Insurance For New Freight Brokers | Final Mile 126

Welcome back to another edition of The Final Mile. This is listener QA. These are your questions, and we're going to answer them. Um make sure to check out all the other content. We've got a full library, a giant bat catalog, a lot of good um, you know, mid-length educational videos, long form podcasts, blogs, it's uh downloadable stuff. Check it out, the website freight three freight360.net. And you've got the Freight Broker Basics course for an educational option. Check out the sponsors of the show, help support the channel. Ben, let's get right into it. So, this first question was actually a follow-up to last week's final mile. We had talked about the uh cost to start and operate a brokerage for someone that's new, and insurance was one of the questions that came up. So we had some comments on that asking um, you know, recommendations. So here we go. As a as a beginner freight broker, what insurance policies should I have in place? And then another comment was is there any any recommendations on an insurance company? So I actually had this conversation with somebody uh late last week who used to um used to work with me and is going off to start his own brokerage now. And he was like, hey, he's like, like, what do I need for insurance? So this is a question that comes up a ton. And I was like, well, you know, at a bare minimum, there's not outside of your bond, if you choose to go the bond route, there's not a requirement. FMCSA is not going to ask you for a certificate of insurance for like a general liability or contingent cargo or anything like that. The the baseline requirement to get your authorities to have either a uh freight broker bond in the amount of 75K, which is technically an insurance product, or a freight broker trust with 75 um K of value in it. So um, you know, that is really the baseline requirement, but the reality is um there are various policies that a lot of freight brokers carry, and I usually say it's really dependent on what your customers' requirements are. And I would say that's mostly what drives it. Um I'll I'll name a couple off, and Ben, I'm curious what your experience has been. You've worked at a lot of companies, you've helped coach folks through starting companies and growing them, but general liability, contingent cargo, those are like the two very common ones that I've seen. Even sometimes a contingent auto, but I mean, what have what are the ones that you've seen? What kind of limits are are folks definitely are typically being asked to carry?

I mean, mostly rule of thumb, most customers require a million dollars general liability and a hundred grand in contingent cargo. I think the really important thing to understand about freight broker insurance is that contingent cargo does not operate or function the same as a carrier's cargo insurance. For a broker, your shipper will require you to have call it 100 grand in contingent cargo. But what's really important for you is if you got to get 100 grand in contingent cargo, you make sure the carriers you book have active and valid cargo insurance for the same amount. Because if there is a claim or a loss, contingent cargo typically does not pay and rarely, if ever, will pay for a cargo claim. What it will typically pay for are your attorney fees if you're sued in the event of a claim. So a shipper views contingent cargo as if it is cargo insurance, but from a broker's perspective, it's really just insurance for legal fees if you get sued and the carrier's cargo insurance doesn't pay the claim or for the loss.

Yeah. So I'll go through and I'll to go deeper down policies. I will read you off the policies that my brokerage carries. Um, but this is a uh not a brand new brokerage. We've been in a business over 40 years and we've got a very diverse customer base. So we've got um general, so commercial general liability,$1 million. That's a very common uh policy that customers are asking for. So we've got a million dollars per occurrence with a an aggregate of of$2 million over the length of the policy. We have an umbrella policy of$3 million per occurrence, and that was a customer requirement for us to carry that. So that when you start adding these on, your your premiums go up. So you got to always make sure that you're weighing the, you know, is the juice worth the squeeze? So when I have to, when I get quoted for this policy, and usually the the insurance agents can ask things like, you know, what what's the volume of shipments, what's the average, uh, what's the commodity, things like that. And that all goes into your pricing. Moving on down, um, third-party liability, contingent auto,$4 million per occurrence. We've got contingent cargo, 100k, pretty standard, like you just mentioned, air and emissions, 250k. And lastly, workers comp at a million dollars um per accident per employee. So the those are like I just rattled off feels like 10 different policies, and there's a pretty hefty price tag that comes with it, but those those cover the um requirement of all in aggregate all of our customers that we're actively doing business with. We won't we don't just carry them just to carry them. Like I you don't want to go to a customer and say, hey, you know, pitch yourself because you just bought this policy that's got a five million dollar umbrella, you know, coverage and whatnot. What you should do is they'll usually give you like a sample COI certificate of insurance and say, yours needs to match this. Get us listed as a certificate holder. Um, I wouldn't recommend you go buy the policies before your customers are required, are requiring you to have.

