How Much Risk Can A Broker Really Ignore | Final Mile 144

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

🚛 Why brokers hide commodity details from new carriers

⚠️ What brokers fear most with new MCs

📋 Can brokers verify cargo exclusions before onboarding carriers?

Support Our Sponsors:

Togo: Click Here

OperFi: Click Here

QuikSkope - Get a Free Trial: Click Here

DAT One - Brokers & Carriers: Click Here to get 10% off your first year!

DAT Outgo Factoring for Carriers: Click Here

AscendTMS: Click Here and use promo code RA-freight360! to get AscendTMS FREE for 90 days!

Recommended Products: Click Here
Freight Broker Basics Course: Click Here
Join Our Facebook Group: Click Here
Check out all of our content online: Click Here

Transcript

Listener Q And A Kickoff

SPEAKER_00 0:00

Welcome back for another edition of the final mile. This is our listener QA session here every week. If you guys have a question that you want us to answer, you can email us at info at freight360.net. You can leave a comment on YouTube. You can hit the contact form on our website. We can't get to all the questions, um, but we try to pick some good ones and get some good variety every single week. Uh, make sure to check out the sponsors to help support this channel. And let's hop right into it. All right. Our first question, and these first couple came from our Facebook group. Said, why would a broker hide the details of the commodity that they're asking a driver to haul? So it sounded like it was a carrier asking, and he he went on to say that like twice recently, what he was told he was picking up was different than what he actually

Why Some Brokers Hide Commodities

SPEAKER_00 0:47

picked up. So it's kind of two sides of this. On one side, if you're just talking with somebody on the phone, the explicit details of the load, I can see when a broker might want to limit that early on in the conversation. Um, you know, it you could be a target of theft, fraud, things of that nature. But dude, with all the commodity exclusions on policies now, I can't see why a broker, when they're actually booking a carrier, would not disclose the details of the commodity. So you could have a bad broker, right? A bad actor who's trying to say, oh, it's, you know, it's this, and the reality is it's a high value, you know, whatever, because they're just trying to book a cheap truck and they're taking a lot of risk on there. And that is not a good way to do business. But maybe you've got, you know, frozen seafood. And I had an insurance agent tell me like two weeks. No, it was last oh, it wasn't an insurance agent. It was Keith Lewis from CargoNet, who we had on the show a couple of years back. I talked to him last week, and he's like, he's the guy that was on 60 Minutes with the the chameleon carrier thing. He was telling me, he's like, yeah, he's like frozen seafood being a target for theft. He goes, that's a new norm now. So just you know, expect to be targeted as somebody that deals in that world and do extra careful vetting of your carriers and make sure you've got really good, thorough review on insurance, etc. But maybe you've got something that's a high pilford or high risk of theft. And until you've vetted a carrier beyond the basics, maybe you would you could say, hey, it's a it's a reefer load, right? Worth X amount of money or whatever. So I could see maybe that, but still, by the time I'm gonna select, book a carrier, and send a rate confirmation, I'm definitely making sure that the insurance covers it, both the value and the commodity. So any thoughts you have as to why a broker might legitimately not be honest about the commodity that they're trying to flip.

SPEAKER_01 2:50

Yeah, theft is the obvious one. But the other one is like it even a long time ago before theft was an issue, like it was pretty common to not put the commodity in the comments, mostly as like a negotiation tactic, because the carriers would shop the loads against each other based on what you were they were hauling. But again, like I don't even think that's too common anymore or makes a lot of sense. But yeah.

SPEAKER_00 3:16

I think ultimately, if I'm a driver, I I want to know what's you know what's in the back of my truck. So it sounds to me like in this case, and we don't have all the details, the broker might have just been being dishonest. It's the same thing where you get like brokers that say it's one weight, and then the driver ends up loading more and they get upset because you're gonna burn more fuel hauling 40,000 pounds versus 20,000 pounds. Just the reality of doing business. So all right, next one. Brokers, what are you really worried about when dealing with a new MC? Somebody break it down. So this is common. Um, you see a lot of times brokers might have a rule that says, you know, you must have, you know, one year authority or six months authority, three months authority, whatever it might be. What do what are your thoughts here, Ben, on what

What Brokers Fear With New MCs

SPEAKER_00 4:03

from the broker's perspective? Because this is probably a a carrier asking or a dispatcher asking, or maybe it's a new broker just wondering what why should I be setting this rule or what should I set it at? What considerations or risks are we looking at here?

