insurance policies can be the high-risk strategy
Dave Riley points to falling standards within the insurance industry and on why this has serious implications for the increasingly international mobile phone business ...
In February this year a daytime raid on a freight forwarder’s warehouse in the Heathrow area saw ten masked gunmen walk off with approximately £2m worth of CPUs and mobile technology; as much as £40m has been lost to thefts and hijackings of this nature in the past six months alone.
With this in mind, it is not surprising that those dealing in communication technology are increasingly turning to the insurance industry for protection. But here lies a problem.
Many so-called ‘experts’ in the high-risk insurance industry have found their market knowledge and contacts wanting, forcing them to withdraw their offer of cover for a number of mobile phone and CPU wholesalers/traders, should they be asked to cover a particular shipment which does not fit their mould. This can obviously leave the company concerned seriously exposed, whilst they try to source alternative cover.
Many companies that have purchased cover from these new insurance sectors (both brokers and insurers), and thought they were protected against freight theft are finding their claims rejected due gaps in their cargo insurance policy, a common example of which is fraud.
Many policies that claim to cover firms for theft may not necessarily cover losses associated with fraud. With reports suggesting that some form of insider collaboration occurs in as much as ninety per cent of all hijackings, it is clear to see the financial ramifications of any related policy gaps.
Similarly, a number of thefts over the past twelve months involved criminals that had managed to penetrate security screenings and secure work as drivers. Once again, such instances would require specific cover to include this risk, cover that some insurance providers should, but often don’t, include.
"Policies may not cover losses due to fraud ..."
Poor communication can also result in important policy omissions.
For example, many insurance packages available to firms exporting mobile phones will claim to fully cover goods while in transit. Perfect? Not necessarily.
It may be that the goods have to be warehoused at their destination point in order for the recipient to inspect and issue payment. Technically the goods have not yet completed their journey at this stage; but they are also no longer in transit and, as such, may not be insured. With the current spate of break-ins at specialist warehouse facilities, particularly in the UK and EU, the number of wholesalers/traders falling foul of this gap, and thus being seriously out of pocket, is rising sharply.
A good insurance provider will ensure that issues such as this are dealt with in the policy construction and are fully explained. Without the adequate communication of such key points, traders could find themselves in trouble believing they are covered for something they are not.
However, policy gaps are ultimately avoidable by working with a broker that does have sector specific expertise as well as close working relationships with both specialist insurers and leading logistic providers.
More importantly they will be able to prove as much.
Such brokers will also be able to help traders develop risk management plans based a knowledge gleaned from the industry relationships already mentioned. For example, feedback from freight forwarders and specialist industry insurers can help identify risk ‘hot spots’ across the country – useful information for any trader.
It is this kind of service and thoroughness that should be offered by all insurance providers operating within the mobile phone import and export industry – but it isn’t. Traders need to be aware of this and protect themselves accordingly by examining their insurance provider’s credentials and experience.
More importantly, traders should not be scared to ask questions. Until recently, ignorance was the biggest reason that many mobile phone dealers found themselves open to the threat of freight crime. Firms simply didn’t know how prevalent the problem was and so weren’t adequately protected. Thankfully, this situation is improving.
However, this improvement is worth little if firms believe they have taken out the right insurance only to still find themselves vulnerable. Simply by asking questions and investigating the full range of insurance options available to them, such firms will help protect themselves from substandard policies and make sure they are covered should they fall victim to freight crime.