Here's the other thing I would add, right? There are what's called a first position policy, meaning a brokerage can purchase an insurance policy that acts like a trucking company's cargo insurance, but it's typically on a per load basis through a company like Load Shore, which you can buy through DAT. But let's just say my customer typically ships 100 grand and I have a hundred grand in contingent cargo, but like this load happens to be 200 grand. And my carrier that always runs that lane for me only has a hundred. You can go to loadshore and buy a$200,000 policy for one load that if it gets stolen, lost, or claimed, you don't need to deal with the carrier's insurance. Loadshore will just pay your customer and then resolve the rest of it. So there are options when the number goes above what you need or you don't have it.

Another one that we've we've used. So load shore um I've used that at my company for years. Um, we we found another one recently that does instead of first position, it's just that gap or spike coverage. So it's stacked. Yeah, it's so it's stacked on top. So it's still like you're still trusting that the like let's say I've got a load that's 250k in value. Carrier only has 100K. I can buy the other 150K and it's gonna be a cheaper policy. The risk there is you're still trusting that the carrier's insurance is going to cover that first$100,000. And if they have a high deductible, that they're gonna pay their deductible. And we had I had an insurance incident that came up in the last uh couple of weeks where the claim was less than the deductible, so it didn't get filed on insurance, and the carrier's not gonna pay us money, so it's it's a huge pain in the butt. But logistic ending with a Q. Um there's a guy, uh Michael, who's I've seen at the TIA for many years from Logistic. Uh, they have a great option for that stacked coverage. Um, and check out with your insurance agent too. Um, they may offer, like we use Avalon Risk at Pierce Worldwide, and um, they've got a single load coverage option. So you can kind of price them out, see who covers what and what your rates are. And again, the same way that you can present multiple truck options to your customer, you can present them with multiple insurance coverage options and ask them what they're most comfortable with. Um, that first position is very attractive because you know, someone like Loadsure is gonna get that claim resolved very, very fast. And um, you know, it's the the ability to like purchase the policy in 40 seconds or whatever the average time is is a huge time saver. But you're you're gonna pay to have that entire first position coverage. So now the question of recommendations, um, find a good agent. That's what I say. Um, they're gonna shop the market for different underwriters. Like if you look at the COI that I was just reading off of, there's multiple underwriters on there, but we have one insurance agency that is is assisting us with purchasing those policies.

So anything else on insurance? Uh just that this is the least understood aspect of our entire industry. And that, and like I don't say that lightly. I don't mean like small new brokers, small new carriers. I mean I am on calls at least once a month, sometimes every other week, with a publicly traded company that has like armies of attorneys, risk insurance people that work for it, and they don't really understand exactly how this works. And I mean, like, at first I was kind of shocked, but then I realized most companies just handle insurance the way they always have. And whatever attorney and risk department did this 20 years ago, they just still do it the same way. Yeah. And very few shippers really understand how and what contingent covers and how and what a carrier's insurance covers. And that's why it is so important for you as a broker to learn and understand and be able to verify both valid insurance for a trucking company and the amount and the type of insurance when you're booking that truck.

Yep. All right, next question. Is it standard practice for a dispatcher to include a power of attorney in a carrier packet? This is the first time I've seen this question come up in our channel.

I've never seen it.

But it so it the uh the answer is it they're they're normally gonna have a limited power of attorney because you've got to think about it. If if an independent dispatcher needs the ability to be able to sign on behalf of that motor carrier to accept rate confirmations, to sign a motor carrier agreement from a brokerage, they need to have that legal ability to do so. So a limited power of attorney can do that. You don't want to give them a full power of attorney, that that puts you in a like they can make you know detrimental decisions on your behalf. But um, that was I brought that one because it was a very um, very interesting question to see on our page. And they had like 90 responses on it um from various dispatchers and carriers given their feedback and their experience with it. So um, when in doubt, I always recommend that if you're uh getting involved in contractual business between your company and another company, um, use an attorney, right? Like we've had you and I use an attorney when you know, personally, when we went through employment things, we've used an attorney with you know Freight 360. And um, we've had attorneys on the show, right? And they they all have their own specialty, and they definitely know more about the law than the average trade broker does. So when in doubt, consult a uh uh legal professional. And remember what Leffler said, he's like, don't get your legal advice from a podcast, go to an actual attorney.

So well, and to his point, like I think I probably deal with five or six, like between personal and business aspects, right?

Like, I mean, there's probably all in different specific niches.

