Different insurance policies:
The epidemic has educated everyone about unpredictability. This has increased the significance of insurance firms. Furthermore, given the global supply chain disruption, exporters must also ensure that they minimize the implications of delays and are prepared for such uncertainty. Different insurance policies may be really useful in this situation.
Insurance is essential not just to assist a firm remain afloat during a crisis, but it is also required in numerous circumstances. According to Tarun Mathur, CBO-GI, customs clearance is granted only upon presentation of a certificate given by an insurer via the portal connected to the insurance policy.
Furthermore, Rakesh Kumar, Director General-Export Promotion Council for Handicrafts (EPCH), claims that exporters may incur a significant loss if he is not paid for an overseas shipment.
“In order to limit loss, the exporter should get an appropriate insurance coverage to protect himself against damage that may occur during exports.”
He argues that the demand for insurance is mostly due to two factors:
Prolonged default or bankruptcy of offshore customers. “In the event of commercial consideration, the importer may refuse to accept the bill of exchange; in the case of a Delivery of Payment (DP) bill, he may refuse to make payment,” he explains.
Buyers may be unable to make payment for Documents Against Acceptance (DA) shipments owing to financial restrictions or bankruptcy. When a loss happens, it may have a significant influence not only on the transportation of products, but also on the profitability of the company in question. As a result, it is critical for exporters to consider purchasing insurance,” he argues.
There are different insurance policies available today that give export credit insurance coverage in the event of an overseas buyer’s delinquency or bankruptcy. Each insurance provides a different amount of coverage.
According to Kumar, before exporting, exporters should evaluate which risks (comprehensive or political) need to be addressed more thoroughly.
He recommends the different insurance policies for exporters:
- Short-term, medium-term, and long-term export credit insurance for exporters (ECIE). ECIE might be based on turnover or exposure.
- Pre-shipment and Post-shipment ECIE
- Export Credit Insurance — A short-term policy that protects against bank guarantees.
These are available via the Export Credit Guarantee Corporation of India (ECGC). Private businesses, such as ICICI and IFFCO-Tokyo, also offer similar coverage to exporters.
According to Mathur, each new exporter should choose a maritime cargo coverage to minimize damage and costs caused by accidents or incidents during transit. “The primary hazards are cargo damage or loss.” “Loss implies the cargo cannot be recovered, and damage means the exported items are no longer useable,” he says.
Alternatively, an exporter may choose a sales turnover policy, which would cover all required sales transits as well as internal transits between their own warehouses and buy shipments without charge.
He goes on to clarify that a maritime cargo insurance coverage covers property loss or damage caused by natural catastrophes such as cyclones, earthquakes, or lightning. It also includes man-made catastrophes such as ship theft, violence, and piracy, land conveyance collision, overturning, or derailment, and ship sinking or stranding.
In terms of exclusions, maritime cargo insurance does not cover regular leaks, cargo wear and tear, faulty packing, or delays. “Any deliberate misbehavior or unlawful activity are prohibited under the policy.” Damage to the cargo caused by war, riot, strike, or civil unrest is also not covered. “The carrier’s insolvency or failure is likewise excluded,” he adds.
While it comes to potential errors to avoid when claiming or availing insurance, Kumar advises the exporter should thoroughly study the policy requirements and choose insurance coverage, country coverage, claim settlement time, and insurance price correctly. “The exporter should apply for insurance coverage whenever he has a confirmed order with clear indication of quantity and price with adequate documents,” he says.
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Consider the following:
- The amount insured must be calculated judiciously, taking into account the needs for the whole year.
- As in the event of a claim, each transit must be disclosed in the forms or site supplied by the insurer. All of these facts will be reviewed, and if there are any discrepancies, the claim may be refused.
- Complete due diligence and care must be performed with the items, since if they are uninsured, the claim may be refused if it occurs due to the client’s fault.
- All important facts must be revealed to the insurer when purchasing the insurance, since if any information is discovered to be incorrect or not provided, there may be complications with claims afterwards.