Commerce in the modern world is a complex procedure. The product that reaches the consumer’s hand has components in it that come from different countries. Ocean shipping facilitates the growth of commerce and traces across the globe by connecting shippers with carriers and manufacturers. The Ocean can be a dangerous place. Ships can get damaged or lost, thereby incurring losses for all the tiers in the supply chain.
According to gCaptain, “Across all vessel types, the number of fires/explosions resulting in total losses increased again in 2020, hitting a four-year high of 10. Fires often start in containers, resulting from non-/mis-declaration of hazardous cargo, such as chemicals and batteries.
Major incidents have shown container fires can quickly get out of control and result in the crew abandoning the vessel on safety grounds, thus increasing the size of the loss.
Container loss at sea also spiked last year, hitting over 3,000, and have continued at a high level in 2021.” Shippers need to know how freight insurance works and why it is worth it.
What Is Ocean Freight Insurance?
Ocean insurance is designed to help with merchandise safety on ships and shipments in multimodal transport.
About 90% of global shipping takes place on the seas. Even with the lockdown in China, international shipping, as noted by FreightWaves, is poised for a year of unprecedented growth. Ocean freight has gone up, resulting in freight insurance rates going up.
According to The Balance Small Business, a buyer and seller contract should determine who the responsible party is for the shipment in transit. Knowledge of Incoterms 2020 as defined by the International Chamber of Commerce and about insurable and uninsurable goods mitigates compliance challenges shippers face.
Proper packaging, reducing per diem charges, and real-time tracking of the shipments all reduce expensive freight rates. With a reduction in transit time, one can expect better insurance rates.
When Should Shippers Purchase Freight Insurance?
Let’s face it. Perfect delivery of the shipment is not the most common occurrence. Although freight insurance is not mandatory, there are enough reasons to purchase freight insurance.
Shipping of Fragile Goods
Breakage of fragile goods is commonplace in shipping as items get tossed about in a container. The shipper must take care during the packaging of goods classified as ‘fragile.’ The right freight insurance is essential to cover any damage to such items.
Shipping Expensive Products
If the shipment is expensive, such products also require special handling. The size and weight details are usually mentioned on the insurance documents. It is also crucial that end-to-end tracking of such a shipment is available, reducing risk and thus cutting cost.
To Avoid Long Claim Processing Charges
Claims for freight damage or loss can take a long time. Claims are made to recover costs, and the claimant should be careful not to include their profit in it. Claims that are filed in terms of freight insurance are expedited.
In this era of multi-modal, multi port transport, knowledge of where the freight is crucial to its safety and timely arrival. An ocean visibility tracking provider with TMS and API resources expertise is essential for ocean shipment.
Common Myths About Ocean Freight Insurance
The unpredictability of ocean shipping calls for a firm insurance policy. Port congestion, the Russia-Ukraine war, and the uncertainty of the Shanghai lockdown all lead to delays in deliveries and possible damage or loss of ocean freight. However, there are many misconceptions surrounding insurance.
The Shipper Might Think That the Carrier, Freight Forwarder, or the Trucker Is Responsible for the Damage or Loss of Cargo
A common misconception amongst shippers, carriers, or freight forwarders may only partially cover a shipment’s liability. The liability is often standardized based on the mode of transport. In some cases, the carrier may completely be absolved of any responsibility for the shipment.
Importers May Assume That the Insurance Bought by the Shipper Is Sufficient
Importers often assume that the insurance purchased by the shipper will be adequate to cover the shipment in the event of a loss or damage. Not so. In reality, the shipper must purchase only a minimum coverage which may prove to be insufficient.
As far as ocean freight is concerned, the carrier will pay:
● For visible loss, immediately.
● No visual or concealed damage within three days from delivery.
Pictures of the shipment when loaded should be taken. This might help in case of loss or damage to the cargo.
As for legal action, it must be filed within a year. A transparent real-time delivery tracking system for the container and the shipment on a collaborative platform can be most effective in establishing communication and trust.
No Knowledge of Several Types of Insurances
Not all marine insurance is the same. Coverages can be of various types like:
● All-risk coverage.
● Only covering for stranding, sinking, burning, and collision.
● Covering the above and inclement weather.
Transportation Charges Will Not Be Assessed by a Carrier if There Is a Loss or Damage to Ocean Shipment
This seems logical but, in reality, not true. Once the cargo is received for transit, all transportation charges must be made in full to the carrier. Whether the shipment is lost or damaged, the carrier is entitled to collect ALL freight charges. A global tracking system may mitigate losses significantly and thus reduce stress and uncertainties associated with international ocean freight shipping.
Tips for Finding the Right Ocean Freight Insurance Company.
Choosing an ocean freight insurance provider is as important as selecting a delivery logistics partner. While there are many options available, there are certainly good practices shippers and importers can implement. These are some of the steps companies can take:
● Asking for the freight carriers certificate of insurance, both liability, and cargo.
● Check the type of risks covered by them.
● Check for the insurance company’s financial stability.
● Employ a logistics partner that collaborates with a real-time ocean visibility tracking company.
Global shippers need a properly vetted freight insurance provider, and it is essential to adopt some of these best practices while choosing them.
Get Freight Insurance and Know the Current Status of All Ocean Freight With OpenTrack.
In conclusion, one can say that buying freight insurance for your shipment is worth it. Adding to the unpredictable environment of the ocean is the current Russia-Ukraine war. The war has been one of the primary factors for increased fuel prices, making the cost of production and delivery that much more expensive. It has added to the unpredictability of ocean and ocean shipping.
Even as the demand for ocean shipping continues to grow, visibility in the ocean poses many challenges. An end-to-end logistics partner with a vast network of freight forwarders and shippers like OpenTrack can mitigate the many challenges shippers and importers face. Get an adequately vetted insurance provider for all ocean freight, and know what’s happening in real-time. Contact OpenTrack for a demo, and understand how partnering with an expert logistics visibility partner is the best way to ensure the safety of your shipment and save time and money.
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