They're all in different areas, two or three that deal in transportation that I'll use with different companies, the one we use for collections that we had on the show, which is a different type of attorney, one that we'll use to set up operating agreements and to structure companies correctly, the guy we used up by you in New York to set up Freight 360, the guy we use for our patents and our copyrights. Like the older I get, the more I realize I'm like, he just ended up with more and more attorneys, but they're all very specialized and they all need to have really good experience in the one thing that they do. Which either way goes back to freight brokerage of like the riches are in the niches. Like, get really good at one thing, and you'll probably do really well instead of trying to be the jack of all trades and doing everything poorly.

Yeah, well said. All right, last one. This was a comment with a question that came after it. Um, the listener said, unpopular opinion for the new brokers here. Speed books more freight than cheap rates ever will. Most loads aren't lost because of price, they're lost because someone replied too late. And the comment and response to that was any tips to improve speed? And this is a really good uh discussion here. And I feel like we've had it in the past. Um, one of the best use cases I can give, a guy that I used to work with. Um, his name is Bryce LaCasco. He's I don't think he's even in the industry anymore. He built um BLX, which is now part of the Worldwide Express group, Wex group. And he was an agent for a company that I used to work for, and then went and became a big agency of global trans. And he did so well and he grew and had this massive company and ended up selling it. And I remember talking to him probably 10 or so years ago, and one of the things he told me is he's like, We have a requirement at my company that an email gets responded to in X amount of time, or a phone call gets answered in X amount of time. And he said, like, basically, it was like whether or not it's it's gonna lead to business um or it's the right carrier or whatever. Um, you have to be able to respond. And and he did at the time he did it through the size of his team. Um, so I think there's a lot of validity to that. And we we just wrapped up an episode with uh Ascend and Convoy platform from DAT about um kind of automating and digitizing that that freight matching process. And I I can't say enough how much I agree with this person's comment about you like Wayne Gretzky, right? You miss 100% of the shots you don't take.

Shots you don't take.

You know what I mean? Um so to improve speed, I would say if it's just you, there's two things. Don't get yourself involved in too much work that you can't give full attention to all of the work you're doing. You need to be able to be 100% in on any customers that you're committing your time to. If you're not, you're gonna become that slow responding lack of service broker that doesn't end up getting the business or growing and building that relationship. The other part is depending on where you're at and what your budget is, find the software and and process solution to augment your abilities to enhance yourself. Meaning, it could be you know something like levity for you know AI plug-in with email to help you, you know, run a quick rate and prompt an email response. It could be something like Convoy, where um you're able to, you know, find a truck hitting the easy button and not having to worry about fielding 50 phone calls. It could be having the right um TMS, like you've got a send TMS and all the tools that are in there that help you skip the manual processes of carrier vetting and and quoting and all those things. It could be so many things, right? It it's what you what you want to do is give yourself the ability to automate what you can automate that doesn't require your manual thinking, so that you have the maximum amount of time to use your brain and your personality to develop relationships and offer solutions to your customers' problems. And that will be, and then eventually you get to a point where you got to hire somebody. Um, but that's my biggest thing is like leverage what you can without overspending and overbuying products. Um, because if you to this this person's uh credit, if you respond in five minutes, it might already be covered because somebody responded in 30 seconds. So any thoughts on that?

I mean, I remember I told this story before, but when I worked at TQL and then there were 5,000 people,$3 billion company. I don't know, somewhere around there. Ken Oakes, the CEO who started the company, if the phone rang anywhere in any building, in any office he was in, the third time, he would literally stop what he was doing and answer it, right? Like, and he did that to set the tone and the precedent that like nobody is too busy to take care of your customers. And the phone should never ring more than three times, right? And I think the same thing is true with like emails. If you want to service a customer, speed matters to get the business for sure, but like just think about it simply. It matters for the person sending the loads out. They don't want to keep waiting to find out when they have a truck. Somebody's waiting for them to tell them when the load will pick up. The faster they get a response, the faster they can get to the next thing. And I think just two simple things are is like one, be organized. The more organized you are, the easier it is to do multiple things or a task switch. And the other is like you should just have a separate screen that is always up that has your email on it, right? Because like you're always gonna have to do other things. And I do think there's some justification for some people to have three because like they're in a TMS and they need to be in another piece of software. So that's what they're doing all day, but they always need to have visibility to their email to see as soon as my customer needs something, I need to be responsive immediately, or somebody else is going to be. Like we're in an incredibly competitive industry where brokers are always competing for business, carriers are competing with each other. So you got to be fast to book the load on the carrier side, and you got to be fast to get the load from the customer. And speed is a huge advantage. And I don't think you can be fast and good if you aren't organized.

Yep. Well said. All right, good questions. Keep them coming our way, and we'll continue to answer them. Final thoughts, Ben.

Whether you believe you can or believe you can't, you're right. And until next time, go bills.