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Loss Prevention Saves a Bundle . . . and a Client

Topics:  Babaco

Loss Prevention Saves a Bundle . . . and a Client

William K. McCardell, Vice President of the U.S. Fidelity & Guaranty Company
Babaco News
Winter 1978

BALTIMORE . . . Cargo theft is a growing problem that has industry, government and insurance people increasingly worried.

During 1976 over $20 million was stolen in 450 separate incidents, according to a random survey by Babaco Alarm Systems, Inc. Average losses were approximately $46,000 per load.

Included in these statistics were thirty-two thefts involving $100,000 or more, enough to make a claim department manager cry.

The need to mobilize against this serious problem was the subject of Executive Order 11836, in which the President of the United States said, "Theft of cargo has emerged during this decade as a serious threat to the reliability, efficiency and integrity of the Nation's commerce. The total cost of theft-related cargo losses from our Nation's transportation system is now estimated to be in excess of $1 billion annually. These losses seriously erode industry profits, result in higher prices for consumer goods, and provide support for unlawful activities."

At that time, the President charged government and industry with the responsibility of organizing to prevent cargo theft.

Various government groups were appointed to work on solutions of the problem, including the Secretary of Transportation, the Attorney General and the Secretary of the Treasury, and government transportation agencies, such as the Interstate Commerce Commission, Civil Aeronautics Board and the Federal Maritime Commission.

Industry, likewise, has organized to the government's challenge "to do something." They have created the Transportation Cargo Security Council, a truly all-industry council which encompasses airlines, truckers, automobile manufacturers, merchants, railroads, shippers and insurance companies.

The insurance industry in particular has long recognized the importance of loss prevention. Both the Ocean Marine segment of the business and the Inland Marine underwriters have cargo loss prevention committees which are among the most active in their organizations.

In addition, individual companies have stepped up educational programs for their engineering people and are developing loss prevention programs tailor-made to fit each risk.

As a result of their exploration of the cargo theft loss problem, insurance companies have made several general recommendations for any concern involved in cargo transport.

1) Obtain the support of top management, whether it is a shipper or a carrier. There is a complete agreement that, unless top management is in full sympathy with loss prevention and is willing to spend the money to support the programs, there will only be token compliance and, therefore, poor results.

2) For any risk of sufficient size, employ a trained security director who reports directly to top management with power to enforce compliance with the rules and regulations.

3) Since the single biggest source of theft loss is attributable, directly or indirectly, to employees, carefully screen all employees.

After this, the recommendations become individual ones to fit each risk.

For example, if the client were a public transport company, one of the foremost recommendations would be the installation of a quality alarm system on all vehicles.

Other recommendations might include the following:

1) chain link fences around terminals,

2) lighting of terminal areas,

3) proper location of terminal tower dispatcher in view of entrance and exit gates,

4) I.D. cards for all employees,

5) king pin locks for all trailers,

6) tail-to-tail parking of loaded trailers at terminals,

7) strict control of tractor keys by dispatcher personnel,

8) planned delivery routes, and

9) identification markings on trailer tops so that they can be easily spotted from the air.

While every case has its individual problems, the master strategy for combating cargo theft loss revolves around a comprehensive evaluation of problem areas within a system and remedial measures to plug the leaks.

A Case History

Epes Transport System, Inc., insured with Irby Insurance Agency, Inc., of Blackstone, Virginia, became a candidate for a system of loss prevention after suffering two hijackings with combined losses of over a quarter million dollars.

In support of USF&G's policy to "save the business of our agents, whenever possible," the Company took steps to resolve Epes's problem.

Located close to Richmond, Virginia, Epes usually transported relatively low-value items, particularly raw tobacco from the fields to the manufacturer. Under those circumstances, their security procedures were normal and acceptable.

Occasionally, however, Epes was contracted to transport shipments cigarettes, a high-value and high-risk commodity. On two separate occasions, their trucks were hijacked while on the road, and in a third incident, a loaded truck was stolen from a terminal.

It came time to answer a serious question: "were there ways to prevent these losses and make Epes a profitable risk once again?" Well, it took a lot of cooperation, hard work and research, but the answer was a very definite yes.

The hard work began when Joe Irby of Irby Insurance Agency contacted USF&G's Richmond branch office, and recommended that a meeting take place between the president of Epes, representatives from USF&G's Home Office and the Richmond branch office. During a series of meetings, the group thoroughly examined all aspects of security at Epes terminals, and soon a list of possible solutions was drawn up.

Together they agreed that the immediate installation of an alarm system on all trucks was mandatory. The president of Babaco Alarm Systems personally visited Epes and offered many helpful suggestions based on Babaco's experience in theft prevention.

Other recommendations followed a thorough survey by USF&G's Engineering Department of all Epes terminals and a review of their internal security procedures in operation.

Some specific recommendations adopted by Epes were:

1) loaded trailers travel in convoy (at least two trucks) between terminals,

2) the identifying number on the tractor trailer is changed once the trailer is loaded and ready for departure,

3) delivery to terminals is done only during daylight hours, and

4) a telephone call check-in is being done by drivers when making city deliveries.

In addition, Epes now has an ongoing program for cargo loss prevention, headed by a newly-appointed director of security. The president of Epes pledged complete cooperation with all recommendations. Epes, in fact, instituted various security procedures on their own.

Since the complete security system has been operational, there have been no serious losses suffered by Epes. Their remarkable turnaround came about step-by-step, through the dedication and concern demonstrated by USF&G and independent agents like Joe Irby. It's a record of which we can all be proud of.