Shipping comes at a cost, and sometimes a high one when items are lost or stolen. The marine industry loses billions of dollars due to theft and loss every year. Many shippers have learned the hard way that, for large or valuable shipments going via sea freight, marine insurance is a must-have.
The National Cargo Security Council estimates such loss of cargo costs the industry about $50 billion annually. Losses occur for a variety of reasons, including theft at the port or at sea, mislabeled or misplaced containers or natural disasters. The WSC (World Shipping Council) states there was an average of 1,582 containers lost at sea every year from 2008 to 2016.
Cargo Theft
While some cargo loss is accidental, cargo theft is entirely purposeful. Cargo theft refers to the loss of goods, chattels, money or baggage as part of a freight shipment due to criminal activity and is, unfortunately, a common occurrence. The value of cargo continues to rise, and with it comes more savvy, calculating, bolder thieves, some of whom are using 3D scanners and other technology to replicate cable seals, security locks and keys. The seemingly inevitable introduction of autonomous ships will present another attractive opportunity for thieves.
Marine Insurance
As a shipper, you can never be 100% sure your shipment will arrive at its destination intact. But, you can safeguard your cargo with marine insurance. It can be purchased not only by shippers, but by transporters, import/export merchants, contractors, or anyone who is engaged in the movement of goods. Shipowners who will be using the vessel for commercial or transportation reasons must purchase marine insurance. A benefit for transporters who buy a policy is that the plan can be adjusted based on the specifics of a given shipment, and other details such as the size of the ship and route travelled.
Insurance Policy Tips
Marine policies can range from 'all peril', which pays for damage regardless of the cause, to only risks named in the policy. A typical insurance policy might cover theft, hijacking, transportation errors, a vessel sinking and damage to rain or saltwater.
Marine insurance policies can be complicated, so do not make assumptions about what is covered. Make sure to read the terms of the insurance carefully as some policies exclude loss or damage of goods due to war or piracy. Even with insurance, it is still always important to document each shipment's value in case there is an issue with loss or damage later.
To get the best rates, provide the insurance company with very detailed descriptions of the items you will be shipping. This information will help them more accurately understand their exposure and liability. And, as the frequency of your shipments increases, you should also be able to negotiate better rates.
In the end, marine insurance is a safeguard against financial hardship due to loss of cargo. Ocean shipping is a highly unpredictable mode of transportation for many reasons – problems will happen. This unpredictability makes it all the more important to have the right protections in place.
