Why Insurance Coverage is Crucial for Logistics Brokers: Protecting Your Business and Your Clients
May 2, 2023
Recent economic instability is contributing to a higher rate of theft and lost freight across the transport industry. Meanwhile, shifting economic tides are leading some businesses to rethink their model. Many brokers are adding international shipping, warehousing, and other services to their portfolio to stay competitive. Change is unfolding rapidly, and many transport companies could soon be in over their heads by adding new services that they are ill-equipped to manage—or insure.
“All of these things can be handled from an insurance perspective,” says Lisa Vranich, VP of Sales and Marketing for Avalon Risk Management. “But if that’s not your area of expertise, you really need to make sure that you are working with an insurance broker that understands these exposures.”
The reactionary approach to expansion is often a recipe for disaster. Take, for example, the trend of logistics brokers adding trailer leasing to their list of offerings. From an insurance standpoint, it’s always best to separate the broker from physical assets. A broker leasing or buying trailers introduces physical assets into the core business, opening up new liabilities.
How do companies like Avalon Risk Management tailor their approach to insurance coverage for logistics companies? Learn more in the latest episode of the Stay In Your Lane Podcast.
“The coverage for an asset-based company is completely different than coverage for a freight broker,” explains Avalon Account Executive Jodie Maher.
For brokers who find themselves leasing trailers, contingent cargo insurance is an important consideration. This type of insurance provides coverage in the event that a carrier’s policy does not respond following a loss. Companies like Avalon step up to provide this uncommon type of insurance for niche customers in need.
“The leasing company is going to ask you to provide physical damage coverage on those trailers and auto liability coverage,” Vranich says of brokers who lease trailers to be handled by their carrier partners. “When you’re not in control of those trailers, it takes a really specialized program to insure that. There aren’t very many insurance companies that want to do it.”
From an insurability standpoint, it’s better for brokers to avoid the liabilities involved in strategies such as trailer leasing. Keeping distance between the broker and the carrier and maintaining the broker’s primary function as the arranger of transportation helps to keep things simple.
“That’s why [brokers] carry contingent auto liability. If a carrier that you hire gets into an accident and harms a third party on the highway, that liability could potentially come back to you,” Vranich explains. Introducing that trailer asset ties you a little bit closer to that accident.”
Brokers who are in a position to provide their shippers with insurance in the event of an accident offer greater peace of mind than those who rely on the carrier’s insurance alone. Facilitating the claims process with the carrier allows a broker to protect their policy’s own loss ratio and can even help to preserve the relationship between broker and carrier.
Why are logistics brokers opening themselves up to liability by expanding their business offerings? Gain insights into this topic by watching the Stay In Your Lane Podcast.
Accidents are inevitable in the transportation field. When they do occur, having the right insurance company on your side is crucial.
“It’s so important for everyone in the logistics industry to be working with an insurance agent that understands their industry,” says Vranich. “That’s the value proposition that Avalon has. Logistics is all we do.”
Avalon’s focus on logistics places them in a unique position to service their clients. Their expertise allows them to adjust their coverage options to keep pace with changes in the industry. It also gives Avalon the opportunity to educate customers on their insurance needs through a deep understanding of applicable laws and regulations in the transportation field.
Just as important as choosing the right insurance carrier for your needs is choosing the right logistics broker. Triple T Transport works with Avalon Risk Management to ensure the best possible outcomes for our customers and carrier partners. Trust Triple T Transport to handle all your 3PL needs with the assurance that your shipment is properly covered. Contact us today to request a quote or to learn more about our full range of services.