Thinning the Herd: Underwriting in a Crowded Freight Broker Market

An increased number of freight brokers over the last several years has led to some hefty complications for the transportation industry. For freight brokers specifically, a saturated market leads to increased competition, lowered rates and reduced commissions. While increased competition is generally a feature of a healthy market, allowing too many players on the field has caused serious damage. Carriers, shippers, brokers, regulators and even surety providers have all felt the impact—most notably, from the significant increase in fraudulent activity and double brokering.

The Status Quo

Your typical surety company is comfortable requiring a simple credit check to provide a bond offer. This may work in most lines of surety, but not in the crucible of freight broker bonds. Credit underwriting allows nearly any applicant through, including those who have knowingly run scams or are ready to try out a freshly stolen identity.

While this loose and fast underwriting has the short-term benefit of more premium to the surety carrier, gains are short-lived when claims begin to snowball. This bond comes with great risk—not only from payment to claimants but in handling each individual complaint. On average, a typical surety bond experiences a combined loss ratio of 15%. An improperly underwritten freight broker bond can skyrocket to 100% or more.

It doesn’t take much to deduce that surety carriers are opening the doors wide to unscrupulous freight brokers (or should we say double freight brokers). This adds to the saturated market and leads to lowered rates and less business overall for legitimate freight brokerages. How low can a double broker bid if they never intend to pay the carrier? 

Jet’s Commitment to High Standards

At Jet, we refuse to compromise our underwriting to reap short-term gains. We are committed to strict vetting of freight brokers to protect the integrity of the freight industry. You may be thinking “strict underwriting sounds complicated, is time-consuming and will cost more”. None of that is true with Jet. Thanks to the tools we have available, this process is not only secure but quick and easy. Most importantly, it allows Jet to provide excellent surety bond rates, monthly payment options, and even multi-year terms! The philosophy is simple, if you don’t bond guaranteed claims, you can offer good businesses better rates.