Having found Angela McCluskie’s blog on marine cargo insurance interesting and thought-provoking, John Potter shares his thoughts on how the market may develop.
Viewed in a different light, the commoditisation of cargo insurance might be seen as an inevitable consequence of falling rates over several years of the soft market. This coupled with commission rates that are greater than they should be.
But it doesn’t necessarily mean that the cargo market will all succumb to commoditisation.
The commoditisation development is a perfectly good business tool for the run of the mill cargo risk, most of which don’t require any bespoke broking or underwriting.
An off-the-shelf cargo policy designed to cover goods sent between two countries in the world is easy to design and the use of IT makes it easy to obtain.
Brokers
Standard cover is provided by way of the Institute Cargo Clauses (A) 1/1/09 plus the cover for War & Strikes risks should be common for run-of-the-mill goods sent every day.
Nor should commoditisation necessarily cut the broker out of the picture.
Brokers can front the cover, just as the likes of, say, Swinton do with household and motor insurance.
Looked at from a different viewpoint, the future in the development of cargo insurance lies principally with Stockthroughput insurance, especially Global Stockthroughput.
These products mirror the development of overseas manufacturing of goods, once the province of domestic economies in the developed world, particularly where the business is headquartered in the host country but which has outsourced the production of its goods to another country, sometimes thousands of miles distant.
Gain
In such cases, Stockthroughput is arguably not just desirable, it may also be essential to the business in retaining full control of all its operations.
I also suggest that another inevitable development from stockthroughput insurance is that business interruption cover arising from a storage location will be commonly covered by the cargo department as a natural corollary to the development of stockthroughput insurance.
On the one hand we may lose a little to commoditisation but gain on the other hand from the development of stockthroughput insurance.
John Potter is a consultant trainer in marine insurance