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The transportation industry has spent the past 18 months racing to meet the steep increase in delivery demands. Throughout this time, we have kept an eye on trends and data within the sector, looking closely at loss trends that could affect our clients. Surprising pandemic-related spikes in three areas are worth examining more closely.
Surge in Cargo Theft
Throughout 2020, the number of cargo thefts skyrocketed to 1,502. This a 26% increase over the previous year. This figure includes both goods stolen out of vehicles and cargo-laden trucks being stolen. Criminals targeted medical supplies and household goods. Given the difficulty obtaining those items amid the COVID-19 crisis, it’s no coincidence that they were at the center of this surge. An additional benefit for thieves is that these items aren’t traceable the way electronic and higher-priced goods are, meaning they’re easy to re-sell or use without anyone knowing where they came from.
Economic recessions correlate with increased cargo thefts. In 2008, when the market crashed, cargo theft rose, but with a focus on food and beverage items. An improved, post-COVID economy should see theft frequency return to pre-pandemic levels.
The losses from cargo and vehicle thefts are felt by businesses across the supply chain, and the surge has increased interest in larger cargo insurance coverage. Just as we have seen auto liability premiums climb amidst nuclear verdicts, it is likely that the theft surge will create a harder market around cargo loss policies, as insurers reassess the cost of covering large theft-related losses.
Delivery businesses can take precautions to protect against cargo theft, including installing trackers in more delivery vehicles and beefing up alarm and security systems. For many business owners, tight margins make this financially difficult and risking theft losses an unfortunately more practical route.
Rise in Traffic Fatalities
Despite fewer drivers being on the road in 2020, traffic fatalities increased by 7%. The U.S. Department of Transportation’s National Highway Traffic Safety Administrations (NHTSA) reported 38,680 traffic deaths in 2020, a 13-year high.
The spike in fatalities is likely directly related to the pandemic. With many roads and major highways largely empty, drivers had confidence to speed and engage in negligent behaviors. In addition, the ongoing driver shortage has pressured some companies to hire inexperienced drivers who are more likely to be involved in an accident.
We saw 2020’s rise in traffic fatalities impact insurance. Because some of these fatalities led to nuclear verdicts, with payout upwards of $10 million, insurers have continually increased rates, hesitant to leave themselves vulnerable to such losses. Many insurance companies and delivery businesses are now requiring drivers to meet higher standards of experience and training before being hired. Time will tell whether these strict requirements will further contribute to the driver shortage or improve road safety.
General Liability Losses in Last-Mile Delivery
The pandemic accelerated a boom in last-mile delivery, increasing the demand for home delivery for items of all sizes and purposes. As delivery increasingly combines with services like installation and set-up, deliverers are entering homes, creating vulnerability to new claims. General liability losses rose steeply in 2020, directly correlated to beyond-the-threshold deliveries, with many related to home damage. It remains unclear precisely how carriers will react to this increase in claims.
The Risk Strategies Transportation team has its finger on the pulse of industry trends, observing the data points and communicating concerns to clients. This way, our clients can focus on deliveries while we focus on insurance solutions. Reach out below if you’d like to talk options.
The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.