Freight 360

Securing Your Freight: Insurance, Theft Prevention, and Broker Best Practices | Final Mile 100

• Freight 360

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Nate Cross & Ben Kowalski answer your freight brokering questions and discuss:

  • "What insurance coverage does a freight broker actually need—Contingent Cargo, General Liability, or both?"
  • "Two friends had loads stolen due to email hacks—how can brokers prevent this type of fraud?"
  • "Should brokers call a driver before booking, or is email confirmation enough?"

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Speaker 1:

All right, Welcome back for another edition of the final mile. This is actually edition 100. I forgot that. Our final mile and our freight 360 numbers aligned just off by 200. Episode 100 of Q&A. We got three questions today. Make sure to continue to send your questions to us. You can message us through our website, freight360.net. You can leave us a comment in the YouTube world. You can hop in our Facebook group. All of those links will be in the show notes description box. You can also check out the Freight Broker Basics course on our website if you're looking for educational options for you or your team, and our sponsors are in there too, so check them out. All right, Ben. Our first question today on insurance. What types of insurance coverages are truly necessary for my brokerage? I've been told I need both contingent cargo and general liability. What is truly essential? You want to take a stab at this one?

Speaker 2:

Yeah, dude, there's this lizard staring at me right through my window. It's creeping me out so bad it won't go away. And it's literally just staring at me right through my window, is creeping me out so bad it like won't go away.

Speaker 2:

and it's literally living in florida and new york, yeah and it's like we keep trying to get rid of them because they're eating all the flowers my wife plants outside and I feel like they're just trying to mock me, like it's literally just staring at me and it like won't move anyway. Sorry, I was getting super distracted because it kept like literally going like this at the window and just like trying to like stare inside and like I tapped on psychological warfare.

Speaker 1:

Yeah, insurance, though We've both been through, you know helping brokerages get off the ground. What have you seen as must haves out the gate, and how do you evolve down the line?

Speaker 2:

So the first thing is like you don't need insurance to run a brokerage, like your only thing you're required to have is a surety bond or a trust with 75 grand in it. If you don't pay carriers, they can go after that. That's what the government requires you to have to operate. Now, however, your shippers and your customers are going to be the ones that determine which insurance you need Right.

Speaker 1:

Exactly Hundred percent. So here's what I want to warn people, if you're brand new because we've heard this a lot like, I just got my authority and I'm getting calls from every frigging vendor that's out there that sells anything to freight brokers and they want me to buy their insurance and this and that, and they're you know they'll put a quote together for general liability and contingent cargo and contingent auto and an umbrella policy and you know everything under the sun. And then you realize, like what, why do you? Why are you paying for that? Like it doesn't, you don't need it. No one's telling you you need it. Yeah, and here's the thing will dictate like if you go through a customer onboarding and their contract States, hey, we need you to have a million dollars in general liability and a hundred,000 in contingent cargo. Well, now I know a starting point of all. Right now someone's telling me that I have this requirement. It's not the DOT or the FMCSA, this is a customer requirement that if I'm able to do business with them, I need to meet their requirements.

Speaker 1:

And I can decide is it worth it for me to spend the money to get a $5 million liability policy with no guarantee of business. So it's kind of a navigating thing there.

Speaker 2:

Here's the thing I would say are like the most important practical things to understand. Most shippers require brokers to have the same contingent cargo as they require a carrier to have cargo. Right Now, the biggest thing you've got to understand is your shipper's telling you we need this. You, as a broker, need to understand your contingent cargo does not ensure that shipper the way they think it does. Most shippers just think I require the broker to have contingent cargo of 100K that covers my cargo. Contingent cargo is not like a trucking company's cargo insurance.

Speaker 1:

Mm-hmm.

Speaker 2:

What you need to make sure you do is you need to make sure you are vetting the carriers to those numbers, not assuming your contingent cargo will cover the cargo. So if they go, hey, all our brokers need 200 grand, for example, in contingent cargo. You're going to make sure every truck you put on that customer's loads has 200 grand in cargo insurance because that's the insurance that's going to cover the cargo, has 200 grand in cargo insurance because that's the insurance that's going to cover the cargo. The other thing I would say is really good thing that I've learned over the years is like lots of shippers require workman's comp insurance but as a brokerage you're not sending employees physically to their site, so that makes no sense. But again, shippers typically just require you as a broker to have the same things as the trucking companies.

