由 caicai8478 - The core role of marine insurance
Risk coverage
Insure physical losses: such as damage to goods caused by shipwreck, collision, fire, bad weather, etc. during transportation.
Protect non-physical risks: such as theft, short unloading, war strikes (additional terms required), general average contribution, etc.
Matters not covered: inherent defects of goods, improper packaging, delayed delivery, etc. (need to read the terms carefully).
Legal and contractual requirements
If the trade term is CIF (seller’s insurance), insurance is a mandatory obligation; under FOB/CFR, the buyer needs to decide for himself.
Bank letters of credit may require insurance documents as a condition for bill payment.
- 3 scenarios where insurance must be purchased
High-value goods
For high-priced goods such as electronic products and precision instruments, the loss cost far exceeds the premium (usually 0.1%-0.3% of the value of the goods).
Case: A batch of medical devices worth $500,000, with a premium of about $500, can be fully claimed if they are soaked in seawater.
High-risk transport routes
Passing through areas prone to piracy (such as West Africa, the Strait of Malacca), and waters with harsh climates (North Atlantic winter routes).
Transit ports have poor security (such as Lagos and Rio de Janeiro), and the risk of theft is high.
Low tolerance for supply chain errors
Customers are sensitive to delivery time, and may face liquidated damages if the goods are damaged and the replenishment is delayed.
- Exceptions to not buying insurance
Low-value and damage-resistant goods
For bulk commodities such as ore and scrap metal, the probability of damage is low and the value of the goods is low, so it is more economical to bear the risk yourself.
Sufficient coverage of carrier liability
According to the Hague Rules, shipping companies need to compensate about $500 for each piece of goods. If the unit price of the goods is lower than this limit, it can be weighed.
Note: There are as many as 17 exemption clauses for carriers (such as navigation negligence, fire, etc.), and actual claims are difficult.
Long-term stable transportation record
There is no claim record for many years on the same route, and the cargo packaging protection level is high (such as full container transport FCL).
IV. Decision-making model: quantifying risks and costs
Evaluation dimensions High risk (insurance recommended) Low risk (optional)
Cargo unit price >$10,000/piece <$500/piece Route accident rate Accident rate in the past 5 years >5% Accident rate <1% Transportation mode Bulk carrier/intermodal transport Full container load (FCL) Customer contract terms Insurance required No explicit requirements Calculation formula: Expected loss = cargo value × route historical loss rate If expected loss > premium × 3, it is more cost-effective to insure.
V. Practical suggestions
Flexibly choose insurance types
FPA: only insures total loss, suitable for bulk cargo.
WA: insures partial loss + total loss, suitable for moisture-prone cargo.
All Risks: covers the widest range, recommended for high-value cargo.
Tips for reducing premiums
Increase the deductible (such as no compensation for less than $500 agreed).
Provide proof of cargo loss prevention (such as ISTA certified packaging).
Obtain discounts from long-term insurance companies.
Alternatives
Some freight forwarders offer “self-insurance plans”, but solvency needs to be carefully verified.
Conclusion
Marine insurance is essentially a risk transfer tool, not a fixed cost. It is recommended to purchase compulsory insurance for shipments with a single bill value of more than $20,000 or a comprehensive risk score of > 6 points (out of 10 points). Other situations can be selected as needed. When purchasing insurance, standardized products such as ICC (London Association Clauses) should be given priority to avoid disputes over ambiguous terms.