Converting a Marine “ non-believer”

You may know a lot about Marine cargo insurance – the clauses, the conditions, the warranties, their interpretations …… you may be adept at understanding a customer’s requirement and structuring a suitable solution or have the uncanny ability to identify and eliminate his pain-points. The ‘so-called’ Marine expert! Yet…… when you run into a ” non- believer”, to convert him, your preaching skills are put to test.

By Marine ‘ non-believer’, I mean a small-time exporter and importer who has been in business for years but has never felt the need to buy a marine cargo insurance policy. Typically, he has approached your organisation for some other insurance product (Maybe Property insurance for his warehouse or Health insurance for his family) and you also try to push the sale of a Marine cargo policy.

You start off by espousing the advantages of having a Marine cargo insurance in place — Should the goods you sell get lost or damaged during transit due to fire, accidents, water ingress, theft, non-delivery or due to anything except the named exclusions, the policy will come to your aid. With a bored expression he says, he has been in this business for more than a decade and has never had a single case of loss/damage. As an additional information, he says that the goods he sells are not susceptible to damage by fire, water or accidents and even if stolen, do not have ready buyers outside, hence no one would steal them. What’s more, the voyage itself is pretty short – Mumbai to the UAE, so no worries at all. You are pushed on to the back foot, yet you do not give up and say, ” Murphy Law, you know, things can go wrong even in a short voyage”. He replies casually, that he would recover from the shipping line. You try explaining that the shipping line may not be always liable and even if yes, the liability would be limited as per statute. Non-believer says – Why fret about it, when no such event has happened at all, in the past.

You try a new strategy now — The buyer may insist on marine insurance as per the Incoterm in your invoice. Non-believer looks up and you say ‘ If the Incoterm is CIP or CIF, the seller,that is you have to arrange insurance’. But I never sell on CIP or CIF terms ever, comes the reply.

You: ‘ Whenever the export involves a Letter of Credit, one of the document banks insist on, is the marine insurance policy’.

Non- believer: ‘ I never involve banks in my exports. The buyers are well-known to me and payments are never a problem. Hence, no LCs’.

Your mind is racing. This is one tough nut to crack. You say – ” Do you import anything? Raw materials, machinery, etc.?’ Yes, he says. Ha, if you do not insure these imports, the Indian Customs takes the insurance cost at a notional 1-1.25% of CFR value to arrive at the CIF value and levy Customs Duty, you say. Non- believer is unperturbed. Nonchalantly he replies that his imports are quite limited and in any case all imports are on CIF terms till final warehouse. So this issue does not arise.

You play your last trump card – Even if your goods are safe following an accident/ incident at sea and the vessel declares General Average, as a cargo interest you have to contribute to the loss/ expense. In such situations, if you have a cargo insurance policy, the insurer will give an Average/ Salvage guarantee allowing you to take delivery of your sound cargo. If you do not have a cargo insurance policy, you will be forced to put up a cash deposit before you can take possession of your cargo. Non-believer is a bit agitated now- ‘ My cargo is not damaged or lost but I have to pay a deposit towards somebody else’s loss and take possession of my cargo? Is this lawful? Is this justified?’

You try explaining General Average to him in layman’s terms. Non-believer is not entirely convinced but to put an end to the discussions he says ” Send me a note on this General Average thing, let me see’. Will he become a believer?

Discussing and debating the intricacies of marine insurance with people who know and understand the subject is easier but trying to sell the concept to a non- believer is truly enlightening. Does that make Marine cargo insurance a ‘pull product” rather than a ‘push product’?