The ocean freight industry has seen several major incidents over the past few weeks, including two fires on board two separate Maersk vessels, and a containership collision in Karachi Port that forced the temporary closure of the port.
These incidents underscore the importance of always buying cargo insurance to protect merchandise and cushion damage, says Klaus Lysdal, Vice President of Sales and Operations at iContainers, a 100 percent online freight forwarder.
“Given that Maersk has now declared general average, which means that the surviving cargo has to pay a share of the cost for the vessel damage, the tow, clean up, legal settlements, etc,” Lysdal said.
By law, all shipping carriers are obliged to offer a minimum amount of insurance, but it offers limited coverage. iContainers says its general advice to its clients is always to purchase additional coverage to protect themselves from worst-case scenarios.
“As a shipper, you can and should always buy extra cargo insurance to further protect your merchandise and cushion your damage. Given the uncertainties of mother nature, it’s a worthy investment as it would cover your cargo while it’s in storage and in transit until it reaches the safe hands of your buyer,” Lysdal said.
It’s been more than two weeks since the Honam fire started, and the Danish shipping line has yet to confirm to which port the vessel will eventually be headed. It will still be awhile before the 2017-built vessel can be allowed to berth. Port authorities will want to make sure that all fire on board have been extinguished and determine the condition of the Honam, which is a process that could still drag on. In such a situation, having cargo insurance not only facilitates the post-shipping processes financially, but also logistically.
“For clients who have insurance, filing the claim with their insurance will help speed up the process of releasing their cargo,” Lysdal explained.
“Plus, claims are generally processed quicker through insurance companies. Without insurance, you may be stuck with the carrier’s liability which is listed on the back of the Bill of Lading: $500 per unit.”
The Danish shipping giants have since declared general average, which means that all losses will now be split among surviving cargo. Unless shippers have purchased a general average coverage insurance, they are all liable to pay a proportional portion of the damage.
“Without cargo insurance, your cargo is likely to be held hostage for payment of those charges. Simply said, without insurance, you stand to gain nothing or next to nothing at most,” Lysdal said.