由 caicai8478 During the long journey of international trade, goods must cross oceans, use multiple modes of transport, and undergo countless loading, unloading, and warehousing operations. This process is fraught with numerous risks: general average, fire, shipwreck, theft, heavy rain, collision, and even political unrest. Cargo insurance is a “safety net” designed to protect against these uncertainties. However, many exporters and importers often choose to “go all-in” to save a negligible premium, ultimately losing out on a small investment and suffering devastating losses.
- Why Do We “Take Chances”?
The neglect of cargo insurance often stems from the following misconceptions and misconceptions:
The “Probability Theory” Illusion: “I’ve shipped so many shipments without incident, how could this one go wrong?” This is a classic gambler’s mentality. Risk is never a cumulative probability; it’s the difference between 0 and 1—either it happens or it doesn’t. Once it does, it’s a 100% disaster for you.
The shortsightedness of “cost-first”: Insurance premiums typically only account for a few thousandths to a few percent of the cargo value, seemingly an “extra” expense. Amidst fierce price competition, companies tend to cut seemingly unnecessary expenses, with insurance being a top priority.
The “ambiguous liability” misconception: Misunderstanding trade terms. For example, under FOB terms, one assumes that risk transfers to the buyer once the goods pass the ship’s rail, eliminating the need to worry about insurance. However, if the buyer fails to insure or the insurance fails, and the goods are unable to pay after an accident, the seller still bears the ultimate loss.
The inertia of “complex procedures”: The belief that the insurance process is cumbersome and requires numerous documents, so skipping this step is preferable.
II. The Cost of “Luck”: Real-life examples of situations where small gains lead to big losses
Saving small gains may result in small losses. The following scenarios should serve as a warning to anyone who harbors misgivings:
Major Maritime Accident:
Scenario: The carrier vessel encounters severe weather, causing the container stack to collapse or fall overboard, or flooding the hold, resulting in total loss or severe damage to the cargo.
Cost: The entire cargo is lost, and costs such as shipping fees remain. Without insurance, the exporter will not be able to recover the payment, while the importer will lose both money and goods and potentially lose downstream customers. The meager premium becomes insignificant in this situation.
General Average:
Scenario: This is the most easily overlooked yet extremely costly risk. When a ship encounters a danger (such as fire or engine failure) during voyage, the captain intentionally takes reasonable measures (such as dumping cargo overboard or tugboat rescue) for the common safety. The extraordinary sacrifices and expenses incurred must be shared proportionately by the shipowner, cargo interests, and other parties.
Cost: The shipowner will declare general average and require all cargo owners to provide average security (usually issued by an insurance company). Failure to do so will entitle the shipowner to detain the cargo. Without insurance, the cargo owner will need to raise a substantial cash deposit (possibly as much as 30%-50% of the cargo’s value) to release the goods. Otherwise, the cargo will be auctioned off. This is an unpredictable and significant financial burden.
Risks at the Port of Destination and Inland Sections:
Scenario: The cargo arrives safely at the port of destination, but is damaged during unloading, warehousing, or inland transportation due to theft, improper loading and unloading, or local riots or strikes.
Cost: Especially with terms like DAP and DDP, the seller’s liability extends to the port of destination, or even to the buyer’s door. Losses during this stage are borne by the seller. Without insurance, the seller will bear all losses.
Buyer Risk Transfer:
Scenario: Even if the buyer is required to purchase insurance (such as with FOB terms), if the buyer fails to do so due to personal reasons (e.g., financial constraints or forgetfulness), the buyer may refuse to pay for the goods after an accident occurs, citing “damage to the goods.”
Cost: The seller loses both payment and the goods. Purchasing “seller’s interest insurance” can mitigate this risk.
III. How to Escape the Trap? Build a Comprehensive Insurance Strategy
Insurance isn’t a cost; it’s the most cost-effective risk investment.
Proactively Obtain Insurance to Avoid “Undercovering”:
Regardless of the terms of trade, the safest approach is to proactively insure your interests. If you’re the seller and are concerned about the buyer’s credit or ability to insure, you can purchase insurance yourself (such as “Seller’s Interest Insurance”).
Understand the terms and conditions to choose the right insurance:
All Risks: This offers the broadest coverage. While not literally “all risks,” it covers most “accidental losses” caused by external factors during transportation. This is generally recommended as the best option.
With Particular Average (WPA): This offers less coverage than All Risks and excludes certain special risks (such as theft, non-delivery, war, strikes, etc.).
Free From Particular Average (FPA): This offers the least coverage, only covering total loss and general average contribution, not partial loss.
Be clear: War, strikes, inherent defects, and natural wear and tear are generally excluded. If coverage is required, additional insurance is required.
Adequately insure to avoid “co-insurance” penalties:
Always fully insure the cargo at the CIF value + 10% (expected profit). Underinsurance means proportional compensation. In the event of a loss, the insurance company will only pay the insured proportion, and the remaining loss will be borne by the insurer.
Choose a reputable insurance company:
Choose a large insurance company with a comprehensive global network and rapid claims response (such as China Export & Credit Insurance Corporation, AIG, and Lloyd’s). Ensure they have a reliable agent network in the destination country to conduct inspections and claims processing promptly.
Process Streamlining and Management:
Make “arranging insurance” a mandatory step in the shipping process and include it in your company’s SOPs (Standard Operating Procedures). Dedicated personnel will be responsible for ensuring that every shipment is covered to ensure no omissions.
Conclusion
Amid the turbulence of international trade, cargo insurance reflects the rationality and responsibility of operators and is the ultimate safeguard for their hard work and business reputation. By hoping for the best, you might save a few hundred or a thousand yuan in insurance premiums, but you’re risking hundreds of thousands, or even millions, of dollars in cargo value and future orders.
“In calm times, insurance is a cost; in rough seas, it’s a lifeline.” Don’t let a single, avoidable incident destroy the fruits of your labor. Protect every shipment with insurance, like a life jacket, to ensure a safe and secure future.