We all know there have been some big changes in military moves under the new Families First Program. We have received numerous questions from insured’s and brokers regarding the impact these changes will have on the cargo and warehouse legal liability premiums of our customers.

Families First is a customer focused program developed by Surface Deployment and Distribution Command (SDDC) to continually assess customer satisfaction and improve quality of life of service members. Families First will obtain this goal by offering full replacement value (FRV) at no additional cost to the shipper, online claims filing through the Defense Personal Property System (DPS), direct interaction between the member and the Transportation Service Provider (TSP or Mover/Carrier), and the use of Customer Service Surveys (CSS). In the past, military shipments used to go to the lowest cost carriers, but now the shippers will have to complete a survey which will be used to calculate a Best Value Score (BVS) for each mover. The BVS will be used to assign shipments to TSP based on member feedback—the higher the score, the more jobs they will get. The Customer Service Surveys addresses attitude of TSP crew, timeliness, quality of services provided and if they plan to file a claim.

The new valuation on military shipments and non-temp storage has gone from $1.25 per pound to $4 per pound. The increase for valuation in storage applies on shipments that enter storage after March 1, 2008 while the transit valuation increase was effective on all shipments after October 1, 2007. There is a minimum of $5,000 and maximum of $50,000 in coverage provided on every military shipment. This valuation change is 200% more than the prior valuations used for military claims and therefore likely to raise claims values by military movers by nearly 200%. This does not correlate directly to a 200% increase in premium. The Mover’s Choice Program (MCP) did not want the burden of the change to be directly passed onto the mover and felt that an immediate deductible change from $1,000 to $2,000 would mitigate spiraling losses by the insurer and creating an unprofitable line of business which then insurers either depart the market or drastically raise rates. Therefore, since most mover’s insurance deductibles for this coverage exposure were set at $1,000, MCP required $2000 deductible to help alleviate the overall premium increase.

Since the cargo valuation increase took affect immediately on all shipments increases in cargo premium are more likely to be more than storage, since movers still have a good amount of storage at the old valuations that entered their warehouse before March 1, 2008. Keep in mind, the increases each mover will see are subject to many different factors; underwriters must weigh in each movers claims history, the amount of annual transportation and/or storage revenue, and years of military moving experience and the mix of other business the moving company has besides military. So the actual increase will be different for each mover.

Families First hopes the military damage claims will be handled more efficiently than in prior years with the help of the online DPS system and TSP incentive to improve its BVS . If the claim cannot be settled between the member and the TSP, they may go to the Military Claims Office who will generally pay depreciated value to member then go after TSP for the balance. All claims must be filed within 9 months of delivery to get the benefit of full replacement cost. If a claim is filed after 9 months, but within 2 years of delivery then the claim will be settled at depreciated value (up to maximum of $1.25 per pound). If a claim is reported more than 2 years after delivery, no payment is required.

The New Family First Program has greatly changed claims reporting and handling for military house goods moves. Currently, insurance companies do not have a claims track record and an understanding if these changes will cause an increase in claims being reported. As all parties are hopeful this change will make a difference, time will only tell if this change will cause an overall increase in insurance rates for these moves.

Please call me to discuss any questions or concerns you have regarding this issue.

Sincerely,

Sue Ortiz
Underwriting Manager
Mover’s Choice Program
sueo@paulhanson.com
(707) 261-2716 –Direct Line

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