At a glance
- Many brokers have misconceptions about marine cargo insurance, leading to gaps in coverage for manufacturers
- Brokers have an opportunity to provide expertise, guidance and value to customers in cross-selling this cover
- Zurich is ready to help brokers with their marine cargo discussions – and can even provide a script
Importers and exporters need to insure their goods correctly. However, marine cargo insurance is something most brokers tend to steer clear of, as the shipping and haulage world is a complicated one filled with technical terms and obscure acronyms.
But this could be a costly mistake – especially for brokers’ manufacturing customers – leading to potential gaps in coverage.
“Most brokers tend to have some manufacturing customers with marine cargo cover, and a few more that should have it but don’t,” says Mike Hall, Business Manager at Zurich’s Marine Cargo Department. “But it is a big oversight to shy away from all conversations on marine.”
Zurich is ready to help brokers with their marine cargo discussions – from the language they use and nuances of the shipping and haulage industry, right through to providing more information when a broker needs it.
“A manufacturer will generally either opt to arrange insurance for all of the shipping themselves – both the inbound and outbound legs – or leave it to their suppliers or customers,” says Mike. “Within this, there are 11 terms of sale – where the insurable interest can pass at different points from buyer to seller.”
The whole process is usually facilitated under the ‘Incoterms 2010’ rules, where buyers and sellers agree terms of sale and at the same time determine responsibility for insuring the goods.
How Incoterms work
Take a look at some of the key terms and transportations risks for manufacturers from The Incoterms 2010 rules. Click here for our downloadable graphic guide.
“Although they can seem complicated, Incoterms are internationally recognised standard trade terms used in sales contracts,” says Mike. “We are more than happy to help a broker out when talking to their customers about this.”
Controlling the risk
When a marine cargo loss does occur, things can go badly wrong – and quickly. If the right cover isn’t in place, a loss can have a huge commercial impact.
“We always recommend that manufacturers take control of their risks; for both importing and exporting,” says Mike. “If you take out your own cover, you know how much you’re covered for, how much you paid for it and what the excess is, and you get to deal with a UK broker and insurer – simplifying the claims handling process.”
If the right cover isn’t in place, you could be left to chase a claim in another country with language barrier and time zone problems, which can result in delays, leaving you with no control over your risk.
Dangers of not insuring cargo
When the MSC Napoli containership ran aground off the Devon coast in 2007, it emerged that 40% of its cargo was uninsured. A manufacturer may choose not to insure cargo either as a cost-saving measure, because they believe their commodity is not attractive to thieves or susceptible to damage, or even through ignorance – believing that their supplier or customer was responsible for insurance.
Marine cargo is a topic most brokers don’t regularly deal with. But if a broker is confident talking about marine, they can spot gaps in cover”
Mike Hall, Business Manager at Zurich’s Marine Cargo Department
But, as Mike points out, not insuring cargo can bring additional risks. “If a ship gets into difficulty, all parties with cargo on board could be faced with a general average loss, even when their goods are undamaged,” he says.
Dealing with hauliers
Manufacturers sending out finished goods across the UK, or on the continent, will generally need a haulier.
“A haulier will often say you don’t need insurance, but they’re unlikely to have the correct insurance for a manufacturer’s needs – as a haulier’s insurance only protects themselves, not the goods they carry,” says Mike.
“It’s similar for freight forwarders. They arrange for goods to get from A to B, but manufacturers shouldn’t opt to buy their marine cargo insurance one shipment at a time, this can be expensive.”
Zurich’s marine cargo cover goes over and above in terms of breadth of cover and add-ons; and the insurer regularly runs cargo insurance workshops– aimed at encouraging brokers to discuss marine cargo with their customers.
“Marine cargo is a topic most brokers don’t regularly deal with,” adds Mike. “But if a broker is confident talking about marine, they can spot gaps in cover. We are happy to provide brokers with a script; and if we can do that it should lead to more sales, and customers having confidence that their goods are better protected in the event of a claim.”
For more information please speak to your local Zurich contact.