A rose among thorns

A rose among thorns

More often than not I have been critical of the insurance industry, particularly as its shortcomings affect transportation clients. Too many insurers enter the market to provide coverage for a class of risk with which they're unfamiliar. With an almost dreary monotony, they abandon the transportation industry when losses emerge, and leave large groups of insureds without coverage.

But all may not be lost. Some reputable companies still exist. One is Atlantic Mutual Cos., which has been in the business for more than 150 years and operates internationally through an active brokerage community in the United States.

Lois Cutler, the company's marine manager, said Atlantic's risk-control managers must understand their clients' businesses and their exposures throughout the world. "Water-damage perils to goods in transit in the Pacific Rim ports are far more severe than similar exposures at ports in the United States or Europe," she said. "Pilferage and theft exposures vary greatly throughout the world." She said Atlantic's loss-control consultants can offer realistic recommendations to reduce the frequency and severity of losses.

Atlantic has always had a reputation for taking the initiative to control cargo risks. While the average transportation industry insurance account moves from insurer to insurer every few years, Atlantic Mutual policyholders tend to remain with the insurer through good and bad years.

In areas as critical as cargo security, Atlantic sponsors risk-control seminars for its policyholders. These seminars identify those exposures - some old, some new - that are likely to produce cargo losses. The company is good at identifying the routine, small losses that occur with predictable frequency and should never be the subject of risk transfer to any insurer. Atlantic also provides a variety of programs for the larger shipper, which limit aggregate deductibles to an agreed-upon limit.

Atlantic also is not terror-struck in looking at a risk that has had poor loss experience. Scott Beebe, assistant vice president of Atlantic's marine division said, "In seeking a long-term relationship with the insured, we rely heavily upon our own loss-control inspections, which emphasize the policyholder's attitude toward preventing recurrences of future catastrophic losses, as opposed to making an underwriting decision based entirely upon what has occurred in the past." Sadly, too few insurers share this philosophy today.

Shippers, consolidators and carriers require creativity by specialty insurers in the design of insurance coverage to provide them with the broadest coverage available. Atlantic Mutual's underwriting personnel routinely author terms and conditions that specifically respond to clients' needs. They can provide extensions of coverage as may be required. They have an account capacity of $25 million. While they necessarily rely upon SAFER and CAB reports, as any underwriter will, Atlantic underwriters focus on the shipper's ongoing attitudes toward loss-prevention activities.

An example is prevention of hijacking losses. Interestingly, Atlantic underwriters report a higher comfort level with most port-security controls in the U.S., particularly since Sept. 11. Hijacking losses, however, remain a major concern. Vulnerability to theft is particularly high on high-value loads at the end of a trucker's first day's run. During the 1960s, the theft of an entire shipment might have resulted in a $100,000 loss. Today, that loss is likely to exceed $350,000. With today's larger containers and trucks, losses per unit can exceed $500,000, particularly if pharmaceuticals, fragrances or computers are involved.

I've often speculated about the number of hijacks that involve employee dishonesty. We used to call this type of loss a "giveaway." It still occurs with regularity. Driver turnover is alarming, and makes pre-employment screening of drivers critical. It is lunacy to entrust a piece of equipment including its contents, which in the aggregate may represent values of $750,000, to a novice. Atlantic confirms that Global Positioning Satellite tracking has helped a great deal, and a variety of newer zinc sea locks improves container security. But the unavailability of experienced drivers and operators may represent the largest challenge the transportation industry faces.

Every transporter of goods, especially in today's environment, needs to secure the services of insurance brokers and specialty insurers who are experts in ocean and inland marine insurance. The capabilities of these specialists are invaluable. Atlantic Mutual is evidence that they do exist.

Thomas A. Laffey is chairman of Polaris Risk Managers Inc., a transportation insurance consulting firm. He may be reached at (973) 882-3100, or via e-mail at polarisins@aol.com. On Insurance is a monthly column.