Carrier and Insurance Selection for Freight Brokers | Final Mile 116

Welcome back for another edition of the final mile where we answer all your questions. These all come from our Facebook group today. So thanks for the roughly 100,000 of you that are participating in there. And if you're not, make sure to check out the link in our show notes or description box to join that group. A lot of good stuff. A lot of people asking good questions and sharing knowledge and sharing capacity and loads too. So um make sure to, you know, subscribe, do all the good like stuff that helps the algorithm get us in front of more people just like you to help with them out and answer their questions. And you can check out our Freebroker Basics course if you're looking for um a solution for training for yourself or your team to get your brokerage to the next level or just off the ground if you're brand new and check out the sponsors of the show. Um help support the channel. All right, Ben, first question. We've got how many of you brokers have your own insurance? And how many of you just have your bond and use the carrier's insurance? So we get a lot of questions about insurance, and the the thing I want to explain here is that what we can purchase, and I'll just talk generically here because there's always exceptions. What we can purchase as a broker versus what a motor carrier can purchase as a carrier with assets are two different things.

This is so important, like so very important. And to be honest, I was on three or four calls last week with brokers, shippers, and insurance companies clarifying what seems to be a large misunderstanding. And the thing that I find really interesting is that like this misunderstanding goes all the way up to the largest chippers that I've ever worked with. I mean, I've literally had this conversation with companies the size of like Mersk in regards to like what insurance covers what? What you require a broker to have, and what you think that actually does. Because they are very, very different things from what I think people think are any insurance can cover and what it actually does cover.

Yeah. So let me kind of break it down. Um, the the question involved about the bond, it's a requirement. You've got to have a bond or a freight broker trust.$75,000. That's just a requirement. Everyone's got to have that. Insurance policies, motor carriers will have a prime, like if we look at just cargo insurance, they'll have the primary cargo insurance. Usually$100,000 is fairly standard. Your contingent cargo policy does not replace that. Okay. The carrier needs to have that primary policy. Now you can purchase a first position policy. We, you know, we call that like an all-risk policy or a single load insurance policy that will um take the first position in the event of a claim. So let's say, for example, a carrier has an excluded commodity or their insurance limits are too low for a high value shipment. You can go into something like an all uh all-risk policy from uh loadsure, you can access right through your DAT account. Um, real quick, just type in what it is of value, and you'll get a quote spit out. But when you're booking a load, your carriers need to have that cargo insurance policy, right? Your same thing, your carriers need to have that auto liability policy. Um, we can have contingents, and those contingents are typically very cheap and they don't really cover a whole lot of situations. Um, but to answer the question point blank, um you need to have your bond or trust, and your motor carriers need to have a primary policy for liability and for cargo. Now, if your customer requires anything specific, like a general liability policy or an umbrella policy or a contingent policy or whatever, that is something where I'd recommend work with an insurance broker and a strong transportation attorney to review your customer contracts and requirements, and then you make a business decision to meet these criteria and the costs associated. Is this worth doing business this way? So anything else on insurance?

I would just say that like, keep it very simple. Your insurance as a freight brokerage basically covers nothing. It only covers you when you get sued. Basically, the only value I've ever seen really in any insurance a freight broker is required to have is if we get sued or didn't do our job making sure the trucking company has it. Like at the end of the day, if you're a freight broker, just make sure the trucking company has the amount of cargo insurance that is at least equal or higher than the thing you're moving, because your insurance as a freight broker is never going to help your customer. Your customer will say, Hey, we require you to have 500 grand. Well, that's just to do business with them. That insurance policy will not cover if something happens to a load, if and literally anything happens. Like they're basically just additional expenses we pay to work with a shipper, but they really cover nothing. So you need to one, like you said, make sure that trucking company has enough, or you go to a different kind of insurance, which is what load shore would be, which is it's called a first position policy because it is insuring your customer directly, meaning, like you don't need to go to the carrier to work with the insurance company. If something happens, that insurance company just pays your customer. Yep. They're more expensive. Like roughly, I'm looking at somewhere between an extra hundred dollars per$100,000. I reviewed a bunch of these last week, and it's like$500,000 a load was about$500. Additional insurance cost for one load. A million dollar one was a little more than a thousand dollars. So like they were roughly about$110 per$100,000.

So cargo shield, um, I think and they're an all-risk policy, but it's just standard$100,000. I think theirs is like$35,$35 a load. But all it's doing is like it's not adding any additional insurance or any, you know, it's it's just saying like, hey, we'll help settle the claim faster and not, you know, we'll settle it within 30 days. Whereas um when you go above that or to other commodities, that's where yeah, you're gonna be looking at a higher price. Like, I I've seen people that have gotten like a load share policy for a couple hundred bucks, um, but and it's worth it for them because it's quick and easy, covers what's needed, and the carrier doesn't have to go and try to figure it out on their end and factor it into their rate.

So um there's another whole rabbit hole you can go down with this, meaning that like since most shippers don't know this, what that what is actually happening in a lot of scenarios is shippers are moving freight that is just uninsured all of the time. And then because I've been in bids that were pretty large with pretty large companies, and I've gotten feedback where they're like, Well, hey, you're like$300 too much on every lane. And I'm like, okay, that's because I added the insurance cost because everything you ship is three to four hundred thousand dollars. And they went, Well, everyone else that gave me rates is exactly this amount cheaper than you. I'm like, that's your you're not insured. They're like, but they have cargo contingent cargo insurance. I'm like, that's not real insurance. And I'm like, you are moving in some cases hundreds of loads uninsured every day and just don't realize it.

