10 Supply Chain Questions Your Insurance Broker Should Ask You

"The merchandise was damaged in transit" is not welcome information. Recovering from the loss will depend upon how well you and your insurance broker have identified your supply chain risks, assessed those risks and put adequate coverage in place. Below are 10 questions that a knowledgeable cargo insurance broker partner should ask when developing a cargo insurance policy that is structured to protect your company’s unique supply chain risks and exposures.

1. How are your import and export cargoes and/or distributed goods insured currently?
This is a place to start to understand whether your assets are adequately protected against loss.

2. Do you use a forwarder, logistics company or transportation carrier to help manage goods in the supply chain?
If so, this impacts the insurance options and the understanding of your supply chain exposures.

3. What are the goods and their approximate value in the supply chain on an annual basis?
Knowing annual value helps to understand your insurance choices. There may be a point below which your own policy isn’t cost-effective.

4. What is the geographic scope of the supply chain?
Geography impacts the risk of loss and scope of coverage.

5. How are the goods packed?
Packing methods affect the risk of loss.

6. What are your terms of sale and/or your purchase terms?
This provides a good indication of where your ownership begins and ends.

7. If you sell your goods on cost-and-freight terms, do you have insurance if title to the goods does not transfer to the buyer?
While the buyer is responsible for insuring the goods, there are many reasons title may not transfer. Therefore, the goods remain in your ownership and at your risk.

8. If you purchase goods on cost, insurance and freight terms, do you have contingency insurance that fully protects your interests as a buyer?
While the seller is responsible for arranging the insurance, the buyer has no control on the price, coverage terms, insurance company stability or language of the policy.

9. Do you have any of these exposures in your supply chain: storage/warehouse exposure, consolidation exposure, staging exposure, processing exposure, fulfillment exposure?
Under a well-structured cargo insurance policy, your goods can be insured for all transit exposures, both internationally and domestically and by any conveyance mode. In fact, while the goods are in the supply chain or lifecycle they can be insured for broad coverage under a cargo insurance policy.

10. If your goods are insured by you, under a policy in your name, what are the coverage terms? Are any supply chain exposures not covered?
A knowledgeable cargo insurance broker can help you understand the coverage terms as well as identify risky “holes” in coverage.

Leslie Levy August is secretary general of Trade Bridge International and a licensed property & casualty insurance broker in Barrington, Ill. She can be contacted at leslie@tradebridgeinternational.com.

Steve Connor is president of Wyvern International Insurance Brokers and a licensed property & casualty insurance broker in Barrington, Ill. He can be reached at SConnor@WyvernInsurance.com.