SPEAKER_01 4:16

It used to be safety of like just experience of a driver, which is kind of less relevant because most of them, the drivers didn't just get their CDL. They're usually an experienced driver that starts their own company. So like that one kind of didn't make sense to me. The second one would be like theft, which used to be because like the new MCs were more likely to be illegitimate, which is not the case really anymore, because the criminals knew that was a red flag, so they just found ways to get older MCs. So like that doesn't really matter anymore. Credit approval, which also to me doesn't make a lot of sense because you're paying them, not waiting for them to pay you. So like to me, that one doesn't also make a lot of sense. I don't really know of any real legitimate reasons why anyone should care that it's less than a year.

SPEAKER_00 5:04

I think you could you hit the ones that are that are big. Like the initial, and again, these can be if you set a rule, the carrier must have, let's say, one year of authority, right? And if they don't, maybe they fail, but now maybe you have a uh secondary review. Right, right. We should talk about this on our podcast episode from last week. But here's the reasons, though, is like, like you said, if they're brand new and experienced, uh, we don't know their history or if they've driven it on our company before. So we're just gonna try to avoid you know a blanket approval of people that are brand new. We're gonna want to do further vetting on them. The second one is back like the the theft and fraud. So if you go back a few years when you would have, you know, 600 MC numbers all registered to a P.O. box in the middle of Wyoming, right? And they, you know, they burn through them and then they get a whole bunch, they get 600 more or whatever. That's what it was was these new authorities that were popping up to be used with the intent of committing fraud. And that is where a lot of the the decision from brokers to set a requirement came from. So yeah, I mean, that's really it. So I mean, I think it is wise to have some requirement and have that requirement, if it's failed, to trigger a further review. Okay. So if I see that a a carrier's been in business for two months, or no, I'll let's even say two weeks, right? I'm gonna want to know, like, hey, did you just start your own company after working somebody somewhere else? And they'll probably give you their whole speech, like, yeah, I was a you know, I was leased on, or I, you know, I was a company driver for you know the last 12 years. You know, I've driven a million miles crash free, decided I wanted to go work for myself now. And that's why I got my own authority. And that's a good example. Maybe those are the best ones. Like the best ones, yeah.

SPEAKER_01 6:58

Dude, it's like the gold mined. Like when I'm talking with especially brokers that are new in their first year, I'm like, you want to find the experienced drivers who just started their trucking company that have like three to six months under their belt, but have been driving, just like you said, for a dozen years, 10 years, a bunch of miles under their belt, and they want to make it on their own. Like, those are the greatest scenarios for the broker because, like, you get a very experienced driver, and the whole industry just excludes them for seemingly reasons that aren't even relevant anymore. And I'm like, those are like the best scenarios because you guys can actually help each other in a way that makes sense.

SPEAKER_00 7:36

Yep. Um, good question. Next one here Is there a way to see a motor carrier's commodity exclusions list for their cargo insurance policy without explicitly asking for it every time you onboard a carrier? Is this public information anywhere? Not that I'm aware of. I'm pretty sure the answer is no, and that's why

