‘Never cut costs on insurance’

In Africa, risk is part and parcel of the challenge – but knowing how to mitigate that risk is key to success. “Africa does pose a challenge for insurers as we often find ourselves having to work in difficult conditions on a continent where the lack of basic communication networks and other infrastructure remains a major challenge,” says Susan Duvenage, marine marketing manager for Prestmarine. “The greatest challenge is to sort out problematic claims. Documents relating to claims often go astray or repair facilities in Africa are not as efficient as in other countries. Then there are times when the consignee does not co-operate with surveyors when it comes to repair and salvage dealings for example. There is a range of problems that impact on the finalisation of a claim.” Mike Brews, COO of Associated Marine, says infrastructure remains a challenge in Africa as in many countries it is either non-existent or deteriorating. “The money is not there to repair roads and ports – and while the influx of Chinese money is helping to some extent, it is still a concern. A pot-holed road can end up causing a major accident resulting in damage to cargo. Also in container depots there is not always enough equipment and cargo takes so much longer to move through the depot and is then more susceptible to damage.” Another challenge says Brews is ensuring cargo is safe at all times. “Because a lot of the cargoes in Africa involve high value it is important to ensure its safety at all times. Copper from the DRC for instance will travel through four or five countries. To have an armed escort following that shipment for an entire journey is not easy and often there are concerns that the escorts are not in place.” And when one is moving R20 million worth of copper on the back of a truck, an armed escort is often the only way of mitigating risk. Duvenage says hijacking syndicates also pose risk. “Previously this was a major concern when entering South Africa, but now there are syndicates operating in the North. Consignments of valuable cargo such as copper, cobalt and ores are constantly being targeted.” Fraud is another major challenge for insurers. Underwriters must constantly be on the look-out as documents are easily and readily falsified. How do you mitigate risk? In terms of infrastructure it is a question of knowing that it is a risk and charging the appropriate premiums, says Brews. “There is nothing we can do to fix the roads but knowing the roads are deteriorating is important and therefore should be taken into account.” He says a lot depends on the cargoes being moved. “As long as clients and transporters know the issues, one can mitigate the risk. In Somalia for instance the best way of travelling is in convoy.” Additional security and packaging of cargo are important for the safe delivery of cargo, says Duvenage. “The costs, however, do become exorbitant and cargo owners are reluctant to apply these in an increasingly competitive market. “The transportation of precious metals and ores could cost cargo owners and the transporter dearly if not handled in the correct manner. Truckloads of copper, cobalt and ores are being hijacked en route through South Africa and African borders. In the past hijackings only became a real threat on entering South Africa, but this has changed dramatically. Insurers are providing guidance on security measures to manage these risks and in some instances are refusing to provide insurance if these measures are not applied,” she says. Where is the risk? Over the past few years an increase in incidents has been experienced from Central Africa with Eastern Africa currently posing a major piracy risk, says Duvenage. Brews agrees, pointing out that Somalia is a huge problem be it on land or sea. “A lack of governance adds to the problem. We had two vessels hijacked last year. In terms of land and sea cargo bound for Somalia we avoid it completely now.” Areas that have seen major improvement, however, include the Democratic Republic of the Congo and Nigeria as well as Angola, where there appears to be political stability. “Risk does seem to be on the decrease rather than increase because of stabilisation of governments especially in the southern African region,” says Brews. But it’s important to deal only with legitimate service providers who are familiar with the African continent, he adds. Whatever the country to which you are transporting, it is imperative not to cut costs when it comes to the packing and risk management of one’s cargo. And always insure the cargo through a professional marine insurance provider that has the expertise and the network of surveyors to deal with any claim efficiently.