Cargo Security Self-Management: Reducing Insurance Costs

Improvements in truck transport safety and security have the potential to significantly reduce loss risks and associated insurance premiums. This has been demonstrated by the integration of global positioning systems (GPS) with transport management systems (TMS) and yard management systems (YMS). These advancements in telematics and data analytics have led to the use of a variety of sensors along with AI to create ‘smart rigs’ that offer safety-related benefits and efficiencies.

Introduction: From Telematics to Self-Management

Telematics has revolutionized the trucking industry by integrating GPS with advanced management systems. This integration not only improves operational efficiency but also enhances safety and security. The introduction of telematics-integrated insurance policies offers further cost benefits by reducing premiums for truckers who adopt these technologies.

However, while traditional telematics focuses on after-the-fact alerts and data collection, there is an emerging need for self-managing cargo security solutions that can prevent theft and logistical errors before they occur. This is where Level5Fleet’s Admiral Hub stands out, offering a comprehensive solution that autonomously manages trailer security.

Who Should Read This Article

This article is designed for Chief Operating Officers (COOs) and other senior executives in the logistics and trucking industry who are responsible for operational efficiency and cost management. By reading this article, you will:

• Understand the current landscape of telematics and its impact on insurance premiums.
• Learn about cargo security solutions, including reactive, predictive, passive, and self-managing systems.
• Discover how self-managing security technologies, like Admiral by Level5Fleet, can significantly reduce insurance costs.
• Gain insights from existing data on GPS and telematics to make informed decisions about technology investments.

Telematics-Integrated Insurance Concept

Various insurance policies take into account location, vehicle type, usage, accident history, driving records, and cargo types. Telematics data, as highlighted by Geotab, has introduced ‘telematics-integrated insurance’ factors, leading to benefit-cost premium reductions. These considerations are crucial for technology purchasing decisions for both independent truckers and fleet managers.

Who Can Lower Your Premiums?

In a nutshell, if we look at the trucking  insurance industry landscape there are at least three types of insurance provider categories: 1. Traditional insurers (brokers and underwriters of insurance policies); 2. Self insurance (very small independents and very large fleets) that carry just the government mandated minimum level of road and third party liability insurance to legally operate in both Canada and the US– but absorbing the remaining risk liability themselves; and 3. In between these two — there are insurance captives formed by single or multiple companies with  larger fleets as well as  some collectives of companies (like co-ops)  of smaller fleets that create their own insurance company (captive) to provide their insurance needs (usually managed by an insurer agent and sourcing specific types of insurance from traditional brokers).

Captives  try to benefit from portions of premiums that are not paid out via  a reduced level of claims. They are generally very selective in permitting independents and fleets in joining the captive who must usually have stellar insurance histories (and good risk scores) to keep captive insurance risk low.

Captives have an incentive to invest in technologies that enhance safety and security, offsetting high premiums due to lower claims and reduced insurance costs. A reduction in theft can lower captive insurance premiums and increase dividends to captive owners.

In the next section, a Geotab example relates their experience regarding GPS telematics savings related to vehicle damage, self insurance and general liability.

Geotab Example: GPS/TMS Accident Benefits

Geotab (a major GPS provider ) has seen vehicle damage and self-insured injury claims drop from $30,000 per 1 million miles driven ($0.03 per mile)  to $22,000 per million miles driven or  $0.022 per mile.

For a vehicle driving 30,000 miles per year – vehicle damage claims can drop from $900/yr avg. before a Telematics policy, to $660/yr avg after, $240 per year in savings. Even self-insured fleets must insure their excess general liability. The insurance premium on this can be reduced after successful deployment and proven reduction in accidents and claims amounts. Safety on average usually drops a vehicle from $5000 to $3500 ($1500/yr avg) once a policy is in place and reinforced by diligent follow up by the firm.

Cargo insurance, which covers products in transit, can protect against cargo damage and theft risks. Although it is sometimes referred to as “marine insurance,” cargo insurance can cover shipments moving via ship, truck, rail, and/or air, depending on the policy.  Many instances of cargo theft go unreported, as companies want to avoid the publicity.

“Half of cargo premium dollars go to cover theft“, estimates David Lee, director, inland marine with insurer Tokio Marine America. Lee also chairs the transportation committee of the Inland Marine Underwriters Association (IMUA).

