Risk Management Clauses in Inland Cargo Insurance Brazil

How to protect customer’s supply chain and insurance policy using risk management clauses for Inland Cargo Insurance in Brazil
 
In the 1980s, robbery of cargo in Brazil increased substantially. The main cause during that period was fraud caused by drivers who gave cargoes to thieves in exchange for money.

Insurers and local risk management vendors therefore decided to analyze driver backgrounds, including commercial and bank history and criminal records. Insurers in that period then saw a 50% decrease in robberies. However, by the end of the 1990s it was growing again, this time because of typical hi-jack.

New tools were then added to risk management programs for customers, including:

1. A loss prevention program (duly signed by transporter, shipper and insurer).

2. Route analysis and nominate secure parking places on the main routes/risk routes.

3. Installing a GPS tracking satellite system on valuable cargoes.

4. the wording clause for each inland policy contains the same loss prevention terms, from the loss prevention program signed by all parts.

5. The insurer validates tracking satellite systems, escorts, security companies, vendors, terminals and customer, with specialised marine risk management consultants that must visit face-to-face all of these partners.

6. Continuously checking the driver’s background as well as the vendors starting to analyse the owners of trucks and trailers to find out if they are also clean

Some insurers started to include these rules in their wording policy as security recommendations.

In the mid-1990s the high loss ratio on the local market meant insurers were forced to include the loss prevention program in wording clauses. It was named Risk Management Clause in Inland Cargo. Again, insurers saw a 50% decrease in losses, thanks to customers that followed the wording clause.

In the mid-2000s, criminals started to learn how to turn off the tracking satellite systems before forcing drivers to follow their orders. Insurers and vendors reacted by enhancing the wording clauses to be more specific in the risk management clauses.

Customers, insurers, brokers, vendors and transporters had to work together to follow the same process of risk management, and in particular wording clauses that were written in the policy.

These risk management clauses also served to protect customers against damages and accidents. Today, this is happening in Brazil because the qualification process and KPI´s point closely towards which provider needs to be better trained or those that should receive a bonus.

Nowadays in Brazil we have more than 200 vendors for risk management cargo protection, and another 50 manufacturers for tracking devices. The target goods for thieves are almost the same. The risk management clauses substantially helped the insurer to have the capacity to act on risks that were not possible in the past and also helped customers to understand that security and protection of cargo care is an important part of the delivery service.

We are seeing some losses in other countries in Latin America that could be avoided if similar programs and specific rules in wording clauses were enacted, such as Colombia, Venezuela and Mexican markets. I hope local risk managers start to implement similar clauses to protect their business continuity and best practices, as we are doing here in Brazil.