Factors for Cargo Insurance Cargo insurance covers goods in transit to various contries by sea, road, rail, inland water and air. A competent cargo underwriter is required to possess sound knowledge about nature of goods and their susceptibility to loss or damage, method of packaging, conditions prevailing at different ports of the world, risk improvement for certaion cargoes and underwriting measures to protect the accounts. Underwriting measure that may be utilized by underwriter are: risk improvement, restriction of cover through warranty or additional exclusions, loading of premium or imposing excess
1. Nature of Goods
Different cargo requires different treatment since the risks are different. The goods insured may be fragile (easily broken), dangerous and perishable (easily damage). Insurer must also access either the goods susceptible to damage through breakage, leakage or sweating. .
➡️Size: Big size vessel with larger tonnage will be more stable.
➡️Age: vessel age more than 15 years is riskier, and underwriter may impose extra premium if the cargo being carried by vessel age more than 15 years.
➡️Classification of vessel: if the vessel is not classified by the recognized classification society, extra premium should be charged.
➡️Flag (represent the country of registration); standards manning in accordance with shipping regulations of the country. construction and
5. Past claim experience
Claim record of insured can be a good source in determining the rate to be charged Underwriter may reject application of insurance if bad claim recorded by the prospect or similar cargo. Basic underwriting information Insured need to disclose below information for insurer to underwrite the risks. Name of assured Cover required - open policy/single policy Description of cargo Description of packing Description of voyage/transit Loss experience Volume of business
➡️The longer the voyage, the longer the cargo will be on board will be exposed to loss or damage. Insurer need to consider the route because some route will involve with piracy risks and bad weather (monsoon, typhoon and hurricane).
➡️The mode, nature and route of inland transit also need to be considered. Some situation the road used is bad, prone to theft which can increase the risks to the goods in transit.
➡️Port risk: insurer need to find information on methods of discharge at ports, directly on quay or on lighters, loading & unloading facilities at ports. Certain ports do not have enough facilities, which increase risks of rough handling. Besides, strikes or political disturbances in certain port also become material risks to insurer
➡️Transshipment: the long distance of goods in transit increase risks of handling and storage.