Cargo Insurance

Cargo insurance covers products in transit, protecting against damage and theft risks. Many cargo theft instances go unreported to avoid publicity. According to David Lee of Tokio Marine America, approximately half of cargo premium dollars cover theft.

Existing Security, Theft Prevention, and Recovery

It is generally accepted that while GPS has incremental advantage over no GPS in regard to security and theft reduction, it is mainly an alert and “after the fact” recovery solution at best.

Some of the potential theft mitigation benefits of GPS have been described by PowerFleet VP Sandoval.

“Telematics can make all the difference, with solutions like IoT sensors and on-board cameras providing round-the-clock protection, it would be almost impossible for thieves to evade on-board cameras which can record attempted break-ins. opening doors outside of defined locations, geofencing alert real-time location information, and valuable evidence in court. The loss of an asset is incredibly expensive and of significant impact to small businesses and large enterprises alike. Only one-in-five stolen vehicles are recovered, and of those, about a third have a significant amount of damage, resulting in significant repair times.”

Despite the GPS surveillance — “Regrettably, the value of cargo theft keeps increasing every year. While the figures vary, cargo theft in the US runs anywhere between $15 and $35 billion annually, according to information from the National Insurance Crime Bureau.”

Level5Fleet – Ushering in a New Era of Security

Benjamin Franklin very apply stated: “an ounce of prevention is worth a pound of cure”. Security from theft is far more than just surveillance and related data telematics. Thieves constantly survey theft opportunities and apply data and AI too so the threat will always remain.

Providing transport rigs and trailers the ability to look after and manage their own security will become  a fundamental step on the transition path towards autonomous trucking. It is inevitable that humans will no longer be a major aspect of the security equation and autonomous solutions will be required. This realization is the heart and soul of the Level5fleet ‘security’ mission.

The benefit of trailer self-managed security will be obvious to most experienced carriers, not only from a daily operational point of view (making them free from interruptions in a smoothly functioning supply chain), to elimination of major disruptions resulting from lost cargo, tractor and/or trailer assets.

Enhanced security adds to these efficiencies. That, together with insurance benefits via captives, further reduce bottom line operating costs while adding significant peace of mind.

Benefits of Telematics-Integrated Insurance with Level5Fleet

Investing in self-managing theft prevention solutions can reduce the need for repeated high insurance premiums. The costs of implementing Level5Fleet’s solutions are offset by savings in existing GPS and insurance premiums, making the investment effectively cost-neutral while proving enhanced security, peace of mind and increased operational efficiencies.

Summary

Trucking marketplace technology has advanced especially in GPS and dash cam telematics and more recently related to ‘smart trailer’ sensors and AI data analytics to increase operating efficiencies. There is also a transition towards electrification and long-haul rig autonomy. Yet while there has been substantial improvement in transport safety, there has not been any commensurate solutions emerging to prevent the ever-increasing theft of cargo, tractors and trailers where losses are still in the $15 – $45 billion range annually and rising.

The current suite of GPS telematics has focussed on navigation efficiencies, driver education for safety enhancements along with use of sensor data to improve vehicle operations. While dash cam and other cameras provide some surveillance capability to assist in warding off thieves, they are not adequate for preventing theft. There are still no effective “before the fact” theft prevention solutions beyond physical locks that are not readily scalable for fleet protection.

Since traditional insurance rates are high, many insurance captives have been created in trucking to attempt to both control and reduce insurance costs. These captive entities can benefit significantly where their members reduce theft claims and move to eliminate unnecessary loss insurance premiums.

Also as the industry moves towards automation and driverless vehicles where handoff between long haul and last mile drayage will also become autonomous, trailer self-managed security solutions will be needed to keep the assets – both cargo and big rigs completely secure at all times and places.

Level5fleet has now developed a suite of simple but robust telematic solutions both for thwarting theft today as well as in tomorrow’s age of truck transport autonomy. The solution benefit is high; the cost is low and may be readily absorbed within the existing savings right at the current bottom line – in insurance premiums, operating efficiencies and lack of unneeded disruptions.

Next Steps

To learn more about how you can lower your insurance premiums and enhance your fleet’s security with Level5Fleet’s self-managing cargo security solutions, get in touch with us today. Let’s work together to create a safer, more efficient future for your operations.