Like this is what it should cost. We had one that where the customer was shipping stuff that was worth like two to three million dollars. Yeah. And big box brokerages that we lost a few loads to, um, won't name them, um, but they were running them uninsured. And when the customer realized our, you know, why our rates were higher, it's because we have this insurance on it. They were like, oh my gosh. Like, and they were they were lucky that nothing ever happened and got damaged because that you'd be in a huge mess there.

So well, that's the real move, right? Having this conversation with your customer and kind of explaining the truth of it, right? Like, hey, you can keep paying those rates, but whether you pay us or any other brokerage, it's not a coincidence that all of those rates are exactly my insurance cost cheaper, right? Because like, and I've shopped these at a handful of different insurance options. I've looked at account specific, customer specific, lane specific, commodity specific, per load, per account. And like, no matter how you cut it, like if you are that much more expensive, it's because your competitors uh either don't probably don't know this, is the first thing. And your shipper probably doesn't know this. And they'll go, well, I moved thousands of loads, there hasn't been an issue. I'm like, yeah, because you haven't had a claim yet. Where do you have a claim on a million dollar load? And then tell me what happens because you are going to be in a shitstorm of problems trying to figure out why you lost a million dollars and thought it was insured, but it actually wasn't.

Exactly. All right, next question. Um, any brokers want to give advice on booking trucks? I need some negotiating skills. I'm new to this. So I picked this question out of all of them because I dealt with something this morning that was basically the wrong way of trying to book a truck. Um, and long story short, somebody was trying to email blast like 4,000 people all at, you know, 4,000 emails in a day, just shotgun blast out, trying to capture carriers about available, you know, a bunch of available loads. And I would say that is, you know, it's one tactic, it's probably not the best. So if I were to look at the primary method of booking trucks, I would say this, right? Primary option number one is go with a carrier that you have a personal relationship historically and that you know and you trust, right? Next up, if that's not available, a carrier that your company has a historical relationship with that somebody else within your company has worked with and can trust, and you can see historical rates or data on them. And then you start to fall into the, well, I don't have any internal data. Okay, well, now you've got third-party sources that are out there that they've got aggregated data of carriers and their performance and um other metrics about them. So this could be something like if you want to source carriers through gen logs or through highway or through the DAT directory, things like that. So you've got actual objective data on where this carrier has been seen to operate, where they've identified they prefer to operate, where they've literally been seen on gen logs camera sensors throughout the country. Um, and then we get to the marketplaces, right? The the load boards, like your DAT, your truck stop, and the new um, the new highway exchange as well, where you're literally you're posting loads up there and you're seeing carriers post trucks, or they might call you on a posted load and you don't have a relationship with them, you don't really have a ton of data on them. You're just you're freely out there in the open marketplace. Um and that's another way to go about doing it. And honestly, when you're brand new and you don't have any carrier relationships, you're gonna likely have to rely on some of these different platforms and marketplaces to start to develop relationships. And I would say the first time you talk to a carrier doesn't have to be when you have a load posted, right? If you know certain areas that you're prospecting business in, I would make the same phone calls on the carrier side, trying to reach out and say, hey, um, you know, what kind of runs are you guys typically looking to make? What lanes do you like to operate in? Where are you trying to get back calls from? Because that'll help you prospect and you're building carrier relationships at the same time as prospecting shippers. So when it comes time to cover that load, you now know, and based on whether you're tracking stuff in your TMS or in a CRM or whatever for carriers, you now know, hey, I'm gonna call this guy. I've already talked to him a couple of times. Um, they typically have this truck available or these uh you know, this equipment available um in these areas. And that just helps you go, you know, way, you know, develop that relationship way further and in advance versus you know, you get a call from a carrier on a load board, you're trying to run their MC, and you're just hoping I'm not getting scammed or double brokered or stuff stolen cargo, et cetera. So that would be uh my advice there is to take a proactive approach to your carry development. Um Ben fell out on us, so I'll take this last question on my own. Lastly, uh, as a broker, do you prefer to work with an owner operator, a company with a large fleet being five or more trucks, or a smaller startup with one to two trucks and a third-party hiring of drivers? Which and why? Well, I think it really just depends on what kind of freight you're dealing with. If you're dealing with a single spot load that is just a very simple, I got one of these, it's got to go out in today or in the next couple of days. Um, it doesn't really matter to me which of those I use the the most likely is probably gonna be a smaller carrier, just because they tend to operate in the spot market spot market more often versus a larger fleet that is likely gonna have their assets contracted well in advance directly with a shipper or maybe with a broker in some instances. Um, larger fleets are really great if you're dealing with predictable freight for your customer. So if you know in advance, hey, my customer, I've got a three-year or a three-month commitment with them on um, you know, these these 20 lanes, that's where you're gonna want to start piecemealing the coverage on those and you want to try and contract them. And typically your larger fleets, even your mid-sized fleets, are gonna have more assets that are more predictable well in advance. So um again, it just depends on the situation and what kind of freight it is. But the the rule of thumb I probably give here is that um the smaller the opportunity or the the more spot market that it operates in, you're probably gonna be dealing with, you know, your owner operator, your smaller fleet, or mid-sized fleet, even. And then your larger opportunity is more predictable, contract-based with a customer. Um, you're gonna likely have to leverage or want to leverage a larger fleet because I'd rather work with three large carriers on a 20-lane project versus 20 owner operators in it. Because then you're just managing a lot different. Um, who am I paying? And um, you know, what are the terms? And we have to qualify these different carriers. So that's my take there. Great questions. Thanks for sending them in. And we'll see you guys on the next edition of the final mile. And until next time, go bills.