Cargo insurance (also called marine cargo insurance) covers physical damage to, or loss of, your goods whilst in transit by most recognised methods of transit such as by Sea, Air or Land ie; road and rail, and combinations of any.

There are Two (2) main types of Cargo insurance available:-

Open or Annual Cover – (mainly for regular shippers such as Importers/Exporters)

This is the most common form of cargo insurance, most often used by regular shippers of goods such as importers and exporters including freight forwarding agents, where a policy is issued to cover a number of consignments being shipped to and from various ports and destinations throughout the year.  The policy can be either for a specific value that requires renewal once the insured amount is exhausted, or an open policy that will be issued for an agreed period, allowing any number of shipments during that time. This type of cover is sometimes referred to as an ‘Open or Annual Policy’ as the insurance cover remains in-force for a stated period of time, usually a 12 month period.

Single Cargo Shipments – (for One-Off Shipments often referred as ‘Voyage Specific’)

This is the next most common form of cargo insurance, mainly taken out by individuals and small businesses for One-Off Shipments of cargo & freight. This is where the cargo as one-off shipment is priced and covered as one shipment from a particular destination to another – the cover usually commences at the point of departure and ceases upon arrival at the cargo’s destination which could be a port or the customer’s premises often referred to as ‘Warehouse to Warehouse’. This type of cover is also sometimes referred to as a ‘Voyage Policy’ as the insurance covers only that specific shipment/voyage.

Cargo Categories

Cargo is usually classified into several different categories and sub-variants, each carrying an individual premium risk rating depending on the degree of fragility of the goods being shipped, ie; for obvious reasons perishable food will attract a higher premium then that of containerised and packed timber.

When a customer requests cargo insurance they will usually be asked to categorise the goods to be shipped from the following primary categories (if a suitable category doesn’t present itself, the broker will assist the customer to broker the risk to the underwriter as a specialist freight order).

Why do Importers and Exporters need Cargo Insurance?

Exporters

Most regular shippers, ‘exporters/suppliers’ will have their own Annual or Open cargo insurance cover which, provides insurance for all the exporter’s shipments of goods that the exporter ships during the annual period of cover, or lesser period of cover if required.

At the commencement of the Annual or Open cover, the exporter/supplier will usually estimate the value of cargo, and the number of shipments to occur within the period of cover. At the end of the period of cover, a formula is applied to the total value of cargo shipped, and by the number of shipments made in combination with other salient factors to determine an ultimate premium payable.

This type of insurance adjustment system allows the exporter a high degree of flexibility within their business and in many circumstances the exporter will have the ability to include within their cover, an extension of cover for the customer/buyer of the shipment.

Indeed, many exporters and trading companies sell ‘Cargo Insurance’ on to their customers in a ‘price package’ - we call this ‘Cost Insurance and Freight’ (CIF) which allows the exporter to arrange cargo insurance at their end, usually on an ‘open cover’ basis.

Because the exporter can, in most circumstances, pass on the insurance cost to the customer, and for which the exporter will often earn a commission on the CIF premium charged, this type of arrangement has become more common practice, especially where individuals and small businesses requirements are limited to a single cargo shipment.

Many buyers/customers see this as essential service provided by the exporter, indeed, exporters who do not provide a ‘package price’ inclusive of CIF can lose business to competitors who do.

The other side of the coin however, is while in theory the customer gets the benefit of the insurance, so to does the exporter and thus, pitfalls and gaps in the insurance cover are regularly encountered by both the exporter and importer where a claim dispute arises.

For example, the customer is totally reliant on the exporter to have arranged adequate insurance on the goods being shipped (ie; has the exporter got the professional financial services qualifications and experience in order to ensure the insurance cover is adequate to meet the customer’s needs – have they put the customer’s needs ahead of their own interests after all, they can have opposing positions if a claim dispute was to arise,  - has the exporter chosen the insurer for its reputation and products or, has the choice been made on the highest commission the exporter can earn).

Similarly, the exporter has to insure their own interests, for instance - if the goods arrive damaged or if the buyer’s insurance does not cover the loss, the exporter may not receive payment.  Additionally if the goods or shipping documents are rejected on arrival at destination, the insurance risk can often revert to the exporter who may not have taken out any insurance for their own risk.

Contingency (seller’s interest) insurance; As an exporter you may often sell goods on terms where your customer (as the importer) is responsible for insuring (or at least bearing the risk of damage of or loss to) the goods, where for example the exporter could be exposed to the risk of damage to the goods while in transit and/or if the customer refused to accept them.  In the worst case your customer may not have insured the goods.

If this happens and your customer attempts to avoid liability, you could seek redress through the legal system.  However, this can prove very expensive, and may often be pointless.  Seller’s interest insurance, usually for a small premium, will cover you for this contingency.  For valid commercial reasons you may not wish your customer to know you have taken out such a policy.

Importers

As mention above in the opening paragraph for ‘exporters’, importers (customers) often assume the suppliers/exporters are including the cargo insurance for free ‘within the package’ however, as alerted the cost will almost always be included, but hidden in the package price.