Speaker 2:

So one of the things I found is like you can actually get what's called like a dead policy. You still pay for it but it effectively is nothing but a piece of paper that says you have it and then the actual wordage in your policy basically covers nothing. So like I've been able to get workers comp plans that are like dead policies for like 500 bucks, that basically it gets the customer what they're requiring you to have, but it does the same thing to them they're doing to you, meaning like it covers nothing because nothing's ever going to happen that that would make sense to have. So you pay a lot less money because it's basically not insurance, it's just a policy that excludes everything because nothing's ever going to happen where you, as a broker, are going to be like on a dock or by a forklift or, you know, at their warehouse.

Speaker 1:

So interesting with contingent cargo is they're usually fairly inexpensive. A lot of shippers will require them and they don't really like. Practically speaking, they hardly ever cover anything. And one time I've ever seen a contingent cargo policy pay out and it was because the carrier's insurance policy lapsed while in transit due to nonpayment. And you'll see like some contingent policies will say like yeah, we'll cover.

Speaker 1:

If it's a, you know they'll sell it as like you know if the policy expires or if the commodity is excluded or like all this stuff. But then there's like wordage in there that's like well, if there's broker liability, it's not going to pay out. Broker liability meaning like you didn't check to see if the carrier's insurance covered that commodity, you didn't check to see if what the expiration date was on it. The one rarity was like broker did all the right things and the carrier, unbeknownst to the broker, didn't pay their premium and while in transit the policy was withdrawn. Right, yeah, and for every time, russians, every time, for that one time that I've actually seen a contingent policy pay out for that circumstance. There's probably been a hundred other policy lapses that just never we knew about because there was no claim on the load.

Speaker 2:

There was no claim.

Speaker 1:

Hopefully not hundreds, maybe a dozen, I don't know. Anyway, insurance Big takeaway Insurance brokers are a great resource. They can shop the market for you and help you put together a package that works for your actual customers needs. All right, next up, this one was from our Facebook group. I'll try to summarize it here. Recently, two of my friends both had loads stolen and the carrier said that their email was hacked. What steps can we take when booking loads to prevent stolen freight? So this is like the last, probably the last, couple of stolen loads. I've uh encountered two or came across. Both were the same carriers, email got hacked, etc.

Speaker 2:

Um, there's insurance for that, by the way.

Speaker 1:

There is Actually, I want to say Avalon risk has like some, they have like some like really cool policy now that, like it I think it's called like there's dishonest acts by a third party, I believe is what it's called. Right it's rolled up we, yeah, we, we've got it as well. The tricky thing is like so it does cover certain double-brokered situations, but the reality is when you look at your deductible and what it's going to do to your premium, you have to make a decision.

Speaker 1:

Am I going to file a claim to get reimbursed for the two grand for my rates to go up, or do I suck it up and eat it and improve my processes?

Speaker 2:

It's kind of a it's there for the nuclear incidents right with the big ones of a you know it's there for the nuclear incidents, right With the big ones. So when usually they have maxes like the ones we've seen, when they first came out they only covered 50 grand I think. Then they increased them to a hundred grand. And I want to say we pay something like 14 grand a year just in premium for that policy and if a load stolen it's got like a $10,000 deductible. So to your point, like if you get a $50,000 load stolen like you're really spending about 25 grand to get that 50. So like, yeah, that kind of makes sense, but they usually don't go super high.

Speaker 2:

Third party insurance, like load sure and things I believe also will cover theft in some instances. But you really got to talk to them about those policies to make sure that's the case. Because if you're moving some three 400 grand like, you want to make sure you are covered. Also, you want to make sure like, how do you prevent this? Like the only real company I know that's I'm not saying there aren't other ones, just the ones that I know that we use like we use a load lock with highway that verifies their email addresses and against their ELDs and our load tenders go through that system to make sure they don't go to a hacked email. But I also know for sure, like that's still not a hundred percent, like nothing's a hundred percent, like nothing's 100 percent.

Speaker 1:

The whole point here is to try and like reduce the amount of risk. Right, that's really what it comes down to. So like practical steps, what do you got I?

Speaker 2:

don't want to cut practical steps.

Speaker 2:

The thing that I've seen catch every one of these, even the ones that got through systems, even for clients.

