NAIROBI, Kenya, Feb 18 – Importing goods has become the norm for many business people who rely on goods from overseas to sustain their businesses locally.
There are many potential risks along the journey as the goods are moved from the country of origin to the destination and unbeknown to many, the – losses can be mitigated through marine insurance which provides compensation whenever the risks materialize causing damage or loss to the Cargo.
Many businesses, however, according to CIC UnderwritingManager (Technical & Risk Management), Douglas Chepkuto, are either ignorant or unaware of insurance solutions that protect them against losses following the operation of perils of the sea (maritime perils) or land.
Some of the main risks include water damage, loading, unloading risks, theft, fire, tsunami, tornadoes, lightning, piracy, vessel capsizing, discharge of cargo at a port of distress, jettison, collision in addition to other complex ones like general average and salvage charges and liability on both to blame collision which may force an importer to incur costs.
Chepkuto, in an interview with Capital FM Business, decried low uptake of marine insurance solutions amongst importers whom he noted end up incurring extra punitive charges levied by KRA in estimating the would be insurance cost to be used in order to
arrive at the customs value.
Despite being higher than the insurance fee, he decried that many importers still prefer paying the former.
“Whenever you have not insured your goods locally hence no insurance value, KRA will provide an estimate of insurance value which is usually higher than the actual insurance premiums chargeable, and load it to the cost and freight figure so that they get the
customs value for purposes of taxation,” he said.
“The challenge is that some customers are either unaware or prefer this route than buying insurance, the amount usually results in a higher customs value hence higher tax. If you insure your goods, you will not only end up paying less tax but also get compensation in case your goods are lost or damaged while in transit,” he added.
Ignorance, lack of awareness are some of the reasons blamed for such occurrence, he said, raising concern that some businesspeople also unnecessarily opt for foreign insurers and subsequently incur more charges.
With foreign agents, he said, importers get subjected to double insurance which does not extend beyond the destination port e.g. Mombasa or JKIA hence no cover for inland transit to the final destination or importer warehouse, unlike local ones which provide cover from warehouse to warehouse.
In a bid to increase the uptake of marine insurance, especially among Small and Micro Enterprises (SMEs), CIC Insurance has partnered with maritime stakeholders e.g. regular importers, manufacturers, consolidators, and cooperatives who liaise with SMEs
dealing in cargo imports.
Consolidators are companies that offer freight tickets for small-scale importers.
“In appreciating that the uptake of marine insurance is still low, we have expanded distribution lines through agencies, we are partnering with stakeholders, members of the maritime community, including consolidators, and that, is where we have the least penetration,” he added.
The low intake has also been blamed on COVID-19 which saw a reduction in imports that subsequently forced some businesses to close as their customers’ spending power reduced resulting in – prioritization of their basic necessities.
RISKS INVOLVED
Whenever a ship carrying cargo develops a mechanical problem in the high seas and it has to be towed to and repaired at the nearest sea port, all importers having cargo in the vessel will be forced to incur General Average Salvage charges which will cater for
the cost of towing the vessel to the nearest port and repairs.
General Average and Salvage charges are usually shared among all those with goods on the container and can cost up to 20 percent of one’s value of goods or even more.
“When general average is declared and you don’t have insurance, goods are held as collateral until the amount is paid; if you don’t pay the salvors to retain the right to dispose of the cargo and recover the charges,” he said
In addition, an importer may incur liability costs that come in whenever two ships collide, the importer will have to co-pay for the repairs of the two ships.
Unlike other insurance products, marine insurance is an all-in-one solution that caters to all potential freight risks.
In order to get started with CIC, a client would only be required to provide a commercial invoice that indicates the nature of goods and their destinations.
The insurance costs vary from goods with ceramic, glassware, electronics, pharmaceuticals being among those falling under the high-risk category while heavy machinery is among those within the low-risk category.
The rates for sea freight range from 0.2-0.3 percent of the total value of goods, higher than air freights which costs 0.15 to 0.25 percent of the total value of goods.
