The movement of products is vital for thousands of businesses and the public. Most international brands transport their products worldwide to increase sales and reach new markets. The transportation of products is impossible without logistics companies.
The movement can be from business to distributor or business to business; the products could be anything from material to fully assembled products. The transportation is typically either through air, sea or road, depending on the logistics management and distance.
Businesses trust logistics companies with most movement details. The companies are liable for various factors of the transportation process. Hence, they are in charge of the type of transportation, agreed timeline of movement, and safety of products.
However, several things can go wrong during the journey, and the logistics company will be responsible. These logistics risks involve damage to products, liability errors, warehouse damage, cyber risks, and even work injuries.
Hence, all logistics companies must have the appropriate insurance policies to cover their risks and liability. The article will discuss the main insurance for logistics companies to deal with logistics risks.
What Are Logistics Companies?
Logistics companies are businesses that plan, implement and control the movement and storage of goods from point A to B. The different companies coordinate with product businesses to ensure the movement is efficient and safe.
Examples of logistics companies include DHL, FedEx, UPS, and many more. Freight forwarders, courier services, warehousing, and transportation companies are just a few types of companies that are part of the logistics industry.
Logistics companies are constantly growing with the implementation of technology and the increasing range of goods movement. The growth also brings in more risks and the chance of claims.
Insurances For Logistics Companies
Freight Forwarder Insurance
Freight forwarders are a considerable part of the logistics industry; they are the companies that plan and manage the movement. Their primary duty is to make sure goods are transported in the safest, most efficient, and cost-effective way.
Therefore, logistics companies have a liability to their clients to handle cargo with care and deliver it in the best condition possible. However, errors and omissions are always possible while transporting goods. In fact, the most common cause of damage is improper storage in cargo containers.
Clients may take legal action if they believe they have been financially harmed due to a freight forwarder error. Freight forwarder companies will have to hire a legal team and possibly pay compensation to the client. The errors could also include taking the wrong route, causing delays, improper documentation, and using faulty packaging.
Errors and accidents can occur at any point, before and during transporting. Logistics companies need freight forwarder insurance to cover liability claims. The insurance will cover legal, compensation and settlement costs. Even if not the freight forwarder’s fault, they may still be liable due to contracts and their duty. Additionally, in some countries the insurance is mandatory to cover forwarder liability risks.
When products are handed over to a logistics company, it is known as cargo. The cargo is put into appropriate cargo containers and loaded onto a ship, plane or truck. Different transport is used for different types of products, distances, and clients’ delivery urgency. However, there is always a chance of things going wrong, resulting in damaged or lost cargo.
Cargo can be damaged or lost due to crashes, fires, handling, bad weather, theft and more. Examples of accidents include a container falling off a ship due to rough seas, truck accidents, or cargo containers not strapped in a plane. One uncontrollable accident can lead to a significant financial loss and delay for the cargo owner.
Many logistics companies provide cargo insurance to their clients to protect the monetary value of cargo. The insurance covers the value of the cargo during the transit, in case of damage or loss. It is a necessary insurance in the logistics industry and a must for any type of cargo. It can save the sender a large amount of financial loss, especially if the accident is unavoidable by the logistics company.
Property All Risk Insurance
Various logistics companies help store goods. The storage area is called a warehouses. Warehouses typically have a range of different products from all over the world. The warehouse companies are responsible for managing the products, ensuring they are safe, and the staff professionally move the products to the freight companies.
Clients trust warehouses to keep their products in good condition and communicate with the companies to inform them about logistic plans. However, like any property, there is always a chance of accidents that result in damaged or lost goods. These accidents can be due to warehouse fires, explosions, weather, and even handling errors.
If the products are damaged while in storage, the warehouse company will have to pay for repair or replacement.
Hence, storage logistics companies need property all-risk insurance (warehouse insurance) to cover freak accidents. The insurance will cover damage or loss due to uncontrollable situations. Situations can consist of fires, floods, natural disasters and theft. Additionally, the insurance will only cover the value of goods listed in the current inventory. The insurance is the perfect protection when damage occurs under the care of a warehouse.
Logistics companies have begun to store more data online and depend on communication with clients online. It has become an integral part of the industry and helps manage the logistics process easier. Every logistics company has detailed information about their clients and other partner firms. With the increase in the technology-integrated process come cyber risks.
Cybercrime is a growing concern for all logistics companies; hence, cyber insurance is necessary. The insurance will cover cyber experts’ advice, threat removal, data recovery, informing third parties and financial loss. Cyber insurance will help logistics firms deal with the outcome of cyber attacks and recover efficiently.
Employee Compensation Insurance
Employees are the people who communicate, plan and manage logistics efforts with clients. Every step, from product storage to transportation, is made possible with competent employees. However, the job comes with risks that can result in work injuries.
Work injuries can occur to any employee, at any time. The injuries can be due to risky equipment, cargo handling, loading, offloading, etc. Logistics company employers are liable for their employees and safety.
Logistics work injuries can be severe, resulting in expensive medical bills and compensation payouts. Employers must be able to provide the beneficial amount without any concern to help their employees.
Employers in the logistics industry are legally required to purchase employee compensation insurance (in most counties). The insurance will cover the costs of injuries and illness due to logistics duty. The costs covered will include medical expenses, salary while recovering and compensation in case of disability. The insurance is the ideal policy to help injured employees and adequately fulfil the employer’s duty.
Why Is Insurance Crucial for All Logistics Companies?
Insurance for logistics companies is crucial due to the unforeseen logistics risks that can occur before and during the transportation of goods. The logistics industry is vital to the world, and they should have the proper protection to keep operations running.
Having the right combination of insurance can save a logistics firm from a significant financial loss. Financial protection helps companies recover no matter the risk. However, the insurance will not cover claims if the company is involved in illegal activities.
Moving products is a long process and involves many steps; fortunately, with insurance logistics, businesses do not have to worry about risks at each step. As long as they try their best to be safe and provide the best service, insurance will cover them, providing peace of mind.
Therefore, every logistics company should analyse their risks and take a moment to understand if they have the proper insurance if they are harmed by any of the above threats tomorrow.