.

There are many low-cost measures that can be taken to deter theft. Smaller, more mobile items that are more likely to be targets for a thief should be left inside a "wagon train" circle of heavier equipment. The use of large decals and unique paint colors will make it harder for a thief to disguise stolen equipment. A full list of such measures is available at www.nerusa/theftprevention.htm.

The minimum that an equipment owner should do is to keep an up-to-date inventory that includes full PIN listings so an accurate theft report can be filed if necessary. Even better is to record key component numbers, such as those on the chassis or engine, as thieves often remove obvious identification numbers located on the body of the vehicle.

To optimize data, this information can be registered online with the National Equipment Register at www.NERusa.com. NER provides law enforcement with a 24-hour-a-day hotline to support equipment investigations. NER also can link equipment to the owner when registered equipment is found in suspicious circumstances, even before it is discovered to be missing.

Registered equipment will display a decal warning a potential thief that the item is registered. Chances of an item's detection while being moved, stored or sold are greatly increased.

Also on the market are a variety of locks, alarms and tracking devices. All help to deter and detect theft, and possess different strengths and weaknesses. With an understanding of those strengths and weaknesses, a cost-benefit analysis can be carried out.

Tracking devices are the fastest evolving technology, and are now being factory-fitted by some manufacturers, although mainly for remote fleet management.

When assessing the use of such devices, key questions that should be asked include:

Is the device active or reactive?

If active, how often does it communicate with the "base station?"

If reactive, what does it react to, how and when?

How easily could a thief detect and disable the device?

How and to whom is the "theft signal" transmitted?

Do police have a pre-planned role in the process?

One thing for certain is that the professional thief will know the answers to these questions.

So, if your backhoe is missing, is it bad luck or bad risk management? The answer is that it is both.

It's impossible to stop a determined thief from stealing most equipment. However, given the number of things that can be done, if your backhoe was stolen and your neighbors was not, then the question, "what more could have been done?" begs to be asked.

David Schillingford is president of National Equipment Register in New York.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 13, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.