Highest area of risk is the least covered
SLIPPING QUIETLY into being on January 1, Spoornet's new insurance rather than standard liability scheme is a trap waiting to be sprung, according to the country's shipping line industry.
It's a scheme devised (and administered) by the major insurance brokerage, Price Forbes. Effectively, the new system incorporates insurance cover into the Spoornet rate structure - replacing the R28/kilogram limited/ restricted liability that existed prior to January 1.
But it's an accident looking for place to happen, according to shipping lines.
At face value, the scheme looks good, said Sid Oram, joint m.d. of Durban-based Marriott Insurance Consultants, and acting for the ASL (Association of Shipping Lines) in its objections to Spoornet over the issue.
And the main ASL objection is that the highest area of risk is the least covered in the new scheme.
You can get indemnity for R500 000 per container in the event of a fire, collision, overturning or derailment, said Oram. At an exchange value of US$100 000, that's pretty low based against the average content value of a container.
But at least it's better than the critical area of loss or damage - where you only get R60 000 per container cover for theft.
Where's the sense in this, Oram questions.
Container thefts of unbelievable magnitude take place every day, he said. I'm handling at the moment claims for 25-to-30 containers which have just disappeared. For this - the prime area of risk - you get
R60 000 (US$12 000) cover. A ridiculous limit.
The main argument from the ASL is that the very imposition of these very low limits in areas where claims are most likely to occur, is wrong.
Another area of concern lies in the shipping lines' inability to be able to place extra insurance cover to make up for the probable shortfall in the Spoornet scheme.
Under his contractual obligations, the carrier has no right to know what is in a container, said Oram. It could easily be a multi-million rand consignment of computer parts. But the shipping line doesn't know.
How can he place extra insurance when he doesn't even know what it is?
He can't make a proper declaration under these circumstances. And if he doesn't, the insurance is limited to the painfully small maximum of R5/kg.
Effectively, the end result of this is that lots of container rail traffic (carrier haulage is a main rail user) is floating around the railway lines of SA utterly under-insured.
The ASL is not even
certain of where Portnet
liability ends, and that of Spoornet begins. There's a fine line somewhere in the container terminal area where Spoornet takes control of the containers, said Oram. But where is it? In these circumstances, the ASL doesn't know who
is accountable.
The very concept of a para-statal insurance operation is also under serious question by the ASL.
Said Oram: Obviously, the big advantage in such an operation is the large volume of cover that is being handled. This is bound to result in a very attractive rates structure.
But nobody at Spoornet seems to worry that they are cutting right across the path of the marine insurance industry with these low rates.
Add to that the fact that history is just littered with the corpses of para-statal insurance operations - most of which have also been backed by reputable, efficient, management organisations.
But they turned out to be utter, unmitigated disasters. It's a serious concern that we've got about this.
Not yet so concerned, but after only some five weeks of the new scheme, are the rail contract companies - the other main users of the railways' CX (Container Express) services for container movement.
According to Chris Oppenheim, import manager at Renfreight in Johannesburg, everything is still incredibly quiet. Having checked with both sister organisations in container movement - Saflink and Saftainer - re possible added costs he reports: No. There has been no rates change at all, and no extra costs raised to cover contingencies.
Lawrie Bateman, director of Container Logistics agrees. At this stage we are carrying on as before, under the same rates, which now include insurance.
But, even given that, Oppenheim feels that there are two basic areas of objection to the principle of this state-operated insurance scheme. They (Spoornet) are basically trying to abrogate their responsibility, he said. Not a satisfactory circumstance.
They are also encroaching on selling insurance, which has traditionally been the responsibility of the marine insurers and the clearing and forwarding industry.
And both are waiting for that accident looking for a place to happen.
According to Bateman, Spoornet are not in a position to prepare insurance over that contentious R60 000 limit - and this has to be handled by outside parties.
There has also been no claim as yet amongst the rail contract holders for ultra-high-value cargoes - so the result of claims is not yet known. Spoornet, under its old liability measures, was a complete disaster at
handling claims, according to one source. But with Price Forbes, this should be more efficiently done, he said.
But, Oppenheim added, we're still in a don't know position. We don't really know, for example, just how much all this insurance (or lack of it) will cost us in the end.
By Alan Peat
