New legislation will change marine insurance landscape

The incoming Consumer Protection Act will have a major impact on the way shipping, forwarding and clearing services are communicated to customers and the way their standard trading terms and conditions are drawn to the attention of the customer to ensure they are clearly understood from an insurance perspective.

Jeffry Butt, accounts manager marine and aviation risk services, a division of Glenrand M.I.B., says the Act will mean that, in the case of transporters, clearing and forwarding agents, their standard trading terms and conditions can no longer absolve them from liability and responsibility for cargo unless this has been properly disclosed to customers in plain language and that the conditions are fair, just and reasonable.

“Currently transporters, clearing and forwarding agents offer insurance cover for goods being shipped or transported and collect insurance premiums. In order to do so, they are required to be licensed as an authorised financial services provider.

“Some transporters clearing and forwarding agents who offer insurance and collect premiums have been registering themselves as a representative of an existing authorised financial services provider, performing intermediary services and providing advice, for example, as an insurance broker.

“This may increase the risk of not providing ‘proper’ advice in respect of insurance cover for goods shipped or transported as their business is not one of insurance, but one of a logistical nature. This scenario potentially exposes customers seeking to be indemnified for loss and/or damage to their goods.

“In fact some transporters are not insured at all, passing all the risk to the customer as their standard trading terms and conditions either absolve them from all liability or limit their liability. Some also do not provide the customer with policy documents outlining the rates, terms and conditions in exchange for the premium paid.

“In other words, should the customer not insure his own goods he has little or no opportunity to recover the loss or damage.

“Customers are entitled to see a copy of the FAIS (Financial Advisory and Intermediary Services Act) license issued by the Financial Services Board (FSB) held by the transporter, clearing or forwarding agent and have the right under FAIS to be properly informed and advised of the insurance cover given and to be provided with a policy document outlining the rates terms and conditions in exchange for the premium they receive.

“Under the Consumer Protection Act any limitation of liability imposed by transporters and agents needs to be properly disclosed to the customer in a language that is simple enough for the customer to understand, thereby making customers aware of the risk implications. The customer needs to procure the necessary insurance from an authorised financial services provider.”

“Currently transporters, clearing and forwarding agents offer insurance cover for goods being shipped or transported and collect insurance premiums. In order to do so, they are required to be licensed as an authorised financial services provider.

“Some transporters clearing and forwarding agents who offer insurance and collect premiums have been registering themselves as a representative of an existing authorised financial services provider, performing intermediary services and providing advice, for example, as an insurance broker.

“This may increase the risk of not providing ‘proper’ advice in respect of insurance cover for goods shipped or transported as their business is not one of insurance, but one of a logistical nature. This scenario potentially exposes customers seeking to be indemnified for loss and/or damage to their goods.

“In fact some transporters are not insured at all, passing all the risk to the customer as their standard trading terms and conditions either absolve them from all liability or limit their liability. Some also do not provide the customer with policy documents outlining the rates, terms and conditions in exchange for the premium paid.

“In other words, should the customer not insure his own goods he has little or no opportunity to recover the loss or damage.

“Customers are entitled to see a copy of the FAIS (Financial Advisory and Intermediary Services Act) license issued by the Financial Services Board (FSB) held by the transporter, clearing or forwarding agent and have the right under FAIS to be properly informed and advised of the insurance cover given and to be provided with a policy document outlining the rates terms and conditions in exchange for the premium they receive.

“Under the Consumer Protection Act any limitation of liability imposed by transporters and agents needs to be properly disclosed to the customer in a language that is simple enough for the customer to understand, thereby making customers aware of the risk implications. The customer needs to procure the necessary insurance from an authorised financial services provider.”