As business-to-consumer (B2C) parcel delivery surged during the COVID-19 pandemic, e-commerce businesses started relying on small operators and gig economy drivers more than ever to complete the final mile and get packages into the hands of customers.
Last mile delivery is one of the most complex and costly parts of the supply chain, with damage and theft being two of the most common loss drivers, according to Ryan Mee (pictured), VP of inland marine underwriting at Liberty Mutual Insurance.
“Many of the risks seen in the traditional long-haul trucking space are also prevalent in last mile delivery, just at a very different scale,” Mee explained. “Last mile delivery drivers, for example, make more frequent stops, which increases the risk for theft. They also drive fewer miles and typically haul less cargo at a lower value, which means the level of risk is reduced if goods were to be damaged – either during an accident or over the regular course of delivery.
“For regional box truck operators, another key risk is in driver experience. This has become even more prevalent in the last few years as last mile delivery has grown, which has attracted newer, less sophisticated drivers into the industry. Less experienced drivers certainly pose an auto risk, which means they also pose a cargo risk.”
Many last mile B2C deliveries are conducted by gig economy drivers. This presents some unique insurance challenges, according to Mee, starting with the fact that most drivers aren’t aware of the commercial use exclusion on their personal auto policy, so there’s a pretty big education gap that needs to be filled.
“Once drivers understand they need business insurance, they then have to navigate the insurance requirements and options provided by whichever delivery platform they are using,” he added. “Several of the platforms only cover excess coverage that kicks in after the driver’s policy is exhausted, while others offer no insurance options at all.
“E-commerce delivery is that much more costly and complex, as gig economy drivers are faced with steep – and often prohibitive – premiums as they get shoehorned into a policy that was built for more traditional trucking operations. This ultimately leaves drivers either paying high prices for excess limits and a set of coverages they don’t need, or liable for the theft and damage of goods under their care.”
To better serve this emerging last mile and gig economy delivery space, Liberty Mutual Insurance has launched a new motor cargo product for the small commercial market. The ground-up build offers lowered limits, a comprehensive base contract and a broad set of proprietary coverage options – providing the flexibility that last mile delivery drivers and operators need to protect the goods under their care, at a cost that matches the risk.
“Prior to the Liberty Mutual motor cargo offering, last mile delivery drivers and operators had to rely on the same coverage as traditional long-haul trucking despite having very different risk profiles,” Mee told Insurance Business. “Now, small commercial customers have access to a product that is sophisticated enough for larger last mile delivery trucking operations, and flexible enough for the previously underserved regional box truck and independent gig operator segments.
“In addition to flexibility and affordability, improving the underwriting experience was also important. Previously, writing a motor truck cargo policy would take days, if not weeks. The Liberty Mutual motor cargo product streamlined the underwriting experience to allow agents and brokers to quote and bind in less than 10 minutes, meaning small commercial customers can get on the road and delivering quickly, a prospect that is particularly critical for gig economy drivers.
“Agents and brokers also play a critical role in mitigating these challenges and filling the insurance gap. They offer the education and advice customers need to make smart insurance decisions, which is especially important for a complex market like last mile.”
E-commerce and the need for last mile B2C delivery was on the rise prior to the pandemic, but the industry has really exploded over the past two years. According to an April 2021 report from the World Economic Forum, 36% more delivery vehicles are expected to be on the roads by 2030.
“Because of the pandemic, consumers are more comfortable relying on delivery than ever and customer expectations have fundamentally changed,” said Mee. “Fast delivery is no longer a benefit; it’s the new standard. And last mile delivery is a critical piece of the e-commerce equation, with the businesses that serve the space responsible for doing the hard and complex work of getting goods from their distribution hub to a consumer’s doorstep.”
Liberty Mutual’s motor cargo product is available through Liberty Mutual-appointed agents and brokers, and was designed to serve fleets with fewer than 50 vehicles that deliver within a radius of less than 500 miles.