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Tuesday, 11 November 2014

What are the benefits of goods in transit insurance for my business in Nigeria?

This week, we will continue from where we stopped last week on Goods-in-Transit Insurance
3.0 Rating Considerations
The following factors are considered in determining the rate and terms under which Goods-in-Transit risk will be accepted.

3.1 Scope of cover: The choice of cover (either all-risks or restricted cover) and the type of policy arranged (either single transit or declaration basis) are considered in determining the pricing of the risk.

3.2 Estimated Annual Carriage (limit per carriage): The EAC is a clear indication of the size of the risk exposure to an insurance company on a policy. When a policy is arranged on a declaration basis, insurers will want to know the limit per carriage.

3.3 Nature of cargo: The nature of cargo being transported is very important; some cargoes are more prone to damage and pilferage than others whilst some require special transportation conditions.

3.4 Mode of packaging: The same type of cargo could be transported in different ways and each way presents different risks to the insurance company. The insurer will consider the expertise of the particular insured in the haulage business in taking a decision on the terms of risk acceptance.

3.5 Owned or hired vehicles: The means of transportation is a major consideration in determining the terms for a goods-in-transit policy. The insurer will ask questions about the ownership of vehicles, the conditions of the vehicle(s) earmarked for transportation of the goods and the length of the journey. If the mode of transportation is by rail, details of the trip, including the terminals where the train will stop in the course of the journey, is the type of information that will be of interest to the insurer.

3.6 Insured’s loss experience: Obtaining loss history of a given insured will assist in assessing the customer’s risk. An insured with a bad loss experience will either pay a higher premium or be ready to abide by the insurer’s terms.

4.0 Policy Exclusions
A Goods-in-Transit policy does not cover certain risks, and these risks can broadly be categorized as: those that are better covered under some other optional insurance, those excluded because of their particular nature and those arising from the insured’s negligent act or omission. Some of these exclusions are as follows:

1.    Loss arising from ordinary leakage, ordinary loss in weight or volume or inherent vice of the goods;
2.    Loss or damage resulting from theft or pilferage assisted by or in connivance with the insured’s employees;
3.    Loss or damage and any consequence whatsoever resulting from or in connection with war, riot, strike civil commotion or earthquake; terrorism is also not covered;
4.    Loss or damage caused by moth, vermin, insects, damp, rust and gradual deterioration;
5.    Loss or damage arising from the carriage of explosives;
6.    Loss arising from leaving unattended the conveying vehicles containing the property;
7.    Carriage of bullion cash, banknotes, bonds, deeds, bills of exchange, promissory notes, treasury notes, stamps and documents of title of property, jewelry etc.;
8.    Delay, loss of market or consequential loss of any description;
9.    Mechanical, electrical or electronic breakdown or malfunction where there is no external evidence that an insured event has occurred;
10.    The absence, shortage or withholding of labour of any description resulting from any strike, lockout, labour disturbance, riot or civil commotion;
11.    Expropriation, which means the lawful seizure, confiscation, nationalization or requisition of goods;
12.    Excess, which is usually found in most insurance policies and is defined as the first amount of each and every claim that is borne solely by the insured. This amount is always stated in the policy.

Note that some of these exclusions can be covered by more specific policies. For example, theft or pilferage assisted by or in connivance with the insured’s employees is better covered by a fidelity guarantee policy, while carriage of bullion, cash, banknotes, bonds, bills, etc. is better covered by a money insurance policy.

5.0 Conclusion
The insured usually determines the extent of the risk exposure required to be covered by the insurance company. Some customers might want to retain risks they believe are unlikely to crystallize. However, taking the goods-in-transit policy remains the best cover for risks inherent in the movement of goods from one location to another whether they are own goods or being carried for a fee.

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