In addition to obtaining information from exporter/suppliers about the specific insurance costs and whether those costs are being loaded with additional fees on top of the base premium, importers/customers have to consider whether or not, the exporter has the professional financial services qualifications and experience in order to ensure the insurance cover is adequate to meet the customer’s needs – has the exporter put their own needs ahead of their customer’s interests after all, each the exporter and importer could end up in opposing positions if a claim dispute was to arise, - has the exporter chosen the insurer for its reputation and products or, has the choice been made on the highest commission the exporter can earn ).

Indeed, the security of some overseas insurers may not compare favourably with the security of insurers in highly the regulated markets of Western Europe, in particular the UK and New Zealand and New Zealand etc’.  A Cargo claim could happen anywhere on Earth therefore, one wants to be reasonably assured that their cargo insurer has at least arrangements with local assessors and claim adjusters in order to deal with claims when and if they occur.

Another important issue is the type of cover being provided – is it comprehensive ‘all risks’ or just ‘total loss’ only?  Is it on a warehouse to warehouse basis or just warehouse to destination port? 

Without all this information, importers may not realise they are paying too much for insurance which in any event might not meet all their needs, and in all probability may leave them with an uninsured exposure.

By having a specialist insurance broker such Cargo Safe arrange your insurance, customers/imports can take control of their own cargo insurance which often leads to a  more comprehensive and price competitive cover than available from the exporter. Indeed, Cargo Safe is a very selective broker, utilising the services of only those insurers with the reputation, experience and specialised products to meet our client’s requirements.

It’s easy, in most cases Cargo Insurance can be arranged online – Cargo Safe's online cargo insurance proposal can be found by clicking here or going back to the home page and obtaining a quote from there


Types of Cargo Insurance Cover Generally Available

Cargo insurance is a pretty standard sort of cover, originally created by Lloyds of London almost 2 centuries ago.

While Lloyds is now one of many Cargo specialist insurers worldwide, the industry still adopts Lloyds lead in terms of policy coverage which usually includes additional but, standard clauses known as the ‘Institute Cargo Clauses – A, B or C, plus War Clauses and Strikes Clauses. 

Simply put, Cargo Clauses A provides the most cover with B and C giving less coverage which is reflected in reduced premiums for the lower cover (somewhat similar to car insurance cover with comprehensive, third party, fire and theft, and third party policies). 

Also there are Institute Cargo Clauses (Air) for movement by air, which is equivalent to the A clauses.  Cargo Safe will be able to give details of exactly what cover is given by each clause so you can choose the most appropriate for your business needs and trading patterns.

Most customers requirements are common thus, Cargo Safe has developed a summarised cover in a more simplistic form as follows;

Where additional clauses are desired, Cargo Safe will arrange with a suitable cargo specialist insurer to include those additional or varied the clauses within the cover, sometimes however, this may lead to an increase in costs.

When you are looking at the types of cargo insurance available, you may come across the term ‘General Average’.  This is one of the oldest principles of cargo insurance and relates only to ocean and sea voyages but, is still relevant in today’s trading environment. 

General Average covers the situation where damage or loss of certain goods occurs so that the remaining cargo and the means of transport are saved.  For example goods may sustain water damage during fire fighting. In this situation, if General Average is declared, all the parties involved must contribute to covering the loss.

How much will Cargo Insurance cost me?

Like all insurance cover (premises, employer’s liability, credit etc’) you will have to pay for your cargo insurance services.  Premium is usually calculated according to the value of the consignment (plus a percentage mark up for profit margin), the type of goods (danger or hazard) and other specific risks (mode of transport, route, destination, etc.) from the insurer’s perspective. 

Conclusion

More and more companies recognise the long term advantage of buying insurance through an independent and qualified insurance broker who works in the interests of the client, not the insurance company.

Cargo Safe is a specialised unit of the RGIB’ Insurance Broking Group, which is an independent insurance brokerage specialising in arranging insurance for many varied classes of insurance throughout the Australasian Pacific & South East Asian regions.

Cargo Safe have access to the very best Cargo insurance companies in New Zealand and abroad, which helps us arrange the most suitable insurance for your particular requirements whether for a one-off shipment or for exporters and importers requiring open cargo policies with flexible terms - infact we can arrange every type of Cargo insurance product.

Appointing Cargo Safe to arrange and manage your Cargo insurance provides guarantees you don't ordinarily get when arranging your own insurance, because, first and foremost we're experts in the field of Cargo insurance and besides [in the unlikely event] we get it wrong we carry a substantial amount of professional indemnity insurance.

It doesn't matter if you're already insured with a company providing the best deal in the market, you can appoint Cargo Safe as your managing insurance broker at any time and keep the benefits you already have - it won't cost you a thing, but it will ensure you keep on getting the best deal year after year without having to hunt around to maintain that advantage, that's our job.

It's all about managing your Cargo insurance in the most efficient and cost effective way - nothing more nothing less, that's why every one of our clients receives 'Our Customer Service Guarantee' which spells out our promise to provide the highest level of customer service and expertise.