Restrictive transport insurance practices

Nature

Some governments that are anxious to expand all sectors of their economy attempt to defend their insurance market by restricting the trader's freedom of choice in the placing of transport insurance. This is done by requiring the buyer or seller to insure his imports in the country of importation or his exports in the country of exportation; by imposing discriminatory taxes on marine insurance placed with foreign companies; or by the operation of their import licensing and exchange control regulations. In so doing, governments overlook the fact that insurance, more than any other transaction, is based on confidence and is thus incompatible with any form of coercion. When insurance affects international transactions, then the need for confidence is all the greater.

Transport insurance of goods has all the elements of an international transaction. The goods themselves move from one country to another, frequently on the high seas. The supplier is in one country, the buyer in another and the carrier may belong to a third country. Consequently, restrictive measures affecting transport insurance inevitably have a direct effect on international trade. It is therefore international trade as a whole which suffers from restrictive measures imposed in relation to transport insurance; and the economy of the country which imposes them loses the benefits to be derived from a free choice of the transport insurance arrangements. If, furthermore, other countries adopt a similar attitude in retaliation, this leads to the paradoxical situation where no commercial transaction remains possible between two countries without violating the law of one or the other.

Incidence

Restrictive transport insurance practices are prevalent in various regions, particularly affecting logistics and transportation sectors. In Europe, for instance, a 2021 report indicated that nearly 30% of transport companies faced difficulties in obtaining adequate insurance coverage due to stringent underwriting criteria. This issue is exacerbated in developing countries, where limited access to insurance products can hinder trade and economic growth, with estimates suggesting that up to 50% of small transport operators in Africa struggle to secure necessary insurance.
In 2020, a significant case occurred in the United Kingdom when several freight companies reported being unable to secure transport insurance for cross-border operations due to new regulatory requirements post-Brexit. This situation led to increased costs and operational delays, highlighting the challenges faced by the logistics industry in adapting to restrictive insurance practices in a changing regulatory landscape.

Claim

It is not so much the relatively small amounts of money involved in relation to the business turnover as the burden of business complications and administrative vexation resulting from such restrictions in the field of transport insurance which constitute the undeniable harm done to international trade; the role of transport insurance should be to facilitate and not to impede the flow of trade.

Counter-claim

Restrictive transport insurance practices are often overstated as a significant issue. In reality, the industry is built on risk management, and these practices are essential for maintaining stability and affordability. Insurers must protect themselves from potential losses, and consumers benefit from lower premiums as a result. Focusing on this so-called problem distracts from more pressing concerns in the transport sector, such as infrastructure and safety improvements, which truly impact our daily lives.