Network Financial Protection Plans Are Not Created Equal

Written by Bill Siemens

Almost all freight forwarding networks offer financial protection plans.  Many forwarders assume they are similar in offerings.

In fact, they are not even close!

When talking to forwarders about joining a freight forwarder network, they often ask, "Do you have a Financial Protection Plan?"

So, we thought we would investigate this and audited 15 other networks’ financial protection plans and found some big differences.

What do you think our takeaway was from this survey of the industry?  We can absolutely confirm that forwarder payment protection plans are NOT created equal, and not knowing the differences could cost your company a lot!

As they say, the devil is in the details.  But the value is also there if you choose wisely.  When was the last time you reviewed the terms and conditions of your network’s financial protection plan?  Have you ever?  How do they compare to everyone else?

The usual question, what is the amount of coverage offered by the network? is not even close to the whole story. Unless you understand the underlying terms and conditions, you may be comparing apples to oranges. Some of the main differences we uncovered come in terms of credit management, start dates, payment caps and about limiting exposure and liability.

We would like to help you discover the differences and we suggest you ask a few more questions before choosing a network and review the details of their financial protection plan, to make sure you are getting what you deserve.  Here are a few questions to ask.

What kind of credit monitoring does the network provide for both existing and new members?  Any financial protection plan should address the credit risks of both the existing members and any new members joining the group.  In our audit, we found only two networks that employ a worldwide credit monitoring agency to cover both, and these are Globalink Network and Global Value Network, both part of the GLNK, Inc, group.  Without such monitoring, isn’t this a bit like driving blind?

When does coverage start? Are you aware that more than one network insists you wait a year or two before you are eligible for coverage from their plan?  However, please note a majority of the networks start coverage immediately upon confirmation of membership in the group, but not all. 

Are you clear on what is covered and what is not? You might be very surprised at how limited this might be. Make sure that you know what is covered: Bankruptcy? Fraud? Insolvency?  Bad Debt?  Do not go in with certain expectations only to be surprised later, as there is a wide range here.   Some plans are wide open, some are very specific.

What is the invoice limit that is covered? Although you're told the top end of coverage, several networks stipulate that they will not cover an invoice over a certain amount, and sometimes that amount can be quite low. One network set this as low as $2,500.00.  However, this is not the case across the board, which is important to check out.

Is there a cap on your contribution to the fund? We reviewed 15 networks, and only two of them cap the contribution payments into these programs.  Those networks are the Globalink Network and the Global Value Network, part of the GLNK, Inc. group.  Without such a cap, it means you continue to pay into these plans forever. 

How are claims settled, and are there any requirements specified to be eligible for payouts? For example: are notification periods specified? Is that amount of time acceptable to you? In some programs, there is no commitment to a particular settlement time, one network mentions finalizing claims by the end of the year and another states settlements take place only after a collection agency finishes their efforts.

Is the network clear about how the member-contributed funds are managed?  While several networks address this, there are several that don't. The money paid into payment protection plans should always be separated from the network's operating cash, and how this happens must be clearly stated.

Many of these plans have a lot of similarities, and some major differences.  This is especially true in terms of how much actual coverage you get for the fees you are paying and how long you have to continue paying for the coverage.

We would be happy to assist anyone interested in comparing what you currently have in terms of financial protections to what we've seen in our audit.  We are proud to say that our coverage is among the most competitive in the industry.   If you are looking to get the most coverage for your company, please let us help and contact us today.