Cargo insurance: necessity or just an option

Cargo insurance: necessity or just an option

There are so many unavoidable and unpredictable incidents in supply chains, and cargo loss is more common than you think. Your shipments are at high risk as they pass through multiple ports and modes of transportation. You cannot control several factors, such as weather, theft, fires, and loss of containers. 

With larger container ships, longer transit times, unpredictable lockdowns, cyber threats, and political upheavals, your goods are increasingly at risk. In the fourth quarter of 2020 alone, two cargo ships encountered bad weather and lost more than 1,900 containers.

Is your cargo insured against the most common causes of loss?

A recent report from insurer Allianz Global Corporate & Specialty (AGCS) shows some interesting data for shippers of any number of ocean cargoes. There are top causes of loss and what you can do to protect your inventory during transit.

AGCS lists the loss leaders (by value) last year:

  • Fire (18%)
  • Collision / Drowning (17%)
  • Damaged goods (12%)

Allianz describes several risk factors that shippers should monitor to make appropriate adjustments. For example, climate change leads to increased fire risk, temperature fluctuations, extreme weather events, and fuel pollution problems arising from the increased use of alternative fuels. All these factors can increase the risk of cargo damage.

The report also points to an alarming increase in the number of engine room fires reported by carriers. Industry-wide cost cuts and inflation may play a role in shippers investing fewer resources in training their crews.

You can’t eliminate shipping risk, but you can reduce it!

Standard mitigation measures include increased use of the sensors, improved tracking technology, and better palletizing and loading practices topping lists. Examples include sensors that can detect temperature changes inside containers carrying sensitive cargo, measure the angle of tilt, and sound an alarm if a container appears off its keel or exposes to extreme weather conditions. Other examples include tracking sensors on individual pallets inside containers that use Bluetooth technology to report their location in real-time.

Cargo insurance for business continuity and operational sustainability

The type of insurance coverage you get can make a big difference if the worst happens. 

Many shippers use “declared value coverage” and believe their costs are not in danger. The reality is that declared value coverage is not cargo insurance; it is a form of cargo damage/loss coverage that increases the carrier’s financial responsibility. It corresponds to the declared value of the shipment and is often subject to deductibles, exclusions, warranties, and policy limits that not disclose to the shipper.

The problem is not how often this happens but the financial impact of this event. Losses can devastate your business if your entire season’s worth of goods is in one shipment.

Under international laws and conventions or general terms and conditions, the carrier’s liability is limited (cents on the dollar). It will only sometimes cover your financial losses due to unforeseen circumstances while moving your goods. Spending a few hundred dollars could save you tens of thousands or more.

Cargo insurance covers your cargo from pickup to delivery by multiple carriers and modes of transportation. It protects your items’ purchase price (not retail value) plus freight and other costs associated with the shipment.

How PartnerTrade can protect your valuable cargo

Modern supply chains require current cargo insurance. With PartnerTrade, you can protect your precious cargo.

We offer affordable insurance options to protect your supply chain from disruptions. Our logistics experts are available anytime, so you can stay up-to-date and worry less about your cargo.

Contact our team to learn more about how PartnerTrade can help give you peace of mind knowing that your shipment will be with all necessary insurance.

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