- By Rick Bridges, Roanoke Trade Services Cargo Insurance for any cargo typically involves customized cargo insurance obtained on a per shipment basis. Whether you are a transportation intermediary or the shipper, here are some cargo insurance buying tips from the unique perspective of an insurance provider. Finding the Right Insurance Provider For small and mid-sized shippers your transportation intermediary may be your best source for cargo insurance. Most have aligned themselves and work closely with specialty insurance cargo providers. For shippers with large or complex supply chains, finding the right cargo insurance provider may mean finding a specialty insurance broker who has the experience to properly address your needs. Some key questions to ask when choosing a broker:
  1. Do they specialize in cargo insurance? A telltale sign may be their website. Does it reference cargo insurance as a core product line?
  2. How do they handle cargo claims? Is this a function of the broker or do they hand it off to the insurance company and hope for positive results?
  3. Does the broker perform an annual supply chain review and meet with the various departments in your company to discuss cargo insurance and supply chain exposures?
Customize Your Insurance to Cover Your Risks Cargo insurance is one of the last unregulated lines of insurance and the strength of the policy you purchase is often based on you and your insurance provider’s ability to identify all the potential hazards within the supply chain, and then to customize coverage to properly insure the real risks of your project. Do not assume that all cargo insurance is the same or that there’s some standard wording. For example, most policies limit coverage at the port to a maximum of 15 days and inland at a maximum of 30 days. If your goods sit at the port longer than 15 days, it’s important to ensure coverage is extended to suit the exposure. This is just an example of hundreds of scenarios that will alter a standard cargo policy. Loyalty and Longevity Assure Best Results Most insurance providers resent being shopped every year by their shippers. Once you’ve found the right provider, sustaining a long term relationship will build trust and comfort that can translate into better pricing and coverage. Switching from broker to broker or insurance carrier to insurance carrier is a tactic that will backfire over time. Getting an alternative quote periodically to keep your provider on their toes isn’t a bad idea, but bidding insurance on every shipment is counter-productive. The consequences of which include an unfavorable reputation, a refusal to quote, slow response time and ultimately higher pricing. Insurance Rates Do insurance underwriters rely on methodology and science to determine pricing or do they just pull numbers out of their hat? Actually, applying a rate to a risk is a combination of both. Contrary to traditional lines of insurance, marine insurance does not rely on company published rate guides or state filed rates. While loss experience, the relative risk, commodity and geography play a part in pricing, at its core, pricing is based on the insurers’ level of comfort with you and the risk. If you want better pricing then the objective is to make the insurance underwriter as comfortable as possible with the risk. When it comes to negotiating cargo insurance, details of packing, prior experience, routing details, and loading or transloading information should be submitted in your request. The more detail the better. Without sufficient information, underwriters will express their discomfort by way of inflated pricing, deductibles and restrictive insuring conditions. For example, An RFP for insurance pricing on $3.5 million of oil rig equipment carried on flat-racks from Houston