Private fleets play a significant role in the logistics and transportation sectors in North America. In Canada, private fleets account for 68% of internal shipments, with the remaining 32% handled by for-hire carriers and dedicated fleets. Similarly, in the US, private carriers manage 75% of outbound and 35% of inbound freight.
This white paper explores the concept of private fleets, their benefits, the risks they carry and how Gallagher can help mitigate these risks.
Understanding private fleets
A private fleet is an in-house team of trucks operated by a shipper whose primary business isn't trucking. This model is prevalent in industries such as manufacturing, agriculture, retail, and food processing and distribution. Companies that produce goods often find it advantageous to manage their own transportation to ensure capacity, control and customer service.
Benefits include:
- Guaranteed capacity and control: Private fleets enable businesses to control their logistics operations, ensuring timely deliveries and reducing dependency on external carriers.
- End-to-end visibility: Companies can monitor their shipments throughout the entire supply chain, enhancing transparency and efficiency.
- Customer service and retention: Direct control over transportation allows businesses to offer better customer service, leading to higher customer satisfaction and retention.
- Branding opportunities: Branded private fleets serve as billboards on wheels, offering continuous advertising for the company's products.
The impact of the pandemic
During the COVID-19 pandemic, many shippers turned to private fleets due to the difficulty finding for-hire capacity. The benefits of private fleets became evident, leading many businesses to expand their own fleets rather than revert to using for-hire carriers.
Risks and challenges
Managerial expertise
While private fleets offer numerous benefits, they also present significant risks, particularly because the primary expertise of these businesses lies in their core industries (e.g., manufacturing, farming, retail) rather than in transportation management. This lack of expertise in transportation management often results in inadequate oversight of insurance and safety/compliance needs.
Insurance and risk management deficiencies
Many private fleets operate under commercial auto policies that may not fully address the risks associated with their operations. The top property and casualty insurers for these types of businesses aren't always the best fit for transportation-related exposures. Often, there's a lack of knowledge and understanding when it comes to managing an effective transportation and risk management program.
Common issues include:
Coverage: Transportation companies require specific coverages that aren't always available from all markets. These coverages include appropriate liability and excess liability limits, non-owned automobile liability, owned cargo forms, transportation floaters, coverage for long haul and US exposure, and other commercial auto extensions.
Claims management: Not all insurers have the expertise to handle automobile claims effectively. This expertise is particularly crucial given the urgency of auto losses and the potential for fuel spills, significant physical damage loss, third-party liability, injuries and other risks that require immediate response. Poorly managed claims can lead to excessive costs, added expenses for clients and potential non-renewals and policy cancellations.
Expertise: It's essential to have an insurer who understands the transportation industry and can address these challenges. An insurer should provide the appropriate coverages and services while offering clients the stability needed to maintain a sustainable insurance program.
Regulatory non-compliance: Private fleets, whose expertise lies in their core business, often have gaps in their risk management programs. For instance, Canadian carriers that cross the border into the US may be unaware of the need to register in the US Federal Motor Carrier Safety Administration (FMCSA) Drug and Alcohol Clearinghouse and conduct random drug testing, which can lead to potential fines and suspension by US authorities. In other cases, private fleets may not have all the necessary safety policies and procedures to satisfy insurance requirements of the Canadian National Safety Code (NSC) and the US FMCSA.
Gallagher's approach
Case studies
At Gallagher, we adopt a comprehensive approach to managing the risks associated with private fleets. Our services include:
Assessments and benchmarking: We conduct thorough assessments to benchmark your current level of safety, compliance and coverage needs. By analyzing hard numbers and prior losses, we help identify trends and areas for improvement.
Documentation review: Our team reviews critical documentation, including safety policies, driver qualification files, maintenance records, drug and alcohol programs and analysis of log books and electronic logging devices (ELDs). This review ensures that all aspects of your fleet's operations comply with regulations.
Tools and resources: We provide ready-to-use tools and resources to help improve compliance in key areas. This assistance includes implementing effective training and risk management programs tailored to your specific needs.
Ongoing support: Gallagher offers ongoing support, guidance and oversight as you continue to develop your safety culture. Our goal is to positively affect your total cost of risk through continuous improvement.
Conclusion
Private fleets offer significant advantages but also come with inherent risks. Proper management of these risks is crucial to ensure the safety, compliance and financial stability of the business. Gallagher's expertise in risk management and insurance solutions can help private fleet operators navigate these challenges effectively, ensuring long-term success and sustainability.
