Are your goods protected?

A question we often hear from our customers is: “What will happen to my products if they get lost or stolen?” While our Senga transporters have never lost a single item, we cannot deny that theft can happen. Accidents, too, can happen. We once visited a potential client on a day when one of their own trucks had overturned.

One of the things we’ve observed in our local Kenyan market is that the majority of truck owners do not carry insurance for the goods that they move. They are typically well insured for physical damage to their vehicles and to those of third parties. We see about ~10% goods coverage in the field. Semi-trailer owners seem to have the best cover penetration as a group. Most other trucks are often uninsured.

Here are a few more uncomfortable truths about insurance and the transportation of goods in our local market:

  • Many shippers (owners of goods) also often do not carry appropriate insurance or understand their responsibilities with regards to liability. They often have their vendors, who are eager for work and will sign any presented contracts, assume full liability for losses of all kinds. This gives a warm and fuzzy feeling of security. A false security.
  • Insurance is complicated. Folks are often (i) misinformed about what the correct insurance is for them, or (ii) sold the wrong insurance, or (iii) unclear on what the insurance they purchased actually covers. In fact, many motor vehicle related claims that are rejected by Kenyan insurers stem from this misinformation about the policies. It doesn’t help that the regulatory authority does not clearly describe the burdens borne by each party. For instance, if you are the owner of a lorry, and you are carrying goods that belong to a customer and the goods are damaged or lost whilst in your lorry, should you expect that the resultant insurance compensation be made to you? The answer is no. What about if they are stolen by your truck driver?
  • Many shippers just don’t care about insurance for them or their transporters as it impacts transportation costs.
Better safe than sorry.

Goods insurance works similarly in many countries. What we experience in the local market is similar to what is experienced in the UK or the US. In general, one cannot transfer his or her insurable interest to someone else. Take a simple example of an item being picked from a warehouse; within the building, the liability is carried by the warehouse owner. Once it is picked up by a vehicle, the liability is transferred to the vehicle, and so on.

In general, the person in physical possession of the goods has the insurable risk. However, it gets a bit more complicated. For road transport, it’s generally wise for shippers to have an insurance policy called Goods in Transit, no matter what the transporter carries. This is because transporter insurance called Carrier’s Liability does not cover the shipper’s goods for all adverse events that occur in a vehicle. For instance, if goods are stolen by a driver or during an accident, this kind of policy will cover it. However, if the truck overturns, damage to the goods is typically covered via the shippers’ policy.

For imports, marine insurance may cover goods from the shipping port to the customer’s door.

What we see is that shippers who sign away all liability to a different party are likely to end up upset in the event that something significant goes wrong — often because liability coverage is misunderstood. Many very large companies may get away with some of this by withholding payment of affreightment or transportation fees but that may still not be useful if your goods are worth millions.

At Senga, beyond our vetting processes:

  • We ensure that high value goods such as fertilizer or cement are only transported in vehicles whose insurance coverage measures up to the value of the goods.
  • We also ensure that we match the goods with the right kind/caliber of carrier
  • We prepare for contingencies.
  • We are also working on initiatives to get uninsured transporters in the market insured. In a market where buyers often have power, transporters are disincentivized to be honest. We spend quite a bit of time not only educating ourselves but also our customers and transporters.
  • We also recommend getting three separate opinions prior to buying the appropriate insurance to counter possible misinformation from well-intentioned insurance sellers. Goods-in-transit (shipper-side insurance) typically costs from 0.15% to 0.35% of the value of goods transported within the territory (versus across borders). Carrier’s liability (carrier-side insurance) is typically ~2% of the value of goods transported.