PIAM urges SMEs to buy marine cargo policy

The Star, Monday October 29, 2007: SMALL and medium-sized enterprises (SMEs) need to realise the importance of having marine cargo insurance for protection against any loss when transporting goods, said the General Insurance Association of Malaysia (PIAM).

It said there was lack of knowledge and awareness among SMEs on the benefits of marine cargo insurance.


Serious loss of damage to a cargo in an accident like this can create financial difficulty to SMEs.

PIAM said that as more SMEs began to market their goods or merchandise from various locations for storage, assembly, finishing, sale and export, there might be a high possibility of these goods being lost or damaged in transit.

Understanding marine cargo insurance and the different types of coverage would help to ascertain the level of protection required for the goods, it said.

The association added that for SMEs to compete in the global market, they must be equipped with the relevant knowledge in various aspects of their operations to grow and protect their businesses.

Marine cargo traditionally connotes merchandise being transported on sea-going vessels. In modern trade, however, cargo could be moved in all modes of transportation on land, by sea and air, it said.

And the types of cargoes include livestock, computers, raw materials such as iron ore, manufactured steel products and cars, as well as fresh foodstuff and canned food.

“Modern trade cannot function without marine cargo insurance since the movement of raw materials, intermediate goods and manufactured goods within a country, between nations and across continents through supply chains, involves cash or credit transactions worth billions of ringgit.

“Serious loss or damage to a cargo can create financial difficulty and the protection against such contingency is insurance,” it said.

PIAM said marine cargo insurance policies issued by all local insurers used the standard international forms developed and introduced by Lloyds and Institute of London Underwriters (ILU) Companies in 1982.

There are basically three levels of coverage – institute cargo clauses A which provide all-risks cover, institute cargo clauses B which provide restricted cover, and institute cargo clauses C which are an even more restrictive cover over the number of perils listed.

The examples of perils are fire or explosion; stranded, grounded or sunk vessel; jettison; and overturning or derailment of land transport.

For local transportation, goods in transit insurance may be used to cover the goods on all-risks basis.

To simplify the process of insurance, the goods in transit policy can be arranged on annual turnover basis.

Premium is adjusted at the end of the policy period based on the actual turnover figures.
PIAM said that when a policyholder was constantly transporting goods within the country, it was obviously impractical to issue a separate policy document for each consignment.

“A useful and common practice is for the insurer to issue an open cover, which is a master policy which sets out in detail the nature of the cargoes to be covered, the mode of transport, the geographical area within which the cargo movements are covered, the limit of the underwriter’s liability for any one consignment, the period for which the contract is valid, and of course the terms and conditions of the insurance,” it said.

The association added that open cover remained in force during the period stated and would provide protection for cargo in the move at any time as long as the cargo movements were within the ambit of coverage.

“Also, marine cargo insurance certificates can be issued manually or electronically under an open cover arrangement and made available to the relevant parties.

“Electronic marine cargo insurance certificates will simplify and facilitate the integration of trade transactions in an e-logistics environment,” it said.

PIAM also advised SMEs to insure their goods locally, saying that local insurance companies provided better service due to being more familiar with the local customs and laws.

By buying locally, according to PIAM, SMEs can be in control of all insurance matters relating to their exports or imports.

“These include extending the journey covered for imports to warehouse and not just limited at the port of discharge, which may be the case if the insurance is arranged by the seller,” it said.

PIAM said local insurance could also increase profit and reduce costs of doing business.

“Invariably in business, a party that arranges for a transaction will top up the costs to pay for his trouble plus a margin of profit before selling the goods to the buyer.

“This also happens when goods are sold inclusive of insurance cover.

“Smart businesses will always buy marine cargo insurance to either make some extra profit or reduce his costs whenever there is an opportunity, irrespective whether he is importing or exporting,” it said.


Source from: The Star, URL: http://thestar.com.my/news/story.asp?file=/2007/10/29/maritime/19253681&sec=maritime