Speaker 2:

Look at FMCSA contact changes and if you call the old phone number you almost always get the actual owner of the company and you just confirm hey, I just want to make sure so-and-so works there, confirm the dispatcher, the load and the driver. Because in every scenario where I've seen a load get stolen, the first place I've had clients call me they're like, hey, this load's stolen. What do I do? I literally go right to carrier 411, for example, go to FMCSA name change, look for the older phone number that wasn't changed or the old email address. I call the oldest phone number. In there I get the owner of the trucking company. I'm like, hey, do you guys have so-and-so working for you and is this your truck? And they're like, nope, our email was hacked, we just put out a thing and like that's the preventative measure too, right. So if you theoretically call the phone numbers and the oldest ones for every trucking company every time you book a load, I think this would probably prevent almost all of them.

Speaker 1:

Yeah, there's other things too. So like quick scope is a load level tool you can use, like if I'm you know some people use it on every load. So maybe, just maybe, on like a new customer or high value stuff that might get stolen, for example, I'm going to have you when you're, let's say, a mile from the pickup, right, hey, it's near this area, call me when you get here. I'll will verify your truck and then it'll release a pickup number to you so you can check in. It's going to have them take a picture of the side of their truck. It's going to geotag them, it's going to read the MC number, truck number, all that stuff, and if it matches what you put in the system, boom, they get released their pickup info. Just saying you're going to use that will deter the bad actors in like 99% of the cases, right, even like Trucker Tools now has a way you can do a vin verification. You could take a picture, um, and upload it as like a registration document to show hey, this is the vin number, it matches the insurance, I want to make sure it's insured, etc. All that stuff. There's so many tools out there, the old school way of gps tracking and having them take a picture of the side of the truck at pickup showing the the signage of the customer's facility, like there's all kinds of ways you can do this stuff. And another part of it, too, is like explain to your customer what your processes are, because like just doing it yourself doesn't mean the customer won't just load somebody without you know, correct. So, yeah, I've got the load going to Savannah. Well, cool, yeah, go to door three, we'll load you up. Right, they got right by you.

Speaker 1:

If you tell your customer, hey, I need to verify this guy, it's really important that we make sure that you know, because this is a very important shipment of yours. I want to make sure there's no fraudulent, even anything close to fraud, here. The guy's going to be in a blue cab, it's a, it's a 2018 Peterbilt. You know, if anybody else shows up or it doesn't have this MC number or this logo on the side, like it's not the right truck, right, that's the kind of stuff and that shows your customer like you care. You know what I mean. Interestingly, our third question it's going to tie right into it is someone asked should I be calling a driver before booking them on a load, or can it be done over email Well this is the biggest A lot gets done over email but.

Speaker 2:

I'm all out of email. Right, this is where criminals are going to try to steal from you. If they know you're just sending emails, that email could be coming and going to anywhere in the world, right, yeah, it's much harder for somebody to lie over the phone, just like we were talking about in the episode. Like building a relationship. Like you can pick up so many things in tones of voice how they're speaking. Does this sound sketchy? Can pick up so many things in tones of voice, how they're speaking. Does this sound sketchy? And also like, again, even if you call the oldest phone number, like you're almost always going to get somebody that actually works at that trucking company, because if they changed any of that, you're still getting to the person that originally owned it. They're going to tell you what's happening. And also, like you should be doing this anyway.

Speaker 2:

One you need to know if your driver's empty on time for their pickup, you want to know what is the MC on the side of the truck. You should be verifying. Do they have the equipment? The dispatcher said they sent via email. Right, that is the guy that is going to perform the work for your customer. Your job as a broker is to hire people on behalf of a company. Like wouldn't you want to speak to anybody that you hired to come work at your house? Would you hire somebody to come work at your house via email without talking to them? I guess maybe, but like I would want to speak to the person before letting them in my house and knowing what's going on. Like to me it's kind of common sense, but it absolutely should be done on every single load, all of the time, 100%.

Speaker 1:

Use our dispatch checklist on our website. It's going to help you get all the details you need from your customer and carriers to make sure that you're preventing fraud, cargo theft, bad actors in general. So good questions. Thanks for sending them our way. We'll continue to answer them. Final thoughts, Ben.

Speaker 2:

You believe you can, or believe you can't. You're right.

Speaker 1:

And until next time go Bills.

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Benjamin Kowalski

Co-host
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Nate Cross

Co-host