In early September, Dan Reynolds, the editor-in-chief of Risk & Insurance, caught up with Janelle Griffith, the North American logistics leader for Marsh Specialty. The topic of the conversation was the sharp increase in cargo theft and what risk mitigation techniques might be available. The conversation has been edited for length and clarity.

Risk & Insurance: Nice to meet you, Janelle. Please quantify and qualify the sharp increase in cargo theft that has been occurring.

Janelle Griffith: Cargo theft trends are cyclical, just like everything in the supply chain. Each supply chain link is affected by the ones before and after it, leading to reciprocal effects.

During the pandemic, the logistics industry focused on becoming technologically enabled and advanced. However, this also led to bad actors finding new and innovative ways to steal cargo using technologically enabled methods.

The data shows that between Q3/Q4 2022 and 2023, the incidence of supply chain cargo theft increased by over 59%. This worrying trend is driven in part by economic factors.

The types of commodities targeted are also cyclical. With food and beverage prices being high, they have become a hot commodity for theft, along with high-value electronics due to the prevalence of e-commerce in the supply chain. We’re seeing spikes not only in certain commodities, but in specific regions as well.

R&I: What types of technology are thieves using to become more sophisticated in their cargo theft operations?

JG: Thieves are leveraging various technologies to carry out more sophisticated cargo thefts. In the supply chain, there’s a significant push for increased visibility, which involves using technology to see beyond the first level down to the second, third or even fourth tier. This integration between conveyances allows for tracking, tracing and predictive analytics.

However, bad actors are exploiting these technologies. They engage in hacking to access and alter bills of lading before they are printed. By falsifying these legal documents issued by carriers, they can redirect cargo and make wholesale changes to the shipment details, resulting in fraudulent bills of lading.

Another tactic is fictitious pickup, where thieves impersonate legitimate trucking companies or logistics providers. They purchase struggling companies with outstanding accounts receivable, keeping the email addresses and company name to maintain a facade of legitimacy. These entities then bid on loads through load boards, playing the long game by waiting to establish credibility.

Some even apply for official DOT and FMCSA authority to further enhance their perceived legitimacy. Rather than resorting to smash-and-grab tactics, these sophisticated thieves redirect cargo and manipulate the system to force the delivery of goods directly to them or their cohorts.

R&I: What insights can you share about the prevalence and nature of cargo stolen from trains, based on the data you have access to?

JG: Train theft is a persistent issue, as trains are still largely operating with traditional methods and often lack adequate security measures. Crime rings target trains in a manner similar to historical practices, particularly along longer stretches between stops where the trains move at slower speeds, making them vulnerable to theft.

To combat this issue, various stakeholders in the supply chain — including rail companies, shippers and intermediaries like freight brokers — are collaborating with federal and local law enforcement. The FBI has dedicated task forces, and local authorities have established protocols to address cargo theft.

The key to preventing cargo theft lies in the entire supply chain working together. The pandemic exposed the existing vulnerabilities in the supply chain infrastructure, and both the industry and bad actors now have a better understanding of these weaknesses.

Rail companies are working with law enforcement to implement security patrols along high-risk stretches of their routes to act as deterrents. Additionally, specialized businesses and task forces have been formed to focus on breaking up cargo theft rings.

Insurers, trucker onboarding companies and logistics entities are also collaborating to help their clients better vet subcontractors, using data to identify potential red flags such as subtle changes in email addresses or phone numbers that belong to other entities. By taking these steps to mitigate risks and working together, the industry can make significant strides in preventing cargo theft.

R&I: What are your thoughts on some insurance carriers determining cargo to be uninsurable due to the current cargo theft situation?

JG: The situation with cargo theft is quite concerning. While we haven’t seen a true instance of cargo being deemed uninsurable yet, multiple insurers have expressed that it might become a reality if the issue cannot be controlled.

Insurers are still providing ample capacity, but we’ve observed significantly stricter insured and underwriting guidelines. Premiums are also increasing, with rates going up between 5 to 8%, depending on the client’s risk profile.

Underwriters are now asking clients to demonstrate safety and security protocols that they’ve never required before, specifically due to this issue. For example, shippers and/or intermediaries are expected to show that they have measures in place to prevent drivers from making unattended stops with the vehicle. Freight brokers need to prove that they don’t double broker and that their appointed trucker maintains control over the cargo throughout the duration of the shipment.

R&I: How has the rise in cargo theft affected the logistics and transportation industry, and what role are security companies playing in addressing this issue?

JG: The increasing incidence of cargo theft has led to the emergence of specialized security companies focusing on this problem. Many of these firms are founded by individuals with backgrounds in FBI task forces and similar organizations, bringing their expertise to bear on the issue.

These companies often concentrate their efforts on high-theft areas such as California, Florida, Texas and Illinois, which is a major transportation hub. Their interventions have proven effective, and cargo theft incidents have dropped significantly in the months following the breakup of theft rings.

However, the modus operandi of these criminal groups is adaptable. Once their operations are disrupted in one area, they often relocate and resume their activities elsewhere, perpetuating the cycle of theft. This dynamic underscores the ongoing challenge of combating cargo theft in the logistics and transportation industry.

R&I: What preventative measures or developments in risk mitigation for supply chain cargo theft should our readers be aware of that we haven’t discussed yet?

JG: Technology remains a powerful tool for preventing supply chain cargo theft risks. Our clients are already utilizing advanced security systems, training protocols and partnerships with law enforcement. However, there is a lack of transparency and information-sharing among entities within the supply chain.

I believe we are currently in the post-pandemic era of logistics 2.0, where we have more knowledge and are striving to improve. To reach the next level, logistics 3.0, we need to transform from a supply chain to a supply line. This means creating a seamless flow of information and collaboration, eliminating the vulnerabilities that exist at each link in the chain where cargo theft can occur.

By fostering more conversation, transparency and collaboration within the supply chain, we can create a more secure and efficient supply line. This is the direction we need to move towards, but we haven’t quite seen it materialize yet in the industry.

R&I: What is the broader impact of cargo theft on the supply chain and the general public?

JG: The vast majority of the public doesn’t realize that cargo theft affecting the supply chain has repercussions on our day-to-day lives. Logistics entities often operate on low margins, so every incident of cargo theft forces them to increase their safety and security protocols.

These preventative measures come at a cost. Additionally, paying out claims or facing increased premiums further impacts their bottom line. Ultimately, in order for these companies to remain efficient and stay in business, they will have to start passing these costs on to the consumer.

Cargo theft isn’t just a problem for logistics companies or the supply chain; it’s an issue that will affect all of us. It’s not a “they” problem, it’s a “we” problem. As consumers, we will ultimately bear the consequences of cargo theft through increased prices for goods and services. &