Controlling Transportation Insurance Costs

Barry Tarnef, assistant vice president and senior loss control specialist at the Chubb Group of Insurance Companies offers these tips for managing transportation insurance expenses.

1.Have some skin in the game.

Consider different deductible levels for your insurance policy, as this can have an immediate impact on your premium - but remember that the deductible is part of your total cost of risk.

2.Invest in security monitoring.

Affiliation with organizations such as CargoNet and FreightWatch may qualify you for a partial or total deductible waiver on certain losses.

3.Become a partner in loss prevention.

Incorporating loss control policies, procedures, and devices, such as asset tracking and monitoring technology, can help improve the likelihood that your goods will arrive at their destination intact and undamaged.

4.Explore other options.

Consider alternate risk-transfer techniques - especially the terms of sale, because these may offer opportunities to shift the cost, transportation obligations, and risk of cargo loss and damage to your trading partners earlier in the transaction.

5.Maximize recovery (subrogation) potential.

A simple step such as listing the number of customary cargo transport units or packages on an ocean bill of lading can increase the carrier's loss and damage liability. Also, seek out transportation providers willing to offer higher liability limits.

6.Operate in full-disclosure mode.

The more your insurance company knows about your operations, shipment preparations, supply chain, and logistics, the more informed underwriting and pricing decisions it can make.

7.Limit the value of individual shipments on single conveyances.

Do not purchase insurance limits well beyond the values you anticipate shipping.

8.Maintain a good loss record.

Your company's experience, net of deductible, and recovery from the transportation provider or other party responsible for cargo loss and damage are key factors in determining your insurance premium.

9.Hire good logistics partners.

The caliber of the transportation companies you use - and the ones in the care, custody, and control of your cargo - is a key underwriting criteria, because they can be your greatest ally or your worst enemy. Using financially sound and well-managed companies with excellent commercial reputations can make a positive difference to you and your insurer.

10.Instill an enterprise-wide risk management mentality throughout your organization.

Include all relevant departments - such as compliance, finance, insurance-risk management, logistics, manufacturing, operations, procurement, quality control, safety, and security - in decisions involving planning, execution, and monitoring transportation activities. Not only should these employees have a vested interest in the safety and security of your goods in transit, but they can have an impact on successful shipments.

(Source: Inboundlogistics)