The main point of insurance is to protect against risk. As a rule, risk is understood as the probability that property, interests, or goals may be adversely affected. A person would seek to avoid these scenarios or receive compensation if they do occur. Insured events are assessed in terms of their probability of happening and the amount of damages they would cause if they do happen.
Logistics risk arises at every level of a supply chain. And how well logistics providers insure against risk speaks to their reliability. With insurance, companies can protect the interests of their customers and business partners.
Risk is inevitable in the transport business, which involves a multitude of different and unpredictable factors. Insurance to guarantee compensation for property loss is one of the key elements of properly planned logistics operations.
In logistics, insurance offers a straightforward way to protect stakeholders’ interests. For example, cargo can be insured against damage or loss during each leg of a journey, storage, or loading/unloading.
As noted by Yurij Verbilovich, Insurance Claims Lawyer at AsstrA, many clients opt to take out cargo insurance.
“In 2019, the AsstrA team organized 5,235 insurance policies. While the number of policies in 2019 was 838 less than in 2018, the amount insured was 520 million euros – 135 million euros greater than in 2018
In case of damage, the obligation to provide reimbursement usually lies with the insurance company, not the logistics company or the carrier,” says Yurij Verbilovich.
Insurance for trucking providers’ liability is common, as is insurance for cargo during transportation and storage.
“It’s important to distinguish carrier liability insurance here. This covers a carrier’s obligation to cover damages arising exclusively due to the fault of the carrier. On average, this liability is typically limited to 10 euros per 1 kg gross weight of damaged cargo,” says Maksim Shkalenko, Head of the Claims & Insurance Division at AsstrA.
According to Vitalij Lazovskij, Supply Chain Security Manager at AsstrA, each transport service provision contract AsstrA signs includes a clause requiring liability insurance.
“To be an AsstrA partner, a carrier needs a sufficient insurance policy. Having such insurance in place is also requirement for some of our clients, who sometimes set the coverage limits themselves. In some contracts, this limit can go up to 10,000,000 euros,” explains Vitalij Lazovskij.
When insuring cargo during transport or storage at a warehouse, the cargo owner’s interest in the property is secured. Such insurance is taken by both the cargo owner and the forwarder. Carrier cargo insurance is also a possibility.
As customers strive to minimize logistics costs, they rarely raise the issue of additional cargo insurance. It becomes critical, however, when the cargo is very valuable or highly resellable.
“Put simply, the cargo itself is insured with a specific invoice value. Limits are not applied, and damages are covered up to 100% of the value of the goods whether or not the carrier caused the damage. Cargo insurance can be called a “cure all,” although in practice there are exceptions. For example, the risks associated with the confiscation of goods by customs authorities will not be covered,” concludes Vitalij Lazovskij.