Everything you need to know about cargo transportation insurance
The transportation of goods is fraught with numerous risks, including theft, loss, and damage during transit. These risks, whether ordinary, such as accidents or fires, or extraordinary, like strikes or thefts, can be managed either through the carrier’s liability or by means of an insurance contract taken out by the shipper engaging their services.
Cargo insurance, a crucial component of logistics, plays a major role in managing these risks. However, the landscape is evolving rapidly, with digitization emerging as a key element to optimize efficiency and security in the world of cargo transportation insurance.
What is cargo transportation insurance?
Cargo transportation insurance, also known as cargo insurance, initially takes the form of an agreement between a shipping company and one or more delivery service providers. Its primary objective is to provide compensation in the event of damage to goods during their shipment.
Different types of cargo transportation insurance
Depending on the mode of transport, several types of insurance can be distinguished:
- Maritime transport: Maritime insurance can cover ships and goods from common risks (events jeopardizing the shipment and requiring financial sacrifices, such as jettisoning part of the cargo), particular average risks (theft, breakage, loss, damages related to transport conditions and/or loading and unloading), and risks of war and similar events throughout the entire transport.
- Land transport: In the context of railway or road transport of goods, they are guaranteed from warehouse to warehouse.
- Air transport: Here too, goods are covered during air transport, as well as during complementary transports, whether by land, sea, or river.
- River transport: Goods are guaranteed from the departure point of the boat to landing in the recipient’s stores.
Why take out cargo transportation insurance?
In the event of a claim, recovering using a company’s financial reserves is often a challenging task. This is where the assistance of an insurance company becomes extremely valuable. This entity can guarantee the financial stability of damaged goods in the event of a claim through the establishment of a contract including the “all risks” provision. Once compensated, the company can more easily resume its activities.
However, the need for insurance goes beyond recovering financial losses. It is imperative to avoid any situation where the amount of compensation would be less than the total value of the damaged goods. This scenario would represent a significant financial loss for any company integrated into a supply chain. Hence, the crucial importance of establishing a cargo insurance contract. Cargo transportation insurance also involves the carrier’s liability in the execution of its missions. Thus, the carrier is obliged to fulfill its commitments, under penalty of compensating the other party in case of losses. When the terms of a contract are detailed in writing, liability limitations must be scrupulously adhered to. Therefore, in the event of the realization of risks during the transportation of goods for a company, any insurer is obligated to fully assume its responsibilities.
Challenges of cargo insurance:
Due to the complex and interconnected nature of supply chains, as well as the multiple inherent risks in transportation, companies face constant challenges in ensuring the security of their goods in transit.
- – Inherent transportation risks: The transportation of goods involves a variety of risks, such as damage caused by accidents, unforeseen delays, extreme weather conditions, or even acts of theft. These risks can lead to significant financial losses for businesses, highlighting the need for robust insurance.
- – Complexity of supply chains: With the globalization of markets, supply chains are becoming increasingly complex. Shipments involving multiple modes of transport and crossing several borders increase the likelihood of disruptions, emphasizing the importance of comprehensive and flexible insurance solutions.
- – Evolution of risks: Risks evolve over time, whether due to new environmental threats, technological developments, or changes in business practices. Insurers must constantly adapt to remain relevant and offer adequate protection.
Beyond these traditional challenges, the rapid evolution of technology provides a new perspective on risk management in the cargo insurance domain.
The importance of digitization in transportation insurance:
Digitization emerges as an indispensable catalyst for efficiency and resilience in the cargo insurance sector. It enables:
- – Process optimisation: Digitization brings advanced tools to simplify and expedite processes related to cargo insurance. Digital platforms allow for quick underwriting, real-time adjustments, and more efficient claims processes.
- – Real-time monitoring: Technologies like the Internet of Things (IoT) enable real-time monitoring of goods during transportation. Connected sensors can detect abnormal conditions, allowing insurers to intervene quickly in case of issues.
- – Analytical data: Digitization provides increased access to analytical data. Insurers can use this information to assess risks more accurately, enabling personalized pricing and better adaptation to the specific needs of clients.
- – Blockchain of transparency: Blockchain technology can be used to create immutable records of all transactions related to cargo insurance, enhancing transparency and reducing the risk of fraud.
Rely on our expertise in cargo insurance
Whether you are a transport company looking to optimize your risk management (goods, transport units, etc.) or an insurance company seeking to improve pricing and limit fraud, ADDINN Group and its cutting-edge solutions are here to accompany you and help you stay ahead of the innovation curve in the cargo insurance sector.
