Marine Cargo Insurance for Small to Mid-Size Businesses Doesn’t Have to Sink the Ship

Importers and exporters that ship only a modest volume of goods do not have to settle for the often pricey or inadequate marine cargo insurance that is available from freight forwarders — the usual source of this kind of coverage for small and midsized businesses.

Just like the world’s largest businesses that trade internationally, small and midsized businesses that import and/or export as little as $500,000 to $50 million of merchandise annually can also procure comprehensive and affordable marine cargo insurance that includes the benefit of services from a specialist marine insurer.

It is generally less expensive — typically as much as one-third to one-half the cost — to purchase marine cargo through a broker or agent versus through a freight forwarder.

Unfortunately, many smaller importers and exporters are unaware that this type of cargo insurance and service is available to them. They often rely on insurance from freight forwarders and/or overseas suppliers. Some even take the risk of leaving their critical shipments uninsured.

One reason is that most brokers who specialize in marine insurance typically represent the larger businesses that meet high minimum premium requirements. These brokers or agents don’t market themselves to smaller accounts because placing this size coverage can be a time-consuming and cumbersome process that often makes handling this business cost-prohibitive.

Another reason is that many insurance brokers and agents who place property and casualty business insurance for small to midsized businesses may be unfamiliar with marine cargo coverage and the exposures involved.

Finally, many businesses may not think they need to secure their own insurance because they assume that their foreign suppliers or freight forwarders are providing adequate shipment coverage. But while the coverage available through freight forwarders may not impose a deductible, it will typically limit recoveries to a fractional amount of the total value of the damaged or lost goods, whether on a “per pound” or a “per package” basis. This is insufficient recovery for most merchandise and an especially paltry sum for high-value products such as electronics, pharmaceuticals or machinery.

Advantages for Small Businesses

The breadth of coverage provided by marine cargo insurance may provide smaller business owners a way to recoup the full value of their goods for partial and/or catastrophic losses, usually with a nominal deductible.

Even when they are entitled to marine cargo insurance at no cost under the terms of their purchase and sales contracts with foreign suppliers, this coverage is no gift. In fact, the foreign supplier may pass their own insurance expense to the buyer through their sales contract, which may be profit-laden.

Another important advantage for small business owners is the more responsive claims-handling service that a specialist marine insurance company can deliver. Routine claims are typically resolved in two weeks to a month, while complex claims could take a couple more weeks to wrap-up.

In contrast, companies with coverage through a freight forwarder and/or foreign supplier may experience significant delays on claim settlements — sometimes taking more than a year to finalize and often with less than satisfactory results.

This difference in service occurs because the freight forwarders may not have the necessary claims-handling infrastructure to efficiently handle these claims. Most specialist marine insurers have dedicated claims personnel who are experienced in the marine field, understand the client’s business, and can service a large volume of a claims through specialized systems.

There are a growing number of insurance companies that facilitate insurance placements for small to midsized businesses with a Web-based underwriting system. These systems are very efficient, making it worthwhile for any broker or agent to place this size and type of coverage.

With a Web-based underwriting system, the traditional time-consuming interaction between the broker or agent and the underwriter can be significantly reduced, which allows for a cost-efficient way to service smaller marine cargo businesses.

For exporters, certificates of insurance can also be issued online and delivered electronically — further reducing administrative hassles for all parties involved in marine cargo insurance placement. Small to midsized businesses should request that their agent or broker seek marine cargo coverage through a specialist marine insurer that has the systems and personnel to effectively and efficiently insure their shipments at a reasonable cost, which is especially important during the current economic climate.

Even if the economy weren’t so challenging, inadequately insuring marine cargo shipments wouldn’t be wise. In today’s economy, it could be financially devastating.

Topics Agencies Commercial Lines Business Insurance Trucking