Taking action early on cargo insurance claims

As the world continues to navigate the uncharted waters of COVID-19, the vulnerability of global supply chains is in sharp focus. 

A recent survey from the Institute of Supply Chain Management shows that almost 75 per cent of companies are reporting some level of supply chain disruption as a result of the pandemic. 

With around 90 per cent of world trade carried by the global shipping industry, what does this disruption mean for marine insurance?

In an upcoming ANZIIF webinar The first few days of a marine cargo claim — Simon Marshall, Marine Surveyor and Engineering Loss Adjuster from Sedgwick in New Zealand, will explore the complexity of marine insurance claims and why early action is vital to the resolution of a claim.

CAREER ON THE HIGH SEAS

Marshall began his career as cadet engineer, working in the engine room of passenger ships that sailed through the Caribbean and along east coast of the US.

‘It was a lot of fun,’ he says. ‘But it wasn’t what I considered to be a sustainable future for me, as it involved working away from home for up to six months at a time.’

Marshall left the high seas for a role surveying the safety of cranes and lifeboats. 

After meeting a number of people in the insurance industry, he took up a job as a claims manager about four years ago, and moved to Sedgwick in 2018, where he saw an opportunity to combine his insurance experience with his hands-on marine knowledge.

MARITIME DISRUPTIONS

Historically, the protection of ships and their cargo progressively became the dominant features of the insurance industry, in line with the rapid expansion of international trade. 

In the early decades of the 20th century, marine insurance accounted for almost half of all insurance premiums, however its market share now represents a small fraction of the industry.

Furthermore, it is estimated that only 50 per cent of global marine premiums are cargo-related.

While hurricanes Harvey, Irma and Maria are among the biggest marine loss events in recent years, losses resulting from COVID-19 remain ongoing. 

The crisis has caused delays in the servicing and inspection of vessels and emergency equipment, for example, supply-chain disruption has created delays in the arrival of consumables.

In addition, the pandemic has had a massive impact on ships’ crews, many of whom can’t leave or join a ship as a result.

CLAIMS ON THE RISE

Marshall says there has been a spike in claims since the pandemic swept the globe. 

‘COVID-19 has caused a massive disruption to global supply chains,’ he says. 

‘For example, we had a claim recently from someone who was trying to source replacement parts from Italy but at the time, most of the country had been shut down due to the pandemic. 

‘The delays were further compounded by COVID-related impacts to shipping.  A particular concern in New Zealand was an inability to unload containers and return them to the global supply chain. There is just a huge disruption and things aren’t operating as they normally would.’

Marshall says lack of access due to COVID-19 lockdowns has caused the greatest challenge for marine insurers.

‘In New Zealand, we had Level 4 (strict lockdown measures) and Level 3 (restricted measures)’ he says. 

‘We might have been aware that there was a potential claim, but how could we actually go out and do a survey during a lockdown?’

TECHNOLOGY TO THE RESCUE

Marshall says technology has assisted in fronting a ‘sizable backlog of claims’ during the pandemic.

‘Fortunately, Sedgwick had already been working on enhancing its remote site visit video technology.

‘It’s been quite convenient, as we can now link up with an insured’s phone and record videos and take photos, without actually needing to attend a site and examine the loss in person, at least in some cases. 

'Though this technology has been a hugely useful way of triaging some claims, sometimes being out onsite remains absolutely necessary.

‘There has certainly been a backlog of claims to deal with, but with the use of technology, we’ve been able to catch up as best as possible,’ adds Marshall.

TAKING ACTION EARLY

COVID-19 has created new risks for every industry. While disruption to supply chains has impacted marine insurance, Marshall stresses that early action on marine claims was vital, even before the pandemic.

‘A lot of claimants don’t necessarily have a big import and export department as they may be small-medium businesses, so they may not have a depth of expertise when it comes to marine insurance claims.

‘In addition, their brokers may not have a great deal of experience in marine insurance,’ he says.

‘The tail end of the claim can be really impacted if you don’t get certain relevant information in the first couple of days.’

WHY TIMING IS CRUCIAL 

Most shipping contracts state that loss or damage must be reported to a carrier within 72-hours, according to Marshall, as it requires time to inspect the damage or assess how a loss has occurred.

‘It’s one thing to tell your insurance company about a loss, but if you wait several weeks before informing [the carrier], it can really impact the recovery side of things and, in the worst instance, this can prejudice a claim,’ says Marshall. ‘Quite often this crucial aspect is missed.’

Marshall explains that swift action is also required for claims relating to the damage of temperature-controlled goods.

‘For instance, a claimant may not have correctly specified what the temperature should be in the container,’ he says. ‘When it arrives damaged, we need to quickly work out what the temperature was and how that relates to the contract with the carrier.’ 

SIMPLE SOLUTION

Marshall says that this challenge can be solved through the use of a temperature logger.

‘If the container happens to smell nasty upon its arrival because the freezer has been out of action for a long period of time, it can be difficult to acquire such information from the shipping company,’ he says. 

‘But if we can get that information in the first few days from the logger, it makes the claim a lot easier to pursue for the consignee. It is worth noting that a logger only costs about US$30 and provides temperature data throughout the entire shipment.

‘With marine insurance, the importance of timing can’t be stressed enough, and this is something that I’ll be explaining in the webinar,” adds Marshall. 

‘Taking action in the first few days makes recovery much easier and provides us with the best opportunity to help the consignee mitigate their loss, because you can quickly determine where something has gone wrong.’