Cargo Theft on the rise

Business Insurance reports an increase in cargo thefts

Truck firms struggle to reverse sharp rise in cargo thefts

Insurers working with others to manage risks associated with thefts

Truck cargo thefts, which cost the U.S. shipping industry tens of billions of dollars a year, have increased significantly in the past year, risk managers and insurers say.

Shippers, trucking companies, insurers and law enforcement officials are collaborating more and adopting a range of risk management tactics to combat organized syndicates of thieves and their black market vendors.

In 2008, U.S. truck cargo thefts, defined as full truckloads stolen, increased 13% from 2007, according to FreightWatch International (USA) Inc., an Austin, Texas-based logistics security agency that tracks freight thefts.

Law enforcement and industry officials estimate that truck cargo thefts cost the U.S. shipping industry $15 billion to $30 billion a year, although many analysts say that range understates the losses.FreightWatch and insurers are quick to urge caution in reading the numbers, because no entity compiled statistics on truck cargo thefts prior to 2006. Even now, industry observers say they are not sure the figures capture all theft; some shippers and trucking companies are reluctant to report thefts out of concern for their reputation and insurance costs.

But insurers and risk managers agree truck cargo theft is a significant problem that has been growing more acute in recent years.

“Over-the-road thefts have been on fairly significant increase,” said Brandon Stroud, vp-loss prevention for North Kingstown, R.I.-based Falvey Cargo Underwriting Ltd.

The vast majority of cargo thefts come from stealing unattended trucks. Some criminal gangs station themselves at truck stops waiting for a trucker to leave his truck unattended; others monitor manufacturing plants and distribution centers for new shipments and follow a departing trailer until the driver stops and leaves the truck, experts say. Once they have stolen the truck, the trailer or the cargo, the thieves typically move the cargo to another vehicle or unload it into a warehouse.

While pharmaceutical thefts were just more than 7% of truckloads stolen in 2008 (see chart), their number rose sharply and their average value spiked to $1.5 million to dwarf all other categories in value, said Dan Burges, director of consultancy intelligence at FreightWatch.

Geographic hot spots for pharmaceutical thefts last year included Atlanta; Dallas; the Los Angeles area; Memphis, Tenn.; Miami; New York; and the states of Ohio, Pennsylvania, Tennessee and Virginia, Mr. Burges said.

Prevention in focus

In recent years, law enforcement task forces and regional industry groups devoted to cargo theft have formed; and insurers, underwriters and shippers have begun to set up internal units focusing solely with cargo theft prevention.

Shawn Driscoll, director of security at Phoenix-based Swift Transportation Co. Inc., heads the trucking company’s team of four ex-police officers devoted to preventing cargo theft.

“These groups doing these thefts…know what they’re doing,” Mr. Driscoll said. “They’re waiting for you to make a mistake, to drop your load, for the driver to leave (or) not put the lock on….If you let your guard down, they’ll get your load. We know that and we take preventative steps.”

Loss control specialists and risk managers say tactics that shippers and transportation companies can use include increasing physical security and surveillance at warehouses and distribution plants as well as screening employees, drivers and transportation partners. Thefts at times involve someone inside the company who relays information about shipment departures and locations, experts say.

Many risk management tactics revolve around the maxim that “cargo at rest is cargo at risk.” Loss control specialists urge a policy prohibiting drivers from dropping off trucks at any unsecured location for any reason.

Barry Tarnef, a loss control specialist at Warren, N.J.-based Chubb Group of Insurance Cos., said more than half of cargo thefts happen between Friday night and Monday morning, so he advises shippers to avoid long-distance deliveries shipped during the weekend. “The reality is that there are very few secure truck parking areas in the U.S. and most people don’t have a driveway to drop the truck,” Mr. Tarnef said.

200-mile danger zone

Loss control specialists also advise that companies instruct departing truck drivers to travel 200 miles or more before stopping for the first time. Most truck cargo thefts occur within 200 miles of origin, Mr. Burges said.

“Some of the cargo thieves have been known to follow loads hoping they’ll stop after a short distance to get dinner and get ready for the long haul,” said Scott Cornell, who heads a special investigative unit on cargo security at Hartford, Conn.-based Travelers Cos. Inc. and sits on the Florida-based National Commercial Vehicle and Cargo Theft Prevention Task Force.

W. Michael McDonald, vp of risk management at Quality Distribution Inc., a Tampa, Fla.-based bulk hauler, said his firm’s thefts decreased dramatically after installing a satellite tracking devices on its trailers.

Mr. Burges said cargo thieves often know how to disable basic vehicle tracking systems. He and others recommend a concealed tracking device planted inside the cargo so even if thieves unload and dump trucks, investigators still may recover the freight.

Thieves “would have to literally go through every box to know where it’s at,” Mr. Driscoll said.

Observers attribute the recent rise in cargo thefts to a variety of factors including the recent economic downturn and ease with which criminals can sell stolen goods in the black market or online. Also, it is considered a nonviolent property crime that often does not generate jail sentences. Using a gun or knife to steal cargo is considered hijacking or armed robbery, and only happens in 3% of freight theft cases, Mr. Burges said.

The 2006 reauthorization of the USA PATRIOT Act directed the FBI to begin tracking cargo theft as a separate category in its uniform crime reports, and Mr. Cornell said the FBI and local police departments will do so this year.

Compiling accurate statistics is the first step toward stiffening the punishment for nonviolent cargo thefts, Mr. Cornell and other experts say.

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