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Courier And Same Day Delivery in 2020, A Bumpy Road Ahead? 


Courier And Same Day Delivery in 2020, A Bumpy Road Ahead? 

As demand for home delivery services skyrockets, retailers and the industry at large are working to accommodate an exploding service sector.  New technology and innovative solutions (apps, business models, insurance, etc.) are required to meet these demands and support companies operating in this segment.

Risk Strategies Transportation VPs, Brian Jungeberg, Bryan Paulozzi and Bryan Ice weigh in on the state of the industry, including top trends, challenges and insurance implications in 2020.

Q: In 2020 how are nuclear verdicts impacting the carrier world and where do we see this trending?

Brian Jungeberg:  Unfortunately, the verdicts are still trending in a negative direction and it’s absolutely impacting transportation markets and carriers as they are both on the front edge of the Nuclear Verdict fallout.  There’s still a great deal of litigation occurring, and future concern of more to come, which has triggered more restrictive underwriting and charging greater premiums by carriers to try and set their reserves as they wait for more mega-verdicts to hit. 

Bryan Ice:  Well, we are really dealing with a perfect storm that’s driving nuclear verdicts in the wrong direction, due in part to increased litigation, soaring medical costs, distracted driving, all of this continues to drive up costs for commercial auto across the board.  There has been talk of proposed tort reform to help control these massive payouts, but no real progress on that yet.

Q: How then does this play into the hardening market that we’re experiencing?

Ice: It just continues to push the market up in terms of insurance costs and I don’t see an end to this anytime soon.

Bryan Paulozzi: In my view there’s no question nuclear verdicts are bearing catastrophic results around the transportation industry, also driving more and more social inflation meaning the monetary expectations from these mega cases keeps going up, and the insurance companies in many cases aren’t prepared for the huge payouts. It’s a big problem and it isn’t going away anytime soon.

Q: We have seen e-commerce continue to explode in the marketplace, particularly through this past holiday season relative to supply and demand.  How has this altered the face of managing risk in terms of our role?

Jungeberg: Well, with the continued growth of e-commerce and holiday demand as we just witnessed, it’s safe to assume e-commerce is on a record pace for growth in 2020 and beyond.  Additionally, I think you’ll see more and more retailers (box-stores like Target), move into the e-commerce space to be competitive. You can’t be the only retailer in your segment and not offer same-day or next day delivery and think that you’ll be able to thrive.  Adapt or die is the motto many retailers are adopting, as they should, consumers are getting younger and younger and their appetite for instant delivery will only continue to grow.

Q: So how does this stress the commerce and logistics piece of the puzzle?

Jungeberg: Well now you’re putting more vehicles, more deliveries and more exposures onto already congested roads with crumbling infrastructure, coupled with the economy improving, so now you’re seeing a limited pool of qualified drivers, and that can be a bad mix.  The trick is to figure out proactively what factors matter most, and how do we help the client base avoid these mega-claims, which will eventually drive down the number of annual nuclear verdicts.

Paulozzi:  No question e-commerce will continue to be the engine that drives consumerism to a large degree.  We’re at a point now where the gold standard set by Amazon is two-day delivery, but now we’re looking at the bar set even higher, where same-day is the norm for many major players in the e-commerce sector.  Then imagine that trend escalating further to delivery on demand within a few hours, no need to leave your house. That’s where it’s heading.  The more these types of e-commerce platforms are available, the more delivery becomes perfected.

Ice: To that point, my counter might be, you’ve got your Millennial and Generation Zs who take a more ‘green’ approach to e-commerce and are concerned about the carbon footprint worsening from in the wake of all this.  So to that end, might there be some kind of push back on what Amazon is doing?

Q: To your point, environment plays into this, no?

Ice:  Oh absolutely, environment plays into it, overuse of fleet vehicles is a certainly a factor, and Millennial and Gen Z-ers could potentially have a loud voice in efforts to help reverse the trend of fast-growing e-commerce because of future environmental concerns.  At the end of the day some kind of consolidation to curb e-commerce collateral damage will need to be addressed, in my opinion.

