January 1, 2016 by Jaclyn Webster, Claims Business Support Specialist, Northbridge Insurance
Transport trucks often haul more than $200,000 worth of cargo. Commodities such as food and beverages, home and garden supplies, electronics and auto parts are at risk of theft.
Although the frequency of cargo theft claims is increasing in Canada, there has been an improvement in how quickly information about the problem is being communicated.
Cargo theft in Canada continues to be a serious issue that costs the economy approximately $5 billion a year, notes research from the Canadian Trucking Alliance (CTA). Over the past decade, cargo crime has evolved from a crime of opportunity to a more sophisticated and targeted crime perpetuated by large-scale criminal enterprises.
This evolution has had a broader impact on society as organized criminals have distribution networks that quickly move goods to a black market economy. This helps fund criminal and terrorist organizations that engage in the trade of narcotics and illegal firearms, among other activities.
With the high value of goods being transported, cargo theft is a low-risk crime with a high reward.
Some cargo theft gangs travel from city to city in order to follow loads. Some even hire commercial drivers to help with their efforts. Freightwatch International has reported an increase in the use of fake drivers and identification since 2011.
Unfortunately, a lack of centralized reporting for this type of crime has made it difficult to understand its scale and scope. With the launch of the National Cargo Theft Reporting Program – a collaborative effort among Insurance Bureau of Canada (IBC), CTA, insurance carriers and law enforcement agencies – there has been a push for greater awareness of the risks of cargo crime and better data collection. The result has been quicker reporting, investigation and recovery of property returned to victims.
Information from IBC members shows the frequency of cargo theft claims is increasing. Northbridge Insurance has seen a downward trend in claims since they peaked in 2008. Over the past five years, the average claim amount has fluctuated, with a slight increase, in 2014, to nearly $30,000. [Click image below to enlarge]
This increase can be attributed both to an increase in the value of goods being transported, and to better targeting by sophisticated criminals for specific types of cargo. A transport truck will often be hauling between $200,000 and $250,000 of cargo. However, settlement criteria, carriage agreements and high deductibles result in lower settlement amounts.
Transportation firms can improve cargo security through measures such as identifying cargo theft hot zones and routes. The riskiest provinces are Quebec and Ontario.
Cargo theft activity also spikes on certain days of the week, with a majority of cargo loss incidents happening between Friday and Monday. Ten years of Northbridge Insurance claims show that Monday has historically been the most popular day for cargo criminals to strike, with thefts almost 40% higher than on any other day of the week. Holiday weekends also see a dramatic spike in reports of cargo theft.
The type of cargo also produces different risks, as some regions see higher rates of theft for specific goods, notes data compiled by FreightWatch International Supply Chain Intelligence Center. For example, the Greater Toronto Area is particularly vulnerable to theft of automobiles and parts.
Across Canada, food and drink cargo make up more than a third of all thefts, due to the ease of reselling to merchants who may not be aware they are purchasing stolen goods. Freightwatch International reports that the top three thefts, by product type, are food/drink, home/garden and electronics.
Historic claims information and industry trends help to inform underwriting guidelines. Understanding the important variables, asking the right questions about cargo type and route, risk management practices and identifying trends help ensure that underwriters minimize losses for companies and customers alike.
In underwriting cargo risk, insurance providers can ask simple questions about where the cargo is going, what the cargo is and the level of commitment they have towards safety and hazard management.
Last year there was an improvement in how quickly information is being communicated to the industry. IBC reports that in 2015, it issued more than 500 alert bulletins on cargo thefts, trucks and trailers, up from 239 in 2014. IBC notes its bulletins are now being sent across North America.
With more collaboration and communication between trucking companies, insurance companies and law enforcement, it is hoped that 2016 will bring with it even more awareness around the risks of cargo theft.