Aon Warns ‘Poor Packaging’ in Fashion Industry Could Affect Claims

“Poor packaging by the fashion industry could mean that insurers refuse to pay claims for damaged goods in transit – not to mention that replacement clothing and accessories are unlikely to be delivered in time to catch the season,” warns a bulletin from Aon’s London office.

The warning coincided with the London Fashion Week. Aon said it is “advising fashion retailers to implement better packaging procedures and extend policy wordings to protect both their designs and their bottom line.”

An example of Aon’s concerns comes from the grounding of the MSC Napoli at Branscombe Bay on the UK coast. Surveyors considered goods in 15 to 20 percent of the containers aboard the ship to “be unpacked or inadequately packed,” said Aon. “This is concerning as a marine cargo insurance policy excludes loss or damage caused by ‘insufficiency or unsuitability of packing or preparation of the subject matter insured’. This exclusion means insurers can decline liability for the damage to the cargo plus substantial costs for recovery, re-stowage or destruction during the salvage operation.”

Aon also points out that “fashion importers may not receive the true value for imported goods lost or damaged as the insurance policy is likely to be based on the purchase price from your supplier. This is opposed to the agreed sale price to your customer, which is likely to be significantly greater.

Aon urged the fashion industry to “take action” by:
1. Examining the robustness of your method of packing and providing clear specifications to contract packers or suppliers;
2. Calling in the services of an expert marine surveyor to undertake a
review. The surveyor will understand the forces that a consignment will be subject to during transit, identify weaknesses in your packing process and propose a course of action to resolve;
3. Seeking to remove the exclusion of insufficiency or unsuitability of
packing from your cargo policy;
4. Using a packing survey to help your insurance broker negotiate better terms and conditions of cover;
5. Ensuring that goods are insured for their true value to your company.

Tim Rowe, marine manager at Aon, added: “Poor packing isn’t a new problem but as underwriters become more vigilant about the issue, we want to warn companies to take action. Risk management is the most important part of any insurance program but many may find their cargo cover is worthless if shoddy procedures in their shipping department invalidate the policy.

“It’s interesting to note that the inadequately packed containers are not just dispatched by small, inexperienced exporters but the majority are shipped by large multi national companies that export huge volumes and considerable values during the course of a year,” he continued.

Rowe concluded: “We are also aware that many importers in the fashion industry do not insure for the true impact that a lost or damaged consignment will make to their balance sheet. This can be easily resolved by taking time to achieve a full understanding of your true exposure and negotiating an increase in cover to reflect this with insurers.”

Source: Aon – www.aon.com