Paulozzi: It’s also important to note that Amazon cannot provide the consumer same day delivery like the box stores because they don’t have the same footprint of stores across the country like a Walmart or Target that can be transformed into shipping centers in every neighborhood across the country, which would consolidate and shorten deliveries while decreasing the carbon footprint and decreasing vehicle overuse.

Q:  What about safety and how that plays into this e-commerce explosion?

Ice:  There’s certainly are growing safety concerns when you’re talking about drivers pushed into service with minimal training and falling safety standards which can result in a growing number of claims and related loses.

Paulozzi:  I would agree, when you put growth in front of safety it can be a recipe for disaster and that’s exactly what we’ve seen over these past few years with some of the larger players ramping up delivery time, which raises safety issues.  The bigger box stores, conversely, can handle heavier volume due to their delivery infrastructure.  Remember that FedEx and UPS wouldn’t be here if not for their safety first moniker.

Q:  California Assembly Bill 5 is now stalled in federal court while supporters and opponents are gearing up for a long battle over the law that’s geared around making it harder for companies to hire workers as contractors.

Jungeberg:  The feeling among AB-5 opponents is that this bill is not very well written and is in need of reform.  I suspect the bill, which is currently held up in court, will be re-written with a focus around criteria that better defines the independent contractor’s migration to employee status.  Given California’s dense delivery population of ICs, and its’ robust economy of late, both side of this issue are motivated to find a balanced solution to AB-5 so that their economy keeps on chugging.

Ice: I have a good degree of skepticism over AB-5 and its future impact in the transportation industry.  I think the country has come to rely on independent contractors too heavily over the years.  But if AB-5 does take hold, I will say the new model of ICs becoming employees could potentially provide more of an equal playing field in the industry.  I do have a number of clients that are moving ahead with an employee model versus an IC model, but that said, I’m still not sold that AB-5 and fewer independent contractors is the future.

Q:  What are our key differentiators at Risk Strategies Transportation that separate us from other brokerages?

Jungeberg:  I think our strongest key differentiator revolves around service and knowledge.  The level and speed with which we service our clients coupled with the depth of how well we understand their world, that’s huge.  Because we understand the inner-workings of our clients business, our customers don’t have to waste time re-explaining issues and challenges they may face.  We also do our homework when a client dives into a new vertical so that we hit the ground running with good risk management solutions. 

We also understand the inner workings of our client’s clients that have demands too, which is critical to managing risk.  Additionally, our expertise in the same day delivery and courier space enables us to understand all kinds of exposures, and how they may impact a client.

Paulozzi:  I think joining forces with Risk Strategies makes us more robust, our overall offerings to our clients allowing us to package many different coverage and products for our existing clients, a kind of one stop insurance shopping, whether a customer needs Work Comp, employee benefits, bonding, whatever the case, being part of Risk Strategies gives us that depth and expansion to do that.  We also now have deeper market access to offer more competitive pricing in many instances.

Jungeberg:  I think our solid client retention speaks to our service and industry knowledge, our clients look beyond pricing and place a premium on their broker understanding the inner-workings of their business, which in the long term pays off.

Ice:  I’d say it’s a combination of our customized service abilities, market access, industry expertise, really understanding the inner-workings of our clients and their risk management apatite.  We make sure our customers are never surprised by anything in terms of their insurance plans.

Paulozzi:  I would also add that our ability to offer a product and program that is differentiating in the marketplace is a difference maker, where competing brokers don’t necessarily have access to those programs.

It really boils down to this, if an insured wants to ‘live and die’ by the pricing sword that’s fine, but if you go with the agent who is more of a generalist, in the end how much money are you spending above and beyond your premium for those additional ‘soft’ costs (outside consultants, attorney’s)?  In short, we often times speak those languages because we understand YOUR business. 

 

Risk Strategies works with nearly 2000 delivery and logistics companies nationwide, specializing in insurance and risk management solutions for this industry: property & casualty, alternative risk solutions, employee benefits, IC risk programs, key person risk management, safety and accident prevention, executive and family risk, and financial services.

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