Just 10 years ago, if you were a U.S. shipper sending goods across the border to Mexico, you faced a significant risk: a lack of cargo insurance.
In the U.S. and Canada, most carriers have at least $100,000 in cargo insurance. In Mexico, however, cargo insurance is very rare and has historically been extremely difficult to procure.
On a $100,000, 40,000-pound load, a Mexican carrier would not be required to have any cargo coverage, whereas the standard U.S. carrier would have at least $100,000.
“The motor carriers they hired in Mexico didn’t have cargo insurance and the logistics service providers — like freight brokers — didn’t have cargo insurance either. That’s the polar opposite of the United States,” said Mark Vickers, executive vice president and head of international logistics at Reliance Partners, one of the nation’s largest top freight insurance agencies and providers of insurance products.
Without cargo insurance, shippers ended up being responsible for losses in transit, relying on their self-insurance or global policies to cover freight losses in Mexico. With their policies having high deductibles, if there was any sort of claim that wasn’t catastrophic, including theft, a shipper would likely end up paying out of pocket to cover those expenses. If the cargo value was $100,000 or less, it wouldn’t make sense to have insurance in the first place, Vickers said.
Cross-border trade in Mexico has become increasingly attractive to shippers in the U.S. — with that country currently America’s top trade partner. Many companies are seeing advantages in nearshoring, or moving their supply chains closer to home.
While Mexico offers labor, taxes and short supply chain benefits to businesses, Vickers noted that many aren’t protecting themselves from the risks associated with cross-border trade.
With more than 17,000 cargo theft incidents reported in Mexico each year, cargo theft continues to plague shippers sending freight across the border. Without carriers having sufficient cargo insurance, companies are facing significant risks when shipping south of the border.
“They’re not thinking, ‘If one of our shipments was hijacked in Mexico, not only could we have a total load loss for the full value but also downtime,’” Vickers said. “It does impact operations cost.”
The need for complete coverage on a load from start to finish was apparent. About eight years ago, Reliance Partners’ Borderless Coverage program began providing shipper’s interest usage-based cargo insurance, giving shippers and logistics service providers of all sizes all-risk or partial value coverage from the moment of pickup in the U.S. to final delivery in Mexico — and vice versa — all with a low deductible.
At first, the service allowed a variety of clients to insure one-off loads across the border. But since then, the program has become honed, focusing on providing logistics service providers and shippers with insurance mostly for contracted freight, and then later opening up the opportunity for coverage for one-off loads.
The result has not only given shippers an affordable way to protect their freight but a way for logistics service providers to stand out to shippers.
“We want to make sure that you’re not just selling on price anymore. We want to make sure that you’re not just selling on capacity. We want you and your team selling on risk management and saying, ‘We’re so confident about our cross-border risk management strategy that we will provide you cargo insurance in Mexico,’” Vickers said. “Their shippers are going to say, ‘Wow, we didn’t know that existed.’”
The companies that are successful in implementing cross-border risk management strategies are going to win the nearshoring game, Vickers said. Borderless Coverage is a good place to start.
Reliance Partners can help companies build a domestic and cross-border program for them and set them up with a portal where they can fully automate their insurance. The portal is also capable of integrating with any TMS, Vickers said.
“Groups that need to move faster, reduce human error and labor and improve standardizations with their brokers, putting in proper commodities in loads and putting in the proper load values, we’ve taken things a step further.”
The portal allows clients to plug in their pickup and delivery addresses and receive instant rates. Businesses insuring their Mexico and U.S. business with Reliance will have fewer fluctuations for rates and insurance.
The usage-based insurance allows businesses to gain coverage for other specialty services as well, including domestic less-than-truckload cargo coverage and high-value coverage.
As more companies are choosing to protect their cross-border shipments, they are able to expand their business opportunities while being assured that their shipments will be covered.
To learn more about Reliance Partners’ Borderless Coverage, click here.
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Source: freightwaves - Cross-border risk management helps companies win nearshoring game
Editor: Jenny Glasscock