Why are freight costs so high right now?

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Why are freight costs so high right now?

Marine Insurance Market

Marine Insurance is currently going through the biggest changes Daniel Morrison, national cargo product manager at NTI, has seen in his 22 years in the industry. The marine sector’s exposure has changed significantly, with bigger vessels and changes in the way goods are delivered.

But the underwriting approach hasn’t changed to match it, Morrison says. Poor profitability in the global cargo insurance market has seen reinsurers reducing capacity or exiting the market altogether. And on top of all this, there’s COVID-19.

“The Australian marine insurance market handles domestic business very well, but, as with all insurers, relies on reinsurance markets. “As they change their capacity for risks they will take on, we have to change how we do things as well. Sometimes they lose their appetite altogether. We have seen some reinsurers we relied on in the past pulling out of storage, they’ve said, ‘It doesn’t make money; we’re not doing it anymore.”

Adding Value is more than just the policy

As insurance premiums have fallen and cargo insurance has become more commoditized. It’s become less focused on exposure and more on premium, but that no longer works in today’s climate. Today’s customer is looking for something more than just a policy when they pay their premium; they’re seeking added value.

“We’re saying, ‘Let’s look at how we service customers, and how we can innovate to provide value to customers, rather than what we charge”.

Cargo insurance is a specialization a lot of customers might not understand, so the broker’s role as translator between customer and insurer is increasingly important.

“The broker must understand the customer’s needs rather than offer just an off-the-shelf product,” Morrison says. “Brokers deal with all sorts of cargo, from frozen and chilled meat to nuts and bolts to cars, and they can’t be experts on all of it – so they have access to the people who can talk them through what the policy covers and help them educate their customer about how their policy works.”

NTI also runs webinars and training sessions to upskill brokers. “We look at how we differentiate ourselves from a proposition and services perspective”. “We have more underwriters, more claims staff, our own internal recoveries team – that all sits within our own marine proposition and is available to all our customers.”

Being Proactive, not reactive

“I think there will be a shift, though it will be slow, towards proactive risk management,” Herron says. Just because they have a cargo policy with us may not mean they see themselves as a cargo mover; it’s just a cost of doing their business. So that proactive view of insurance makes for better engagement, so we get better buy-in from our customer. We don’t want to just be another yearly bill that you curse and then pay.”

Being proactive is important because there’s an increasingly significant factor over which cargo owners have no control – larger vessel sizes. This trend toward mega-ships presents whole new challenges.

“They are the future,” Herron says – but he adds that they’re not always safer, are harder to navigate, and groundings are more costly to deal with, as there is more cargo and fuel to salvage. So should these ship-zillas be treated differently to other vessels from an insurance standpoint?

“It’s the million-dollar question,” Herron says. “How do you minimize risk and expo-sure when you have more accumulation and no control? The vessels that come down to Australia, the biggest are around 10,000 TEU. It’s a mammoth task to get them in and out, as we either don’t really have the deep-water ports to go much bigger. So you put your cargo on a smaller vessel and take it up to Singapore; then it’s got to go to Europe and ends up on those massive vessels – you have no control over what vessel it goes on.”

Taken from https://www.insurancebusinessmag.com

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