How Tech-Enabled Risk Management Programs Are Widening 3PLs’ Influence

tech enabled risk

AS THE WORLD continues automating links in the supply chain, the protection of assets is no different. 2020 was a trying year of evaluation in which many 3PLs and motor carriers were forced to look inwardly at how to approach the inefficiencies which put many companies out of business. While we all know the looming threat of nuclear verdicts, what about the smaller claims for which a broker may have to put marks against their insurance or pay out of pocket? 2021 was a year or repositioning, game-planning, and correcting in the logistics space.

What the pandemic revealed in many 3PLs is the assumption of unnecessary risk when it comes to both Less-Than-Truckload (LTL) and high-valued loads. Brokers don’t want to miss out on the $500,000 load that may get them in the door with a reputable shipper client while they may have trouble sourcing motor carriers with adequate coverage in a pinch. The possible results of which are a marred loss history which will negatively impact insurance cost for years and an increase in paid-out-ofpocket claims. At a time when brokers needed to be capitalizing on available opportunities, their insurance markets reported high losses on cargo liability, contingent auto liability, and excess liability. These high losses result in higher premiums across the board, even for the most meticulous and safety-minded 3PLs.

Showing a potential shipper client that a broker can reliably move high-valued freight could be the difference between a hard month and a contract that keeps the broker scaling. To help these brokers place that $500,000 load quickly and safely, Usage-Based Insurance (UBI) programs were created with safety and speed in mind.

Cargo insurance now has the agility to shift between the standard traditional annual commitments and low-touch, load-by-load coverage. While there have been insurance carriers offering similar pay-as-you-go products over the years, traditional usage-based cargo insurance options have large lists of exclusions and may be narrow in coverage. More recently, technology-enabled insurance providers sought to bridge the gap in liability that is more commonly paid out of pocket by freight brokers.

To fill in the typical gaps in coverage, these usage-based cargo programs have taken root as a necessary tool in the 3PL arsenal. As adoption of these resources broaden among carriers, shippers, and brokers, technology-enabled insurance markets find themselves thriving. Even some of the most traditional transportation insurance markets are scrambling their underwriters to create comparable pay-as-you-go or monthly/quarterly reporting programs.

How do these programs benefit the 3PLs who are investing in further protecting their clients’ freight? Many of these programs can produce on-thespot quotes prior to booking, meaning that, for example, for the $40 it costs to fully insure a shipper’s LTL load, that broker may pass along a $50 cost to the carrier/shipper. Building that $10 into their cost accomplishes the dual purpose of providing first dollar coverage to shippers as well as opening a narrow but potentially steady revenue stream for the 3PL who may have been anxious to begin moving LTL loads in the first place.

Some of these programs on the Excess Cargo side will consider motor carriers’ insurance limits, while others offer a first dollar coverage regardless of the carriers’ limits. Having safe carrier vetting practices in place is the best way to minimize risk, and UBI coverage is a second layer of defense between a claim and a 3PL. Losses in most UBI programs don’t reflect on the annual renewing cargo policy but are on a loss history of their own which only pertains to that UBI market. Through this separation of coverages, there is a new first line of defense for freight brokers to keep a clean history through legitimate risk-mitigation.

A final and most crucial piece of how usage-based insurance programs benefit the modern 3PL is in their integrative capabilities. Many of these programs can integrate into most TMS (even proprietary in-house systems) to take the lift off of their sales force. API enablement is discussed in most aspects of the supply chain and is seen fulfilled here in these programs. Brokers and shipper clients now have the capability to purchase excess or full value cargo coverage at point of sale, leaving insurance agents out of the equation and saving time for both parties. Some of these programs also offer automated claims handling in which shippers may be paid for their loss in less than 24-hours if the cargo value is under a certain threshold and the loss meets certain criteria.

With these new innovative ways to keep unnecessary cargo losses off of a 3PLs loss history and encourage a swift logistical process, many 3PLs are poised for hyper growth in 2022. UBI programs are encouraging a trust between shippers and brokers that may have previously struck out by trusting a motor carrier with less than satisfactory insurance on file. If this trust is to bloom in the new year, the growing U.S. economy must receive the support it desperately needs from all parties in the logistics pool.

Graham Gonzales is Director of Strategic Accounts at Reliance Partners, an insurance agency offering commercial insurance products and is based in Chattanooga, Tennessee, specializing in transportation with a focus on trucking companies, 3PLs, and warehousing operations. Visit to learn more.