Business insurance for importers

Importing goods into Australia carries with it a variety of risks, from goods being lost, stolen, damaged or destroyed, to importing goods that do not meet Australian standards and expose you to possible litigation.

Business insurance for importers means the importer is protected from loss or damage to their goods and from liability should the goods prove faulty or dangerous.

While cargo insurance may be included by the exporter, an importer needs to consider whether that insurance is adequate and is fairly priced. The importer may also want to consider whether they could pursue a claim effectively from an insurer based in another country.

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Why do importers need business insurance?

There has been a steady increase in imports into Australia over the last few years, particularly from countries such as China, where cheap labour costs mean cheaper prices for importers.

But with this increase in imports has come greater risk for importers, with shipping accidents more likely to happen due to overcrowded sea lanes. Increasing vigilance by Australian regulators has also meant that inferior or dangerous imported goods can now lead to heavy fines, product recalls and lawsuits against importers.

In such an environment, importers have little choice but to insure their goods against every possible eventuality, from the time they are manufactured overseas to the time they arrive at the warehouse door in Australia.

What types of risks do importers face?

Importers face numerous risks while their goods are in transit.

During manufacturing

Once they are manufactured, the goods are at risk of being lost or damaged during transportation from the manufacturer’s premises to the dock. There, they may face delays prior to shipping, such as problems with documentation and the possibility of pilfering or theft.

During transportation

Once the goods are loaded onto a cargo ship they can face a range of hazards including being damaged by seawater, being washed overboard in storms and being damaged or lost if the ship runs aground, sinks or capsizes.

Once they have arrived in Australia

When (and if) they arrive in Australia, they then face the risk of delays due to possible documentation problems, industrial action or customs delays. Once they leave the port, they then face the risk of loss or damage during transportation to the importer’s warehouse.

Even if the goods arrive uneventfully, if they are fragile or perishable in any way, they could still end up being damaged due to poor packaging or rough handling, or be spoilt due to delays in transit.

During distribution within Australia

Even once they are shipped out to retailers and appear on the shelves, the importer still faces risks. If the goods are found to be faulty or cause injury to consumers, the importer faces a product recall at best and at worst, the prospect of a lawsuit.

When is business insurance compulsory for importers?

Business insurance isn’t technically mandatory for importing to Australia, but you might find it hard to get very far without it.

International Commercial Terms (Incoterms) will often specify insurance requirements, in which case having insurance might be mandatory, and beyond that it’s simply common sense to protect your investments.

What type of insurance do importers need to consider?

In addition to any of your more general business insurance needs, there are three types of cover that relate specifically to the importing or exporting of goods:

• Public and products liability
• Cover for stock in storage
• Goods in transit cover

These can cover many of the types of losses importers might risk.

• Public and products liability

  Some form of liability insurance is often standard for businesses, but as an importer you have some special considerations. These may include the risk of inadvertently importing dangerous goods (product liability) or otherwise causing damage in the course of your business.

  For example, if you import goods that turn out to be defective and cause injury as a result, your liability insurance might cover the cost of paying compensation to the injured parties, and/or legal expenses incurred in defending yourself against those claims.

• Cover for stock in storage

  Your warehouses goods should probably be insured, or one fire or accident could wipe out all your stock. Even if you’re using a third party logistics provider who is financially responsible for the goods you’re paying them to store, it’s possible that an accident might leave them insolvent and destroy your chances of recovering compensation.

  Having your own insurance for goods in storage is important, regardless of whether you’re handling the storage yourself or using a third party provider.

• Cover for goods in transit

  Often known as “transport insurance”, this is probably one of the most essential core cover types for importers, and anyone else who moves goods domestically or internationally.

  This is because some of the main risks of damage come while goods are being transported, and there’s also a significantly increased risk of liability issues.

  Some of the main hazards might be encountered in transit, including:

  • Theft, pilferage or hijacking
  • Errors or mistakes in transport, such as road accidents, plane crashes or damage to improperly secured goods
  • Exposure to rain, salt, sun, sharp temperature changes and other environmental hazards

  Meanwhile, liability issues may include:

  • Maritime salvage liability. If a vessel is forced to eject goods to prevent sinking, the cost of the goods is paid for by everyone whose goods weren’t ejected.
  • Third party property damage. For example, if a car is damaged after your goods are ejected from a truck.
  • Third party injury or death. For example, if improperly packaged goods cause injury by suddenly shifting.

Which of these products is right for my importing business?

Insurance is typically priced by risk, so your costs will tend to match your cover needs when buying through a broker.

For example, if you’re using a contractor to carry goods by road then you might not be paying as much for trucking liability insurance. But if your own business is doing the trucking, your liability insurance might cost more.

Speak to a broker

The cost and ideal type of cover will depend on your situation, and might be most effectively bought through a broker.

With a broker, you might have a policy for your main business assets and operations and then simply call your broker to set up a policy as needed for each new load of cargo.

What does business insurance for importers cover?

Business insurance for importers can be divided into two main types: cargo insurance and products liability insurance. Cargo insurance covers the importer’s goods during transit and products liability insurance covers the importer in the event that the goods are found to be faulty or dangerous.

There are three main types of cargo insurance:

• Open cover insurance. This insures an importer’s cargo on all journeys over a set period of time (often annually).
• Single transit insurance. This provides cargo insurance for one journey only, from warehouse to warehouse.
• Contingency insurance. This provides additional cover if the importer has not arranged the insurance themselves.

While terms and conditions may vary and importers may require special conditions to cover specific cargoes and circumstances, cargo insurance will usually cover situations such as:

A cargo insurance broker can find you the best price on cargo insurance and make sure that it is adequate for your needs. They can also assist you with any claims that might arise.

Can importers get income protection?

It's possible for importers to also get an income protection policy to protect personal income against injuries or illnesses that force you or key people out of work. A good place to start is by speaking to an adviser:

Business insurance for importers FAQ

Q. I always buy on CIF (Cost, Insurance & Freight) terms, so why should I change?

• A. When you buy on CIF terms, you will have to deal with a foreign insurance company if there is a claim. This can be difficult as there is often a language barrier and you will not be a high priority for them. Also CIF does not usually cover the transportation from the manufacturer to the port, so effectively your goods are uninsured during this period.

Q. Will my transportation carrier pay my losses?

• A. No. Your transportation carrier is not obliged to reimburse you for any losses that occur beyond their control. If they do pay you anything, it will probably not cover the cost of your goods, as carriers limit their liability for loss according to their tariff.

Q. What is domestic cargo insurance coverage?

• A. This needs to be added to the cargo insurance policy when the goods are being split into separate cargoes, bound for separate end destinations. Domestic cargo insurance will cover each of these separate cargoes during transit.

Q. Is warehouse coverage included in an annual all-risk cargo insurance policy?

• A. Yes, if the goods are stored in a warehouse during the normal course of transit. If they have to be stored outside the normal course of transit for any reason (such as before they are shipped to the retailer), the importer would need to take out additional warehouse coverage.

Q. What is an all-risk cargo insurance policy?

• A. This is the most general type of shipping insurance and it covers any kind of loss or damage from any external cause. Often taken out on an annual basis by importers, it automatically insures their cargo at a set rate and according to set terms and conditions.

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Some forms of insurance are absolutely essential and importers insurance is one of them. With the increased risk of loss or damage to goods during transit and the increased likelihood of being held accountable for the safety of their products in Australia, it is a brave importer indeed who thinks they don’t need business insurance for importers.

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