Insist on Customized Insurance Policies
February 22, 2012 Could there be anything more stressful to cotton merchants than today’s unprecedented price volatility?
Actually, yes. Those volatile prices could surface in the middle of a loss, at a foreign destination, with surveyors new to cotton, at the spinning mill of your brand-new buyer.
That certainly makes for a very stressful situation, and one that affects everyone in the commodities supply chain, including insurers.
Since the days of sail, marine commodity losses – especially those involving cotton – have traditionally ranked among the most difficult and complex maritime claims to settle promptly. In the current commodities marketplace, where collateral dollars are so tightly held, that is certainly truer than ever. The impetus to be as thorough and timely in resolving claims has never been more vital.
The overriding emphasis today is the need for speed. As today’s hyper-priced cotton moves at hyper-speed around the planet, shippers, merchants and warehouses require access to information. And they require it now.
My firm recently introduced the industry’s first mobile device application to meet this demand for instant, real-time information and service. Our “RECIS 1st Mate” app was specifically created for marine commodity insurance and is designed to work on both iPhone and Android platforms.
By using this app, cargo claimants, owners or consignees are able to initiate a notice of damage and transfer all relevant information into the secure database serving our Rekerdres & Sons Cargo Insurance System (RECIS). It starts the claims process with a push of a button.
Cost of insurance coverage continues to climb and there are several factors driving those price increases. For one, commodity insurers share an underwriting pool that includes offshore rigs, tankers, ports, cargo and other maritime adventures. In addition, primary insurers must depend on re-insurers, and they were negatively impacted by a record number of global disasters – both natural and man-made – in the past few years.
Finally, these firms are dealing with exposures in developing countries that in the past would not have been insured at all.
Trends: Customization and Sustainability
When all of these issues come together, especially during a sour economy, the replacement of reinsurance capital is impacted, so primary insurers are forced to pay more, take less cover, or both.
Insist that your insurance company customize your policy to your needs. Plain, generic clauses do not cover many of the intervening factors that change and reduce the security of your financial interest.
For example, at Rekerdres & Sons we attach cover from the moment of financial interest forward, offering traditional attachment throughout the process through delivery or buyer take-up.
The most significant development affecting the cotton industry as it relates to insurance, from my standpoint, has been the focus on sustainability. It is incredible how quickly we have moved from sustainability as a “niche” to sustainability as a predominant commodity model.
Yet while it is tempting to take good practices for granted, the focus must continue to emphasize gaining uniformity of certification criteria and standardization of sustainable business practices.
To that end, our agency supports clients who have adopted sustainable ag practices. If a client qualifies for a Best Management Practices or another accredited program, we and our participating underwriters contribute a portion of their insurance premium to support and encourage sustainability.
For insurers, sustainable businesses are, by their very nature, better risks.
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