Active risk management: Delivering holistic freight protection to SMBs

Risk management—it’s a mission-critical component of the profitable, large enterprise business. Whether enabled by in-house teams or incumbents who provide risk engineering to large accounts, these businesses tap the intelligence that helps them navigate a constantly shifting minefield of cargo risks.

Not so for the small-to-medium-sized business.

These organizations lack the deep pockets that would otherwise support internal expertise or expensive consultants. Without this guidance, they’re then left without a strong understanding of their risk profiles and exposures, and they’re also less sophisticated purchasers of insurance. As a result, many SMBs are operating with broad risk exposure today. In fact, 60 to 90% of freight in transit right now is under or uninsured.

To be clear, this is not a niche commercial problem.

From COVID-19 and the Ever Given grounding to geopolitical instability and the war in Ukraine, the global supply chain has experienced massive disruption. If a shipment is lost today, the costs and delays associated with bringing replacement goods to market are far greater than they were in 2018.

We’re all feeling the effects of the supply chain crisis.

The promising news, however, is that the insurance industry can play a pivotal role in minimizing supply chain disruption—all while better serving the freight community and driving business growth.

We’re bringing holistic freight protection to SMBs

If we’re to mitigate the effects of cargo losses on companies and consumers, we need to make risk management accessible to every business.

Leveraging AI, automation, and predictive analytics, active risk management delivers on this critical need—and our solution is on the horizon.

How will it work?

The freight community today is awash in high-resolution data. Leveraging embedded insurance and API integrations, we’re already collecting vast amounts of this anonymized data and feeding it into the AI learning engine that will power our active risk management solution.

In the future, we’ll supplement these granular shipment details with real-time asset, environment, and behavior data, as well: Vehicle maintenance and driver behavior metrics; weather, road, and traffic conditions; cargo theft patterns; and more—all right down to the shipment level.

Our AI-powered solution will then deliver automated loss prevention recommendations and impact measurements to customers. This will empower SMBs to do what they couldn’t before—make prudent decisions about how they move freight and mitigate losses from occurring in the first place, regardless of the size of their organization.

This approach to freight protection simply wasn’t possible before the recent wave of digital innovation. Now, as it breaks over the insurance industry, it will enable the holistic freight protection SMBs have long struggled without—and in the not-so-distant future.

You might think of it as risk management 2.0.

Active risk management—a win-win for brokers and the freight community

While our active risk management solution hasn’t made its way to the cargo space yet, we’re already seeing the benefits of this approach in the commercial auto space. Progressive, for example, was the first to market with a parametric solution. Delivering driver behavior insights, like speeding, rapid acceleration, hard brakes, and corner handling to fleet managers, Progressive has empowered them to deliver targeted driver training and reduce crashes while also lowering premiums.

I expect to see similar benefits in the cargo space, as well.

SMBs will gain the peace of mind that comes from far more than a piece of paper. With deeper insights into risk profiles and exposures, they’ll have the intelligence to reduce losses and mitigate business interruption. Meaning, they’ll not only protect their balance sheets, but the business relationships, customer loyalty, and brand reputation that are so critical to their success.

What’s more, as assureds improve their performance, they’ll also realize increasingly better cargo insurance pricing as they go.

Brokers will similarly benefit from active risk management. With a more granular understanding of customer risk, they’ll better support clients in addressing their exposure. For instance, as assureds start to use new shipping lanes or carriers that have delivered adverse losses to other clients, brokers can caution them, guide them through loss mitigation approaches, and provide dynamic products that meet their precise needs.

As a result, brokers will not only be empowered to deliver added value, they’ll strengthen relationships, deepen trust, and improve retention as customers come to see them as active participants in their risk mitigation.

Active risk management is the future of insurance

From where I’m sitting, there will always be a place for the insurance policies that have served as the foundation of our industry. Even with visibility into massive data sets, AI engines simply can’t deliver loss prevention recommendations for every possible occurrence—they’re predictive, not omnipotent. A risk transfer mechanism that protects balance sheets will always be necessary.

That said, active risk management will usher in an era of holistic freight protection that both reduces losses and levels the playing field for SMBs. Delivering such sizable benefits, I’m confident the freight industry will eventually come to see insurance not as a line item cost but rather as a crucial component of their overall business sustainability and a clear competitive advantage.