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Insurance paying off

In the third instalment of a five-part series on transport logistics, Alison Birrane talks to WA’s marine insurers to uncover the issues of insurance in import and export transactions.

GUARDING against the commercial risks of importing and exporting may sound simple, however, there can be many pitfalls for businesses that do not utilise the services of reputable insurance professionals who are knowledgable in the field.

That is the message from WA’s industry professionals who say it is crucial to know who you are dealing with when it comes to insuring goods during import and export.

Marine insurance companies are specialists in the field of insuring against the loss or damage of goods during shipment, including during air freight, and their services are available either direct or through insurance brokers.

Other risks associated with transit such as delays, problems with distributors or fluctuating market conditions are not normally covered by marine insurance.

Associated Marine Insurers senior underwriter Jim Pougher said importers and exporters should ensure they were always in control of insurance.

“Because marine insurance is such a specialist area, a company needs to make sure they deal with an insurance company that knows what it is doing,” he said.

Goods can be insured from the time they leave the warehouse in the country of origin to the time they arrive in the warehouse in the country of destination.  This is termed ‘cost, insurance, freight’ and means the goods are insured for the duration of the trip.

Alternatively, goods can simply be insured during the shipment.

This is termed ‘free on board’ and means that insurance ceases once the exporter’s interest in the goods ceases.

“We would recommend to any insurance company to export and import CIF, so if there is a problem they are dealing with an Australian insurer,” Mr Pougher said.

He said it was easier to deal with a known entity within a familiar culture with no language barriers when something went wrong.

Mr Pougher said he recommended that all companies that imported and exported goods should use a reputable insurance broker – an opinion reflected by other sources in the industry.

“Any company in the import or export business ought to have an insurance broker because if something goes wrong they will have someone on their side who speaks the insurance language,” he said.

Insurance risk and, therefore insurance cost, varies depending on the types of goods being transported, the particular vessel used in the transportation, the port and country of destination, the type of packaging and the type of insurance required.

General insurance for goods that fit in standard-sized cargo holds and containers and that use standard shrink-wrapped plastic wrapping is relatively inexpensive, according to Mr Pougher,

However, perishables and cargo with special needs such as live cargo can be more expensive as the risk is higher.

The particular vessel used to export live cargo can also have an impact on cost and whether an insurance application is successful.

“Some vessels have an excellent history and some have a terrible history,” Mr Pougher said.

Risk can depend on how experienced the crew are with the transport of particular and management of goods during transit.

The amount the goods are insured for is generally the invoice value of the goods, plus the cost of freight, plus an additional 10 per cent to allow some sort of protection for things such as currency fluctuations that may occur during the period of transportation.

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