COVID-19 Has Increased Inland Marine Losses
According to a recent report, the Coronavirus pandemic has impacted inland marine insurance, increasing losses as much as 40 percent over the past year. These changes have created an uncertain climate that’s expected to continue in 2021. What should you know?
Effect of the Pandemic on Inland Marine Coverage
A type of commercial policy, inland marine insurance applies to products, equipment and materials transported by truck or train over land, as well as any temporary storage. This encompasses a range of industries, from construction and retail to computer repair.
Traditional property and liability coverage exclude transport and storage. Inland marine helps close this gap, so you’re not paying out-of-pocket for any related losses. If you ship products to customers, displays to trade shows or temporarily hold onto clients’ belongings for repair or storage, this type of coverage is essential.
Coverage comes into play if these events halt or operations are interrupted. Businesses may have a claim if recent COVID-19 restrictions required commercial entities to close, conduct in a reduced capacity or completely stop operations, which negatively impacted livelihood.
As you consider filing a claim, the timeframe your state or municipality enacted restrictions is significant, particularly if you have a short-term inland marine policy.
New Risks Due to COVID-19
COVID-19 has presented the following types of risks concerning inland marine claims.
Delayed Construction Projects
In one instance, your company sends equipment or materials to a building site, only to find out the project has been delayed indefinitely, suspended without notice or canceled. You may also be expecting to begin a project or work with vendors to procure supplies but are met with delays beyond your control.
When you’re waiting to hear if and when a project will resume, this scenario comes with the following risks:
- The equipment and materials are sitting indefinitely at the building site and may potentially be stolen.
- Capital and labor have dried up and you’re waiting for a project extension.
- Unoccupied construction sites have a higher risk of flooding, fires, theft and vandalism, which could damage your equipment or materials.
- Project scope has changed and your equipment or materials are no longer needed.
All of these factors can result in a loss of income to the company in charge of the construction project and the business supplying the equipment or materials.
The uncertainty around new construction has caused such businesses to address and revise their operations to meet the current climate and decrease potential losses.
Supply Chain Issues
During the pandemic, one global issue has emerged: Containers of merchandise or supplies being stranded at ports. This illustrates the sudden shifts and disruptions in supply chains across several industries, influenced by consumer demand, trucking companies revising their operations and warehouses allotting space for new merchandise.
When this scenario occurs, what can happen? Oftentimes, the container stays at the pier and results in a loss. A company’s supply chain partners either fail to pick up the merchandise, arrive late or a reliable warehouse for storing goods complains they no longer have space.
Unfortunately, while inland marine coverage assists with payment for the damaged or stranded merchandise, it does not cover costs related to detention or port charges. Also, if the merchandise does get sold but at a significantly lower rate, insurance coverage won’t assist with making up the difference, as physical loss did not occur directly to the product.
To anticipate these issues, all companies that ship merchandise or materials are encouraged to revisit their business continuity and interruption plan and have a backup solution for transporting and storing the supplies, in the event their original strategy falls through.
Responsibility in the supply chain and coverage usage play a role. If your merchandise is in transit to the destination, your coverage applies. If damage occurs at the destination, the warehouse or buyer’s policy should assist with compensating you for your losses.
If you’re concerned about these risks and want to adjust your inland marine insurance coverage, contact us today.