When it comes to transporting international cargo, ships and planes rule the seas and sky. The trucking industry, however, is the undisputed king of the road for good transported within the U.S. Truckers are they key players in the distribution of consumer and industrial goods. More than $13 trillion worth of goods more than $9 trillion worth – are shipped by truck. On any given day, $25 billion worth of goods are in motion on our national and local roadways. And all of them are susceptible to damage and theft. (Source: Freight in America)

Types of Cargo Carriers:

• Common carriers who offer their services to the general public. They
  have regular routes and established rates. Common carriers are
  typically held to a high degree of responsibility for the goods they
  transport.
• Contract carriers do business only specific customers under contract.
  The contract spells out the rights and obligations of both the
  transportation provider and the shipper. Rates are typically
  negotiated.
• Private carriers transport their own goods on their own trucks.
  Private carriers do not typically need cargo liability coverage.
• Small package or express carriers transport small shipments on an
  expedited basis on their own trucks. Their liability for good carried is
  generally very low and is based on a per package amount.
• Specialized carriers focus on a specific type of commodity such as cars, household goods electronics or fine arts. These carriers typically have special contractual provisions.

Responsibility for Good in Transit

Under the terms of a bill of lading or a contract with the shipper, a trucking company assumes responsibility for the safe deliver of the goods it carries. While some companies self-insure, many purchase motor truck cargo liability insurance to protect themselves and to help them maintain good relationships with their customers. Motor truck cargo liability insurance, also known as carrier-for-hire insurance, covers the trucking company’s liability for loss or damage to goods in transit for which they have assumed contractual liability.

In the eyes of an underwriter, the quality of motor truck cargo risks varies widely. Insurers consider many factors in evaluating motor truck cargo risks. Some of those variables include:

• Driver selection and training
• Financial stability
• Past loss experience
• Type of commodities being
• The value of goods on each truck
• How they are packaged
• Security measures
• Routes traveled
• The number of terminals or exchanges along the way

Drivers Make a Difference
Driver error is one of the primary causes of motor truck cargo losses. Collisions and truck overturns are two common causes of cargo damage. Even sudden braking can cause damage to certain types of goods. While a driver can’t control road conditions or the actions of other drivers, his or her experience level and skill behind the wheel are critical to handling adverse and unexpected occurrences on the road.

There are an estimated 300,000 plus independent truckers. Yet hiring and retaining qualified drivers is a constant challenge for trucking companies. The American Trucking Association reports that annual driver turnover rates range from a low of 17% among less-than-truckload (LTL) carriers to a high of 136% for large truck load carriers. While many drivers switch employers but remain on the road, many others leave the industry for better pay and more predictable schedules. As a result, there is a growing to be 20,000 and is expected to grow significantly each year as older drivers retire.

Hiring inexperienced, unskilled drivers puts the trucking company at risk not just for cargo losses but also for workers’ compensation and auto liability losses when those drivers are involved in accidents on the road, not to mentioned costly safety citations from the FMCSA (Federal Motor Carrier Safety Administration). The existence of a training program for new drivers and a refresher course for seasoned drivers reflects on a trucking company’s risk management attitude. Another important component that factors heavily in an underwriter’s assessment of a risk is the practice of completing a thorough background check prior to hire. Companies that fail to do a thorough background check on drivers may unknowingly hire drivers with a criminal record, which has been demonstrated to increase the likelihood of theft losses and other security risks.

Ill Gotten Goods
Theft is a significant cause of motor truck cargo losses. Estimates of the value of stolen goods range from $4-$12 billion per year. The biggest problem, however, is not a lax procedure of truck drivers. It is opportunistic thieves- those who break into unattended trucks – as well as highly sophisticated organized crime rings.

High value goods, especially those that are difficult to trace and easy to dispose of, are most vulnerable to theft. Goods that fall into this category include technology products, pharmaceuticals, cigarettes, liquor, high-end designer clothing, footwear, and accessories, and some types of food products (source: Theft of High Valued Goods – An overview of Exposures , Loss Prevention and Underwriting Concerns). Depending upon the goods shipped, the value of property on a single truck could be a few thousands dollars to $1 million or more.

The shipper is the first and best line of defense against theft of goods in transit, but the trucking company can also help. The following table outlines a variety of ways to protect goods in transit.

Financial Responsibility
There are few barriers to entry in the trucking industry. While the cost of a big rig easily reaches into the six figures, buying a tractor-trailer truck is a comparatively low cost way to for an individual to start his or her own business. Staying in business, however, is considerably that don’t have established customers. Each year more than 5,000 trucking companies go under, subject not only to their own business practices, but also to a variety of factors they can’t control including – foreign trade policies, fuel prices, imports and exports volume, U.S manufacturing and agricultural production and competition.

The financial health of a trucking client is important to an insurance carrier because of the filings that the carrier is required to make on its behalf.

U.S. Code 49 USC 13906 requires that the trucker show evidence of minimum cargo limits $5,000 per vehicle $10,000 aggregate any one time or place. For companies that are subject to the code, the insurer is required to add an endorsements and make a filing accepting responsibility for damages or losses for which the trucker is liable, subject to those limits. When a trucking company fails, its insurance carrier continues to be responsible for cargo claims for which the trucker is held liable.

The most commonly used source of financial data involving the trucking industry is CAB
(Central Analysis Bureau). CAB is used by the DOT and insurers to rate the financial stability of trucking companies based on factors that include years in business, loss history, moving violations, safety record, financial status, and the likelihood of being able to cover mandatory deductibles.

Source: The Hartford