Growing competition within the UK haulage market is putting ever greater pressure on logistics firms. As Angela McCluskie, freight liability underwriter at specialty MGA Fiducia, explains firms need to push back against an ever greater assumption of risk.
For haulage firms the fleet so often comes first when it comes to insurance. It is quite natural if you have one, two or three vehicles which are worth in excess of £100,000 that you need to protect your physical assets. Let’s face it they are the vehicles upon which your business literally runs.
Alongside such cover haulage firms need freight liability insurance to protect themselves while their clients’ goods are in their care. However, it needs to be remembered that the owner of the goods should have the final responsibility for ensuring those goods are fully insured.
Traditionally freight liability cover will provide an amount for the haulier’s liability to those goods. Typically for domestic transits within the UK, this would be around £1,300 per tonne for general goods, £5,000 per tonne for refrigerated goods and up to £12,500 a tonne for items such as bottled spirits.
However, what has been noticeable in recent years is the cargo owners looking to push the responsibility for insuring the full value of their cargo – the goods they own – on to the haulage firm.
For the cargo owners this may well make sense. Faced with the cost of shipment, if they can transfer the cost of insuring those goods on to the firms which are transporting them it is cutting the overall costs of shipment.
However, this leaves the haulage firm in the situation whereby they should be factoring in the additional costs of the higher limits of their insurance into that charged for their transportation. It seems right on paper, but in the competitive environment in which they operate it may not be a cost they wish to pass on to their customer for fear of losing the business to a cheaper rival.
This ongoing attempt to shift the liability for the whole costs of cargo has the potential to hit the smaller operator harder than most. Therefore, brokers need to work with their underwriters to ensure their clients have the ability to withstand such pressure, with the additional comfort that they have robust insurances in place should they be needed to make a claim.
Much the same can be said for the freight liability insurance sector. There is no doubt that competition remains fierce and the price of cover is always an attractive weapon for those who are looking to aggressively win business.
However, it also remains a case of you get what you pay for when it comes to speciality insurance classes and we have seen in recent years underwriters who have sought to compete on price suddenly finding their books of business burnt by claims attrition and they are then forced to exit the market.
For brokers as well as their clients there is something to be said for a relationship with underwriters who not only know their class but are also committed for the long term. They need to know their underwriter has the capacity, appetite and most importantly the knowledge and expertise to write freight liability business ranging from one-man owner operators to large national logistics businesses.
The above was an opinion piece written by Angela McCluskie, freight liability underwriter at specialty MGA Fiducia. The views expressed within the article are not necessarily reflective of those of Insurance Business.
