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Reasons for Taking Out Marine Insurance on Goods Imported into Australia.

Importers generally need little convincing for the need to protect their investment in the goods they are importing. They routinely arrange marine insurance against loss or damage in transit. While modern shipping methods have greatly reduced the hazards of transportation, claims payments on Australian imports amount to tens of millions of dollars annually, and show that marine insurance is still essential for Australian importers.

Unfortunately, and despite the obvious benefits of arranging their own marine insurance, many importers continue to import on c.i.f. (cost, insurance and freight) terms. Every time they do this they are, perhaps without realising it, importing the marine insurance as well as the goods.

Importers are urged to discuss with their insurance brokers, the benefits of always importing on c&f (cost and freight) terms rather than c.i.f., and in their own interests arranging marine insurance themselves in Australia. This not only benefits the importer but also has the effect of reducing the foreign currency cost of imports. This in turn helps to improve the national balance of trade and supports the "Buy Australian" campaign.

Benefits to importers buying on C & F terms

1. Control of Premium Costs

By importing on c.i.f. terms, the importer pays a premium in the c.i.f. invoice price, even if a separate charge is not specified in the invoice. The importer has no control over, and often no knowledge of, the amount of this marine insurance premium charge. Marine insurance rates in Australia are very competitive with overseas rates, so that in most cases if he insures in Australia the importer will pay no more for his marine insurance protection. He may even pay less. 

2. Policy Conditions

By effecting his own marine insurance in Australia, the importer can arrange the policy on insurance conditions which exactly meet his requirements. When importing c.i.f., he receives an overseas issued insurance policy with conditions which suit the overseas supplier, but which may not suit him. He also has no opportunity of selecting an insurer who offers top security and specialises in marine insurance.


3. Prompt and Efficient Claims Handling

Importers buying on c.i.f. terms who need to make a claim will have to do so under an overseas issued policy.

Even if the claim is straight-forward, they will find that in most cases they have to wait for weeks and even months while documents are sent overseas and the overseas insurer sends funds for settlement of the claim. If there is any dispute over the claim, they will find themselves at the mercy of an insurer in an overseas country over whom they have no commercial leverage. It becomes even more complicated Should legal action ensue. Compare the situation where the importer has purchased c&f and is able to deal with his own insurer in Australia: claims can be presented easily, dealt with quickly and any disputes resolved by face to face negotiation.


Reasons for Taking Out Marine Insurance on Goods Exported from Australia.

Exporters can further help themselves and Australia's balance of trade by exporting services as well as goods. When an exporter sells goods on cost, insurance and freight (c.i.f.) terms he becomes responsible for arranging marine insurance for the overseas transit of the goods on conditions of insurance agreed with the overseas buyer.

This insurance policy is issued in the name of the exporter. He assigns the policy to the overseas buyer by endorsing the reverse of the policy. It is important this be done before risk in the goods passes from seller to buyer. In case of loss or damage during the overseas transit, the buyer is able to claim under the policy in his own name.

The policy covers (subject to the agreed conditions of insurance) the risk to the seller of loss or damage in transit until the risk in the goods passes to the buyer under the terms of the sales contract. From that point the policy covers the risk to the buyer and to any subsequent buyers provided the policy is correctly assigned before risk passes. 

The exporter usually recovers the full cost of this marine insurance from the overseas buyer in the c.i.f. invoice price.

Exporters are urged to discuss with their insurance brokers the benefits of always attempting to sell on c.i.f. terms of sale. This not only is of considerable potential benefit to the exporter but also has the effect of increasing foreign currency earnings from exports. This in turn helps to improve the national balance of trade. In effect, it is not only the particular goods which are exported, but also the marine insurance covering those goods. 

Benefits to exporters of selling on CIF terms

Control of the cost of marine insurance and commercial flexibility in the passing on of this cost to the overseas buyer in the c.i.f. invoice price.

Tailoring of conditions of marine insurance to meet the precise needs of both the Exporter and his overseas buyer. Avoidance of the need for and the cost of separate marine insurance in the name and at the cost of the exporter to cover his risk in the goods until the time this risk passes to the overseas buyer under the terms of contract.

Saving of the need for and the cost of Sellers' Contingency Insurance. This type of insurance protects the exporter against loss or damage to the goods in cases where the overseas buyer fails to take up the goods and the risk in respect of loss or damage remains with the exporter.

Information is available to the exporter from his insurers in respect of claims paid to the overseas buyer for loss of or damage to the goods. This information can assist the exporter in risk management and in the minimisation of future losses. However, where sales are made on cost and freight terms of sale, with insurance to be arranged directly by the overseas buyer for his own benefit, such useful details of loss or damage are not usually available to the exporter.



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