Banks misrepresent consumers, putting insurers at risk. By exploiting consumer ignorance, banks make excess profits and expose insurers to potential losses, especially in underdeveloped nations where laws and regulations governing bank activities are lacking. This unethical practice needs better oversight to protect all parties involved.

Bank Misrepresentation Puts Insurers at Risk

Freight Forwarder.

In addition to managing the logistics of the client’s cargo, the freight forwarder also provides advice on purchasing marine insurance. Batu Pahat manufacturers import textile cotton yarn from Taiwan and Pakistan, and export garments and knitted apparel to Europe and North America via Singapore port.

Upon arrival at the port, after customs inspection, the full container load (FCL) is broken down into 20′ or 40′ lorries before being transported to its final destination. This process ensures that the shipments are efficiently managed and securely delivered to their respective locations.

Two Insurance Policies

To clear customs, you need several documents: the bill of lading, invoice, packing list, insurance policy, and the customs form. Often, I notice there are two insurance policies included. This redundancy can complicate the process and potentially cause delays. Ensuring that all necessary documents are prepared and correctly filed can streamline the customs declaration process and prevent any issues.

Bank misrepresents

I discovered that the reason for having two insurance policies for the same consignment was due to the bank issuing a letter of credit and also helping customers buy marine policies. The first policy covered the sea voyage, while the second one covered inland transit after Singapore customs’ clearance. This has been a local practice for years. However, it is unethical and unfair for importers to pay additional charges for this redundant coverage.

Ensuring transparency and fairness in the process would benefit all parties involved. By streamlining the insurance process and combining coverage where possible, importers can avoid unnecessary expenses and complications.

Bank Misrepresentation Puts Insurers at Risk

Claim repudiate

An importer mainly purchased goods on FOB terms and had a separate policy from a local insurer to cover inland transit, protecting her shipment from accident damage. She did not want to experience the same ill fate as her elder brother.

Her brother had imported electronic parts from Taiwan, which were completely damaged midway to the factory. The insurer rejected his claim, stating the coverage was only up to the port, not to the factory.

“This is strange. I’m sure you know XYZ company, and we paid the full claim for electronic parts damaged on the highway,” I explained to my potential client.

“Oh… you only handle marine insurance for them. When can you drop by my office to discuss cargo insurance?”

International Trade term

When buying on CIF terms, it’s acceptable to have the same insurer for two separate policies. However, with FOB terms, a foreign insurer covers the sea voyage, putting the local insurer at a disadvantage for inland transit. Invisible damage during the sea journey is a risk. Therefore, it’s best to thoroughly examine the cargo before loading.

Additionally, there’s a charge for opening a letter of credit and two insurance premiums, which results in the bank making an excess profit from the client’s lack of knowledge.

The solution

I advise all my clients, whether importers or exporters, to opt for CIF terms. It’s essential to include the “Warehouse to Warehouse Clause” in the policy. Ensure it is an All Risk or ICC “A” policy for comprehensive protection. This approach benefits both the insured and the insurer, saving a substantial amount on insurance premiums. Additionally, dealing with one insurer instead of two simplifies the process and eliminates any finger-pointing when a claim arises. This ensures a more straightforward and efficient experience for everyone involved.

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