The cargo insurance business, hardly a first-mover when it comes to information technology adoption, is about to leapfrog into the 21st century.
Within the past week, two initiatives were announced that, although different in tactics, share an overarching, tech-driven objective – enabling shippers and intermediaries to shed the manual process of obtaining coverage, and to integrate insurance functions in real-time into their freight workflows.
On Wednesday, information technology provider project44 and insurer Reliance Partners unveiled a system integration allowing shippers, freight brokers and third-party logistics providers (3PLs) – intermediaries that buy and manage freight services for shippers – to access real-time quotes and to purchase coverage as they book their shipments. The initiative relies on Chicago-based project44’s Automated Programming Interface (API) network, which blasts out data at lightning speed directly to users without the information routed through a third-party.
Last Thursday, UPS Capital, the financial services and insurance arm of UPS Inc. (NYSE: UPS), rolled out a program with InMotion Global, the developer of the popular transportation management system “AscendTMS,” for small- to mid-size shippers to request and obtain coverage, pay their invoice, and submit and settle claims through the TMS.
The real-time execution, which relies on UPS’ suite of API tools, functions like an “insurance by the drink” model, in which shippers can buy coverage for what they need at a given time rather than purchasing annual blanket coverage for services that they may never want or may never use, the companies said. The “as a service” model is common in many industries as users slough off annual contractual obligations in lieu of services purchased to fulfill a specific on-the-spot need.
Both initiatives aim to automate what has historically been a time-consuming process that project44 President Tommy Barnes is conducted through “phone calls and sticky notes.”
Companies can spend up to 20 minutes per transaction obtaining and reconciling various insurance quotes, according to Reliance President Chad Eichelberger. For a mid-sized broker, that adds up to about 1,000 hours per year, said Eichelberger, who worked at broker Coyote Logistics, a unit of UPS, and was a top executive at broker Access America, which Coyote acquired in 2014, the year before UPS bought Coyote.
Barnes estimated that there is, at minimum, a $7.2 billion addressable market for automating the cargo insurance processes.
In an interview late on April 17, InMotion Global President Tim Higham said the two initiatives are not competing with one another. The UPS-Ascend program targets the small- to mid-size user market that don’t understand how APIs work and, even if they did, lack the in-house resources to write code for it. The project44-Reliance model is best suited for larger shippers, brokers and 3PLs with the expertise and resources to add an insurance API to their suite that may include, for example, APIs for less-than-truckload services, Higham said. By contrast, the Ascend platform already builds in the insurance component, Higham added. There is no labor intensity involved other than deciding whether to turn on the function or leave it off, he added.
Higham didn’t draw negative comparisons with the project44-Reliance model, saying the platform is perfectly fine for users who are comfortable working with complex API tools. The two platforms are pursuing different user segments, he added.