5 ways to keep your marine insurer happy

With 2019 already seeing over 50 major casualties so far, specifically three General Average events declared, one total loss and a recent onboard fire, directly affecting Australian shippers it’s no surprise that the insurance market is starting to harden. (Refer February edition for more about General Average).

Talking to Vanessa Rice, State Development Specialist – Marine for Australia’s largest marine insurer, Marine Protect (powered by NTI Limited) we’ve identified five ways to keep your marine insurer happy.

1. Correct Incoterms
Does your current insurance policy protect your exposure which arises from the terms of sale (usually your agreed Incoterms)? It may sound simple and a bit silly, however, if you’ve changed suppliers and you have a set and forget mentality to insurance, you may be out of step

Consequences:
You’re paying a premium for insurance you can’t use when the rainy day comes.

What to do:
Assemble all relevant internal staff, including but not limited to,:
1.Finance team (who may procure the insurance)
2.Logistics department (who organise actual transportation of the goods)
3.Sales team (who agree contract terms)

Once you’ve confirmed that all internal teams are working from the same terms of sale, contact your broker to confirm your appropriate insurance is in place.

2. Notify losses asap
We are seeing an increase in delayed lodgement of claims as clients believe that freight forwarders and/or carriers will pay if shippers ask nicely.

Consequences:

What to do:
Have a claims notification checklist. This will set out the basics of which staff member is responsible for contacting brokers and insurers. Good governance reduces communications gaps and panic

3. Mitigate, mitigate, mitigate.
You owe a duty of mitigation to the party who caused your loss. That is, you have an obligation to minimise the amount of loss you incur.

Examples:
a.If you can sell your product in an alternative market, you have to attempt that avenue of reduction of loss.
b.Holding onto your container for longer than necessary (incurring detention and demurrage).

Consequences
The claimable amounts may be reduced by your insurer due to failure to mitigate

What to do:
Have a disaster recovery plan for certain transit points in the supply chain with known recovery options. Also ensure that your staff are appropriately trained in notification and documentation (for instance, don’t sign a clean bill if the goods are obviously damaged).

4. Declare everything!
Insurance contracts are based on the concept of utmost good faith. Marine insurers don’t get the opportunity to eyeball the property before going on risk. The failure to declare everything could see your entire policy void from the date of issue. Cover offered based on the updated information, may result in changes to the policy wording and increase in premium to adjust for the risk.

By declaring everything; your Insurers:
a.don’t need to make assumptions so can correctly price a policy,
b.can structure the policy wording correctly, and
c.can understand what the Insured does to improve their risk.

Consequences:
Uninsured losses. This is quite significant in the instances of general average and total loss events.

What to do:
Meet with your internal teams who are involved with the chain of responsibility in the transport of goods. Information to know includes (but not limited to):
-Detailed description of all goods that are shipped (stay away from general descriptions)
-Percentages of each type of goods
-Values that need to include the full cost of the goods (freight, insurance, 10% plus any applicable duties)
-Port of Load / Port of Discharge / Delivery point (and any transhipment ports)
-Country of origin certificate

Marine insurance certificates should be considered by the business as a safeguard and measure of good governance.

All shipping documentation should match. If there is a discrepancy, you have a gap in your business processes.

5. Help your insurer help you.
Your insurer has a range of resources to assist you in the recovery of your loss. However they cannot do it alone
Early notification (including letter of intent) is key as it enables the insurer to appoint a surveyor to document the damage and/or loss.
Your insurer may also be able to assist with your mitigation obligations.

Final take-away points:
1. Co-ordinate internally so you are all working from the same “playbook”.
2. Have proper processes and documentation.
3. Train your staff to ensure best practice.
4.Don’t hide things from your broker / insurer.
5. Prepare for the worst ahead of time.
6. There is no such thing as “over notification” when it comes to your insurer.
7. When in doubt ask for help! In some circumstances, your broker can put you directly in touch with your underwriter (insurer) to clarify your questions and issues.

By Alison Cusack & Vanessa Rice

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