Taking Control of Your Goods

This article will look at the pitfalls of allowing third parties - such as suppliers, buyers, road hauliers and freight forwarders - to arrange or control insurance on your goods in transit. It will show that a good choice for you is to take control of transit insurance yourself, by accessing a specialist Cargo insurance broker who can provide competitive pricing and a comprehensive claims management and settling service.

IMPORTS

'My suppliers insure the goods'

If you think your supplier is insuring the goods free of charge , youmay be mistaken. They are paying to insure and are probably passing on this undisclosed cost to you in their invoice! With regard to the cargo insurance cover; where suppliers insure the goods on your behalf, their minimum obligation may be to insure the goods only for the transit to the UK port/airport, and not for the final road transit to your premises eg they sell on Cost, Insurance & Freight (CIF) terms. This could leave you exposed to uninsured losses on the final leg of the journey.

Then there's the financial security of the overseas insurer to consider. Not all countries demand the same level of financial security from their insurers as the UK, and while a claim may be technically admissible under a given overseas policy, a financially insecure insurer may seek to delay or avoid settlement.

What about service? When a claim occurs, who will assist you to achieve settlement? Will a delay in settlement affect your cash flow? What if you have to deal with an overseas insurer? Just when your business is suffering the disruption of goods not arriving (or being damaged), you may have to deal with insurers in another time zone, culture and language. If these foreign insurers have an agent in the UK, remember the agent will act in the insurer’s best interests, not yours!

EXPORTS

'I leave it my buyers to insure the goods'

Why not make life easy for your buyer? If you include cargo insurance in your exports sales package your customers will thank you, because it is sometimes easier and cheaper for them to buy insurance from you than it is to buy it in their own countries. If your competitors offer this service and you don't, you may lose business. Further, if you arrange the cargo insurance via a specialist cargo insurance broker, the cover can be tailored to your needs and to the specific needs of your customers.

If the customer insures and the goods arrive damaged, who will your customer complain to? You! Your customers may have basic cargo insurance but why should they risk increased premiums when they can push the claim back to you? They may also push you to supply a replacement at cost, meaning that you've worked twice for one profit. So not only have you made a loss on the whole transaction, but you still have to dispose of or freight your uninsured, damaged goods back to the UK – and pay for the privilege.

Finally, if you allow your overseas customers to insure your goods with their local insurers, you lose control of any of goods which are the subject of a local claim settlement. This is because when the local insurer settles the claim they get to keep your damaged goods, as salvage. Would it cause a problem for your brand image or for your local agents or distributors if your branded, damaged goods were being sold at below cost-price overseas? Or possibly in the UK?

CARRIERS

'If there is a loss or damage, the carrier will pay in full'

This is unlikely. Most road hauliers operate under Conditions of Carriage which restrict their liability and impose time limits for notifying and quantifying claims. The majority of carriers in the UK operate under RHA (Road Haulage Association) Conditions which restrict liability to £1.30 per kilo A similar situation applies with international transits, where an International Convention applies.

'My carrier insures the goods for me '

Only if they have an insurance facility to do so, and only if you have specifically requested and paid for Goods In Transit insurance. Many carriers who say they provide ‘transit’ insurance actually mean they have freight liability insurance which covers their own legal liability, and not your goods. Can you be sure that adequate goods insurance is in place at a reasonable premium? Do you receive a policy or only a summary ? Most importantly, road hauliers who arrange insurance are no longer required to be authorised and regulated by the Financial Services Authority. Why take the risk?

Last reviewed 7/11/2011

To talk to an expert in your area and get a quote, contact your local insurance broker.

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