Marine underwriter using outdated git for transporter

In the dynamic world of marine insurance, transporters face a myriad of challenges that require both strategic foresight and practical solutions. From managing sensitive product information to navigating complex insurance claims, marine underwriters play a pivotal role in safeguarding goods in transit. This blog delves into some pressing issues faced by marine underwriters and transporters, offering insights and best practices to enhance risk management and insurance efficacy.

1. The Conundrum of Sensitive Product Information

Transporters often handle products whose pricing and specifications are sensitive. Manufacturers typically do not disclose unit prices to transporters to maintain confidentiality and competitive advantage. This presents a challenge for insurers when estimating annual carrying values for insurance purposes.

Best Practice:

• Blanking Out Sensitive Information: Ensure that both invoices and delivery orders have unit prices blanked out. This maintains confidentiality while still providing necessary documentation for insurance assessments.
• Collaborative Estimation: Work closely with manufacturers to develop standardized methods for estimating values without disclosing sensitive information.

2. Declaring Inland Transit Without Cross-Border Complexity

Declaring inland transit can be straightforward unless the transportation crosses international borders, such as within the EU, where multiple regulations and Incoterms come into play.

Best Practice:

• Clear Documentation: Ensure all inland transit documents are thorough and comply with local regulations.
• Understanding Incoterms: Familiarize yourself with relevant Incoterms like FOB (Free on Board), CIF (Cost, Insurance, and Freight), CNF (Cost and Freight), and Ex-Works to determine responsibility and liability accurately.

3. Navigating Insurance Claims and Responsibility

In scenarios where goods are hijacked before reaching the port of loading, determining responsibility can be complex, especially when different Incoterms are in play.

Case Study:

• Ex-Works Term: The transporter is responsible until the goods leave the warehouse. If goods are hijacked during transit, the transporter’s insurance is liable.
• FOB/CIF Terms: Responsibility shifts based on the Incoterm. For instance, under FOB, responsibility transfers once goods are loaded onto the vessel, making the overseas buyer’s insurer liable for subsequent claims.

Best Practice:

• Clear Incoterm Agreements: Clearly define Incoterms in contracts to delineate responsibility.
• Subrogation Clauses: Implement waiver subrogation clauses to prevent double insurance claims and streamline the claims process.

4. Addressing Double Insurance Concerns

Multiple insurers cover the same risk, leading to complications during claims.

Solution:

• Waiver Subrogation Clauses: These clauses allow the insured to waive the right to subrogation, preventing insurers from pursuing each other for claims, thus mitigating the risk of double insurance.

5. Premium Calculations and Affordability for Transporters

Transporters with substantial sales turnover may find high insurance premiums burdensome, especially when estimating annual carrying values that are significant.

Example:

• A transporter with a sales turnover of RM9.5 million might face a premium of RM1.5 million for an estimated annual carrying value of RM100 million at a premium rate of 1.5 sen/100 from an Asian insurer, compared to 3 sen/100 from a local insurer.

Considerations:

• Reinsurance Treaties: Local insurers may offer lower premiums due to reinsurance agreements, making them more affordable.
• Risk Assessment: Transporters should conduct thorough risk assessments to determine the most cost-effective insurance options without compromising coverage.

6. The Role of Agents and Brokers in Closing Sales

Agents and brokers play a crucial role in the insurance ecosystem by bridging the gap between insurers and transporters. However, there’s often a tension between designing comprehensive quotations and meeting the immediate needs of clients.

Best Practice:

• Balanced Quotations: Develop quotations that are both comprehensive and client-friendly, ensuring essential clauses are included without overwhelming the transporter with complex terms.
• Client Education: Educate clients on the importance of various clauses and coverage options to foster trust and facilitate informed decision-making.

7. Enhancing Practical Knowledge in Marine Underwriting

Marine underwriters must stay abreast of field realities to provide relevant and effective insurance solutions. Practical experience complements theoretical knowledge, leading to better risk assessment and claim handling.

Recommendation:

• Field Engagement: Encourage underwriters to engage directly with transporters, visit operational sites, and participate in maritime industry events.
• Continuous Learning: Invest in ongoing training and professional development to keep up with evolving industry standards and practices.

Marine underwriter using outdated git for transporter

When it comes to the marine underwriter asking for an annual estimated carrying for a transporter, it’s crucial for accurate premium calculation. However, as you pointed out, the transporter often doesn’t have access to sensitive information like the unit price of goods, which makes estimation challenging, especially if the product is sensitive. Transporters often rely on delivery orders or blank invoices, and when cross-border transactions or Incoterms (like FOB, CIF, CNF, Ex-warehouse/factory) are involved, the complexity grows.

The case of fraudulent claims, such as the hijacked goods before port loading, highlights how both the local and overseas insurers can get involved, leading to potential double insurance. This can occur when two policies—like the local transporter’s inland transit insurance and the overseas buyer’s international marine insurance—both cover the same risk. Whether the total value of goods like $300k is factored into the estimated annual carrying or not depends on the underwriter’s approach and the specifics of the policies.

