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There are inherent risks in transporting goods of any kind, raw materials, finished products or valuables and not all risks are foreseeable.

Whether you move goods from A to B by road transport, ship, aircraft or any other means of conveyance, you should insure your business or personal asset for the consequences of an unforeseen event. The cargo can be damaged, destroyed or lost in the of an accident, contamination, sinking or theft.

To offer a quotation, we require details of the scope and nature of your activities, cargo values, the coverage required and a claims record (if previously insured).

Why do businesses need cargo insurance?

Exports

Many major UK exporters and trading companies sell on Cost Insurance and Freight (CIF) or similar terms, which allows them to arrange marine cargo insurance in the UK - usually on an 'open cover' basis. Because this insurance cost is legitimately passed on to the customer, who also gets the benefit of the insurance, this virtually amounts to free insurance which the exporter controls.

Many foreign buyers see this as essential service provided by the exporter, given that cargo insurance rates in UK are often cheaper than those available to the overseas customer in his local market. Indeed, exporters who do not provide a 'package' which includes insurance, can lose business to competitors who do.

The other side of the coin is where UK exporters allow their customers to arrange the insurance. This can range from selling on Ex Works terms to exporting on Free on Board (FOB) or Cost and Freight (CFR) terms. An Ex Works sale represents the minimum obligation for the seller, who has merely to make the goods available at his premises for collection by the buyer's designated carriers.

However, what tends to be overlooked is that the exporter is totally reliant on the buyer arranging adequate insurance on goods which have probably not been paid for. 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.

Imports

Many importers assume that the suppliers are including the marine cargo insurance for free when, in fact, the cost is included in the purchase price. In addition, obtaining information from suppliers about these costs and whether they are being loaded can prove difficult.

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 UK port? Without this information, importers may not realise they are paying too much for insurance which does not meet their needs, and may leave them with uninsured exposure.

A further issue is who is actually insuring the goods? The security of some overseas insurers may not compare favourably with the security of insurers in the highly regulated UK market. In the event of goods arriving damaged in the UK, the importer will probably deal with the UK agent of the overseas insurance company - an agent who will be working for the insurer, not the importer. This can lead to delays in processing and settling claims.

If the importer takes control of cargo insurance they can arrange the necessary cover in the UK market, which is often more comprehensive and price competitive than in overseas markets.

What types of cargo insurance are available?

Open Cover

This is the most usual type of cargo insurance, where a policy is drawn up to cover a number of consignments. The policy can be either for a specific value that requires renewal once the insured amount is exhausted or an permanently open policy that will be drawn up for an agreed period, allowing any number of shipments during this time.

Specific (Voyage) Policy

Although not the norm for cargo insurance, you may from time to time need to purchase an insurance policy for a particular consignment. This is usually referred to as Voyage Policy as the insurance covers only that specific shipment.

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, for example under FOB and CFR Incoterms 2000. In these cases you are exposed to the risk of damage to the goods while in transit and your customer refusing to accept them. In the worse 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.

More and more companies recognise the long term advantage of buying cargo insurance in the UK and using the services of an insurance intermediary such as Sabre Insurance Services. If you are a small or medium sized business you need to look more closely at this area of your international trading operations. You could reap benefits for your business through enhanced protection of your interests, improved international trade administration, better trading relationships and increased competitiveness, resulting in greater profitability.

For further information or to enquire about cover for you or your business please use our contact form as below.