Are fruits and other perishables insurable? This is the question asked by one of our clients last week.
She has been struggling to find a suitable insurer for her containers of plantain imported from Ecuador. For those who do not know what plantain is, think of banana but slightly harder when ripe. See main difference in this article written back in 2013. They are said to be lower in sugar content than bananas and are more starchy.
Every week, she ships s couple of containers through a leading shipping line. Unfortunately, she has experienced damage with every container. At first, she was insured through a broker with a leading insurance company. Due to her rising claims both in frequency and amounts, the insurer decided to discontinue her cover.
So this begs her question are perishables insurable? In our experience, yes. But there is a caveat. We think that for a portfolio of perishables to be profitable, there must be an excellent accompanying subrogation recovery program. Damage to fruits and other perishables in transit is almost a certainty. As such, insurers will be well-advised to ensure that they are attempting recoveries on all claims paid out.
Considering that most lawyers and recovery agents today charge 15 to 30% in recovery fees including the cost of quality control or surveys, the generally low success rates do very little in really protecting the bottomline of a cargo insurer. So what then?
We considered this question for many years and asked many of our market contacts why cargo underwriters are not handling their subrogation recoveries by themselves. The answers were obvious: lack of time and technical knowhow. Insurers prefer to focus on their core business and allow the “dirty” work of recoveries to be done by recovery agents and maritime lawyers.
Digital transformation and the advancement of technology today presents a unique opportunity for insurers to regain control of their profitability, better manage their financial reporting and to have deeper understanding of their risk exposures. With the wealth of data that today exists around international trade, insurers who are not looking into tapping into this data for their subrogation recovery activities are, in our opinion, missing out on a golden opportunity. Imaging injecting about 15% to your margins simply through automation! Using our CroP platform, insurers and uninsured perishable traders can automate their recovery activity.
There has been some scepticism about this approach. It is worth remembering that even the humble container had its critics. Let us consider the cargo claims process:
- Damage occurs
- Surveyor is appointed
- Letter of protest is sent
- Claim is adjusted and paid
- Claim letter is sent to shipping line
- Authority to claim is established
- Proof of quality of cargo at loading
- Proof of quality at discharge
- Proof of loss and salvage
- Proof of market value
- Claim is acknowledged
- Negotiations ensue
- Offer is made and accepted
- Receipt and Release is signed and claim is closed.
Irrespective of the cargo in question, the process will largely take the form above. If you understand the data set around the cargo and the steps above, the process can be automated. To know more how you could improve your margins, book a session with us to discuss your portfolio. We have made a commitment that where a case is not settled on our platform, we will use our resources to handle the claim manually at the same 5% no cure no pay rate as the platform.