Co-operation helps minimise risk at source

05 Mar 2000 - by Staff reporter

Pre-shipment
surveys are part of
counter-strategy

THE BROKING industry's rather old fashioned approach to transport and freight risks is rapidly changing, according to Gavin Ord, director of Transportation Risk Management Services (TRMS) - a specialist division of risk management and insurance broking consultancy Alexander Forbes Risk Services.
It has to be, he told FTW. In the private sector, this is an industry where services alone have an annual value of R1-billion - while the value of goods carried is in the region of R10-billion. That's a lot of risk.
Today we are seeing a lot more co-operation regarding risk in the freight and forwarding industry - with lines of communication opening up between the broker, freight company and the manufacturers of cargo, whether they be small, medium or large enterprises.
This, Ord added, is leading to an environment open to new ideas, new products and new ways of tackling risk problems - with distinct trends towards increased self-insurance and risk control to minimise risk at source.
Unconventional, innovative approaches to meeting the risk management needs of the industry are emerging, he said, as a result of co-operation and communication.
For example captive or cell-captive insurer arrangements can bring considerable financial savings on the non-catastrophe risks - while catastrophe risks and liability risks that cannot be economically retained, can be re-insured.
A main area of concern for the industry is container theft, which Ord said appears to be predominantly a result of organised crime. Sample statistics, he told FTW, show most containers stolen are those with high value contents that can be quickly and easily distributed.
Sample statistics also reveal that about 21% of marine claims are for theft of containers or theft from containers. The problem here, according to Ord, is that such losses are actually just the tip of the iceberg. His estimate is that lost sales, loss of customs duty and market share can be as much as four or five times the actual claim value.
The best response to this particular problem is a counter-strategy, said Ord. This using a client-specific combination of risk control solutions and high levels of risk transfer. High claim ratios usually result in cargo owners having to increase their risk retention and risk control for certain highly attractive goods - or suffer increased premiums and/or deductibles.
Pre-shipment surveys and proper recovery processes, are part and parcel of the effective counter-strategy, Ord maintained.
Pre-shipment surveys, he said, focus equally on physical loss control measures - such as unmarked packaging; welded container doors; effectively-locking door mechanisms. Also on procedural matters such as handling; placement of containers back-to-back in rail carriages; pre-clearance and so on. All of which enables accurate risk assessments to be made and appropriate solutions to be determined.
Recoveries from proper follow-up of losses help to reduce claims experience and ultimately the total cost of risk borne by the cargo owner.
However, few cargo owners need to take an active role in recoveries, Ord added.
The key to effective recoveries, he said, is quick reaction and the use of specialist recovery agents - who have both the skills and the networks to ensure some degree of success.