T8—Obtaining and Placing Cargo Insurance; Deciding Upon Coverage

Subscriber price: $68.00, Non-subscriber price: $110.00
Estimated total study time: 4 hours 1 minute

This course provides a decision framework concerning cargo insurance (i.e., when to insure, optional coverages, etc.), and then covers the role of a transportation intermediary in advising and placing insurance coverage.

The Decision to Insure—Basic Factors

This lesson covers the most basic issues one should consider in deciding to insure cargo, and serves as an introduction to cargo risk analysis.

(Estimated study time: 1 hour 9 minutes)

Introduction
General Considerations in Deciding Upon Insurance
Insurance Terms and Premiums are Negotiable
Coverage Limitations and Self-Insurance
- General
- Deductibles, Franchise
- Adjustments to Premium "Costs" for Coverage Limitations
Historical Loss Experience; Projections
- Past Experience of Shipper, Consignee
- Insuring Conditions and Premiums as Relative Risk Indicators
  - General
  - High Risk Indicators
  - Premiums Do Not Predict a Particular Shipper's Expected Losses
- Experience-Based Loss Projection
- Allowance for Changing Risks

The "Value" of Insurance (Shipper's Perspective)

This lesson describes a quantitative approach a shipper can use to help determine the "value" of cargo insurance. We refer to this as "net theoretical insurance value". Knowing the value of insurance helps a shipper justify the decision to insure, or, where the cost of insurance is too high in relation to value, the decision to "self-insure."

(Estimated study time: 1 hour 7 minutes)

Introduction
Net Theoretical Insurance Value
- Concept
- Computation Steps
- Simple Example of Net Theoretical Insurance Value Computation
- Carrier Liability Adjustment
- Adjustment for Changes in the Shipping Environment
- Adjustment for Insuring Conditions/Restrictions/Deductibles
- Practicalities
Risk Tolerance; Peace of Mind Value
- General
- Routine Risks: A Cost of Doing Business
- Non-Routine/Improbable Risks
- Peace of Mind Value
Convenience Value; More Timely Claims Settlement
Summary: The "Self-Insurance" Option

Contingency Insurance and Underwriting Issues

This lesson covers cargo insurance a shipper can use to cover his exposure when depending on his trading partner to arrange primary insurance, and then continues with explanation of the various considerations an insurance underwriter must address when setting insurance premiums.

(Estimated study time: 33 minutes)

Introduction
FOB/FAS Endorsement/Contingency Insurance
Underwriting Considerations (Insurance Carrier Perspective)
- General
- Loss Experience and the Actuary, Underwriter
- Costs of Operation; Profit Margin
  - General
  - Reinsurance
  - Marketing and Sales
  - Underwriting and Actuarial Costs
  - Claims Processing/Subrogation/Legal Defense
  - General & Administrative Expenses; Profit Margin
- Brokers vs. Underwriters; Competition

Reaching an Insurance Decision; Rationale

This lesson offers a framework and step-by-step process through which to reach a well prudent cargo insurance decisions, including the negotiation of needed insuring conditions.

(Estimated study time: 32 minutes)

Introduction
Reaching a Cargo Insurance Decision; Rationale
- The Question
- Cost vs. Value
- Key Decisional Steps
  - Step 1: Separate Typical/Predictable Losses from Unpredictable Losses
  - Step 2: Gather/Organize Your Data—A Negotiating Imperative
  - Step 3: Prepare to Shop for Insurance
    - General
    - Make a Coverage Category List
    - Review and Adjust Your List
  - Step 4: Arrive at a Negotiating Position ("Must-Haves," "Nice-to-Haves" and "Not-Justifieds")

Role of Forwarder/Customs Broker/Other Transportation Intermediary

This lesson explores the function and responsibility of transportation intermediaries in advising shippers concerning cargo insurance, arranging such insurance and assisting with claims, including special issues which arise when concurrently acting as an indirect carrier.

(Estimated study time: 40 minutes)

Introduction
Responsibility for Advice and Expertise
Verifying/Assuring Insurance Coverage
Arranging Insurance Coverage
- The Intermediary's Open Policy
- Open Policy Insured Value Limits
  - General
  - Accumulation Clause
    - A Question of Control
    - Notification upon Discovery
  - Pro-Active Policy Limit Management Required