SMEs’ Guide to Insurance Cover for Goods in Transit

Small to medium sized businesses (SMEs) who ship their goods to customers are advised not to rely on their transport operators' insurance. The reality is that many claims for loss or damage to goods while in the carriers' care are denied by their insurers, so it's strongly advisable for shippers and cargo owners to arrange their own insurance, ideally using an experienced transport insurance broker.

This is because carriers typically limit their liability, with the terms and conditions on what they are prepared to cover usually set out in the fine print on the bill of lading or consignment note. A freight insurance expert will be able to identify the cover a business requires for its specific activities to protect against goods in transit risks.

What are the typical risks to business goods in transit?

Shipments frequently pass though many hands, with cargo loaded and unloaded from trucks and containers, through ports, customs and from warehouse to warehouse. Having your goods move through so many checkpoints increases the chance of damage and it can be difficult to pinpoint where it may have occurred.

It's important for the shippers or owners of the goods to understand the range of risks involved and take steps to protect against them through their own insurance cover.

Some common risks for goods shipped by sea include external risks such as climatic conditions, theft or accidents such as vessel groundings or vehicle collisions. Other exposures may involve operational factors such as incorrect handling or delays in movements.

Regulations and compliance may also pose risks such as penalties or seizure of goods. Changes in trading restrictions may also affect transport and delivery of goods.

Some common risks to goods in transit include:

• packing damage — a large proportion of cargo damage and accidents can be attributed to improper packing such as over-filled boxes, insufficient padding and incorrect stacking
• cargo movement — with various types of movement occurring during an ocean voyage some loss and damage to cargo shipments can occur
• water damage — stormwater may infiltrate cargo containers, causing damage to goods
• overboard losses and jettison — some cargo containers may be lost overboard during storms, and in some extreme circumstance there may be no option but to purposely jettison cargo overboard
• fire — dangerous goods such as chemicals and batteries have the potential to cause fires and explosions
• sinking — all cargo is usually lost in extreme situations that cause the vessel to sink, unless it can be salvaged
• pirate attacks — freight can be delayed for ransom or stolen
• stranding — factors such as storms, groundings, government delays, port strikes, vessel collisions and freight contamination can cause goods to be damaged through extended delivery delays.

What insurance cover do SMEs need for shipping goods in transit?

When selecting goods in transit insurance businesses need to consider the relevant risks for:

• type of goods: perishable goods may require specialised cover
• transport mode: different risks are associated with shipping by sea, air or land
• destination: local regulations and risks may apply.

How a broker can help with getting the right transit insurance

Since there are complex risks and multiple touchpoints in transporting goods a specialist insurance broker can provide invaluable guidance on assessing a business's specific needs, the nature of the goods to be transported, destinations and the exposures involved.

With this information it will be easier to select the most appropriate insurance cover for domestic and international transport.

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