For a transporter with RM100 million in estimated annual carrying, premium rates of 1.5 sen/100 from an Asian insurer compared to 3 sen/100 from a local insurer may seem excessive, especially if the reinsurer treaties increase the local premium. An RM9.5 million turnover transporter may find it hard to justify a premium of RM1.5–3 million unless the risks are significant or the terms are more favourable. This situation often places brokers or agents in a tough spot, as they need to balance competitive premiums with adequate coverage and terms that protect the insured. Challenges in Estimating Annual Carrying:

Transporters often face difficulties in providing accurate annual carrying estimates due to a lack of access to sensitive information such as the unit price of goods. This is especially true when invoices and delivery orders have prices redacted.

**Double Insurance Risk:**
Double insurance can occur if both the buyer and transporter take out separate policies covering the same goods. For instance, a local transporter might have inland transit insurance, while the buyer holds marine insurance. This situation can complicate claims, particularly in cases of loss or theft before the goods reach their final destination.

**Premium Calculation and Negotiation:**
For a transporter with RM100 million in estimated annual carrying, premium rates can vary significantly. A transporter cannot afford the high premiums, if the local insurer’s rates are influenced by reinsurance treaties. This is a critical point for brokers and agents who need to ensure competitive yet comprehensive coverage.

**Practical Advice for Marine Underwriters:**
Marine underwriters should be proactive in understanding real-world risks by engaging with the field rather than solely relying on office-based assessments. Practical experience can lead to better policy designs that balance coverage and cost-effectiveness.

These revised points will provide a clearer and more accurate perspective for those involved in marine and inland transit insurance, ensuring that responsibilities and risks are well understood.

Marine underwriter using outdated git for transporter

**Annual Turnover vs. Estimated Annual Carrying**

The **Estimated Annual Carrying** is often irrelevant in a good-in-transit proposal form due to Incoterm provisions. From a transporter’s perspective, it’s more logical to use **annual sales turnover** to compute premiums, as this approach minimizes the risk of double insurance.

Mitigating fraudulent claims:

The use of estimated annual carrying can lead to exploitation, where fraudulent transporters might submit endless claims within a year. For example, one year could see multiple claims, followed by even larger claims in subsequent months. To curb this, it’s wise to cap aggregate claims per year and per accident and limit liability per accident based on the transporter’s annual turnover.

**Fairness in Premium Calculation:**
– This method of capping and limiting liability not only prevents fraudulent claims but also creates a fairer system for both the insured and the insurer. It aligns the premium more closely with the actual risk the transporter presents, rather than relying on potentially inflated estimates of annual carrying.

. **Practical Advice for Marine Underwriters:**
Marine underwriters should incorporate these strategies into their policies to strike a balance between coverage and fraud prevention. By limiting liability based on turnover and capping claims, insurers can offer more realistic and fair premiums that reflect the true risk profile.

Marine underwriter using outdated git for transporter

These points offer a comprehensive approach to addressing the complexities of marine and inland transit insurance, ensuring that both transporters and insurers are protected against potential abuses and misunderstandings related to Incoterms.

My experience in handling such complex claims and standing firm on your decision, even in the face of legal pressure, reflects a deep understanding of both insurance law and the intricacies of shipping and transportation.

Marine underwriter using outdated git for transporter

**Real-World Case: Repudiation of a Transporter’s Claim:**
In one notable case, despite the transporter hiring two prominent lawyers to speed up claim recovery under ex-work terms, the claim was repudiated. I countered legal arguments with a deep understanding of shipping and insurance principles, leading to the refund of premiums and blacklisting of the transporter.

**Leveraging Industry Experience:**
Drawing on a decade of experience in a conglomerate’s shipping department, it’s crucial to stand firm on contractual terms. My background provides the necessary insight to recognize when claims are unjustified. The claimant applied legal pressure on me.

4. **Importance of Accurate Premium Calculation and Claim Limits:**
This experience underscores the importance of capping aggregate claims per year and accidents and limiting liability based on the transporter’s turnover. These measures protect against fraudulent claims and ensure premiums are fair and reflective of actual risk.

5. **Guidance for Marine Underwriters:**
Marine underwriters should use these insights to design policies that are both fair and robust. The claim is paid based on the terms justification. This involves a thorough understanding of Incoterms, claim responsibilities, and the potential for fraudulent claims.

This approach combines your expertise in handling disputes with practical advice for other professionals in the field, ensuring they are better prepared to manage similar situations.

Marine underwriter using outdated git for transporter

Conclusion

Marine insurance for transporters is a complex field that demands a balance between risk management, cost-effectiveness, and practical applicability. By addressing sensitive information handling, understanding Incoterms, preventing double insurance, managing premiums, and enhancing practical knowledge, marine underwriters can provide robust support to transporters. Building strong relationships through transparent communication and tailored insurance solutions is key to navigating the challenges and ensuring the safe transit of goods.

Finally, please leave your thoughts and constructive comments in the comment section.  Thanks for reading.

About the Author: Jamin Wong is a seasoned marine underwriter with extensive experience in marine insurance and risk management. Passionate about improving industry practices, Jamin Wong shares insights and strategies to help transporters and insurers navigate the complexities of maritime insurance.

Contact: For more information or to discuss your marine insurance needs, contact [email protected]