Commodity Exclusions And Insurance Proof

SPEAKER_00 7:57

we have seen some of the carrier vetting platforms like take steps towards this level of insurance verification. But it's really difficult because when you get a carrier's insurance certificate, it usually like you're gonna see the policy dates and you're gonna see the policy limits. It doesn't always explicitly state what it covers or excludes. Sometimes it does very outwardly list exclusions, like, hey, this does not cover eggs or this does not cover, you know, fish or whatever, right? But I'll tell you, like, whenever we deal, and this kind of this is where it's tough. You it comes with experience, but there are over time you'll realize what commodities tend to be excluded. So that's why, back to our first question, it's always important to when you're booking a carry to make sure that, hey, this is what the commodity is. I just want to make sure that your insurance covers it. And if it's one of these common ones that has a high risk of claims or theft, so think like produce, for example, like lettuce and berries. If you look at, uh we talked about frozen seafood already. If you're looking at high value electronics or firearms, ammunition, I'm gonna want to have it either clearly stated on the cert that it covers it, or I'm gonna want in writing from the insurance agent that it covers. So, and those are big. And when in doubt, this is when you can look for an all-risk policy, right? You might you might pay a little extra money, but you can give your customer peace of mind that we've we're able to secure you primary cargo coverage with you as the you know, the beneficial payee of the policy if there is damage or theft to this specific shipment. So I will say too, when you get into like those, you know, those tough commodities that are tough to find coverage for, whether it's the value or the specific type of good, that's a niche, right? If you can get, if you can figure out a way like to service those customers and never have an issue finding them capacity because you have a mix of good carrier selection, uh processes and software, and available insurance products, you basically can do anything for them when any other broker is is limited in in what they can find for capacity on them. So yeah. I wish there was a like a way to see like what's excluded and what's not, but I haven't seen anything like that.

SPEAKER_01 10:26

Yeah, and to be honest, like dude, just insurance in general to me is like I can't stand dealing with it because like what they actually pay versus what is even listed as excluded, I think is intentionally obscured, hidden in a way that you can't see it. Like that, none of

Insurance Delays And Cash Flow Risk

SPEAKER_01 10:45

that's by accident, right? In fact, I looked at this.

SPEAKER_00 10:48

Our goal is to charge you as much as they can and pay out of what they pay nothing.

SPEAKER_01 10:51

What was this? It's like delay, deny, litigate for like everything, whether it's health insurance, whatever it is, is just to even if they do pay, drag it out forever. So I was evaluating accounts receivable insurance yesterday, and I won't say the company's names, but two of the largest, there's like three very large companies that make up most of the market. Two of them compared to each other, okay? One average claim payout time frame expected from them is what they say was 150 days. And the other one was, I think, 30 or 60. I think it was 60. You have the 60, because I used your guy and he told me what you guys have. And I'm like, 150 days. I was like, how does that actually help?

SPEAKER_00 11:36

Yeah, and that's on top of how long you've actually waited before you file a credit.

SPEAKER_01 11:39

Right. I'm like, so if you waited 30 days and then found out your customer's not going to pay you, or even 45 days, I'm like, that is the better part of a year almost. And I'm like, at that point, I'm like, if it's a $200,000 claim, like your credit rating as a broker will just be destroyed. Like, how many brokers have an extra $150,000 in cash sitting there to pay all of these other loads that you ran for that same customer? If there's even a $100,000 claim, let alone a $200,000 accounts receivable claim. I'm like, $150 days like doesn't solve the problem. The company very well may be out of business or have no credit to do any business anymore.

SPEAKER_00 12:20

The only time I would see the $150 being the optimal choice is if it's a large brokerage that can stomach that cash flow and in return they're getting a cheaper premium on it. And that's a business decision, right? But if you're a small to medium-sized broker, like cash flow is literally maker, it maker makes or breaks your business.

SPEAKER_01 12:40

So well, here was the other crazy one. Not only that, and they were like, if the customer disputes it, it goes to another process that extends that. And I'm like, what is how do you define dispute? And they're like, oh, if they just say they don't owe it. I'm like, so they can just say we don't owe this money and then like you guys just drag your feet longer. I was like, what if I have the document that states they're not correct and they can't justify the fact that they don't want to pay it? Is that still a dispute? Like, well, that's kind of a gray area. I'm like, how is that a gray area? I'm paying you to insure me against people that don't pay me. And if they just tell you they feel like they don't owe me money, but I give you the documents that show they do, you drag it out for 30 to 45 more days on top of the 150? I'm like, how does that help? Like, that's not even insurance at this point. Like, yeah, just gonna pay out a policy to a business that doesn't exist anymore because it was bankrupt waiting for the insurance to pay out. It's like, well, you know, these guys are these folks are pretty good, so I wouldn't worry about that. I'm like, why would I not worry about that? When is an insurance company like tripped over themselves to pay a bill sooner? I'm like, in no scenario in my entire life. Yep. Good.

SPEAKER_00 13:50

Good discussion. All right, good questions. Keep sending them our way, and we'll continue to answer them. Final thoughts. You believe you can or believe you can't, you're right. And until next time, go bills.