Shipping products from country to country has changed little over the years. Although we're in the Age of the Internet, and the speed with which information is transmitted continues to change the way companies do business, most goods are physical and have to be moved physically. This opens the door to loss and damage, which have to be insured against.

Ocean, rail, and truck transportation are managed and operated by human beings, and humans can be the victims of circumstances beyond their control (such as weather), as well as within their control (such as the lure of theft). Controlling these risks is important to shipper, carrier, and customer.

One If by Sea, Two If by Land

A company importing or exporting goods between bodies of land needs ocean cargo insurance coverage to cover loss. Ocean cargo insurance provides coverage for goods shipped by water or air from point of shipment to point of destination, covering perils such as heavy weather or theft. Readily available from most major insurance companies at reasonable rates in today's marketplace, this coverage is relied upon by most companies engaged in heavy traffic import/export.

Ocean cargo coverage ends upon landing, however. What if the goods then need to be transported over land, say from the port of arrival to a city 500 miles inland? This creates the need for another type of insurance coverage-inland marine coverage.

Inland marine coverage, by definition, covers both the policyholder's loss of goods or products in transit, and the policyholder's liability arising from loss or damage to the property of another that is in their care, custody, or control. This coverage may be purchased by either the producer of the goods, the shipper, or-if applicable-the common carrier. Perils covered by inland marine coverage include fire, theft, collision, derailment, collapse of bridges, lightning, and others.

Although ocean cargo coverage is in most cases issued as a completely separate insurance policy, it can be added to the ocean cargo policy, with a sub-limit covering the maximum amount insured-say $50,000 or $100,000 per inland shipment. Alternatively inland marine coverage can be added as a sub-limit to the client's overall commercial property policy. For example, if a business has a comprehensive property insurance program covering its buildings, stock, etc., they can usually add a sub-limit (with little effect on overall premium) to the policy for inland transit.

Perils Covered from Port to Destination

Depending on the client's operations, the insurance company underwriter will usually want to know the maximum anticipated shipment value, protection measures taken, and other facts. Most major insurance companies, such as Chubb, Atlantic Mutual, St. Paul, Kemper, and others are flexible in providing inland marine coverage in both of the above scenarios. Coverages provided by the standard Inland Marine policy are as follows:

• Bodily Injury and Property Damage: covers injury or death to other persons and damage to property of others.

• Collision and Upset: to a deductible, provides coverage in case of collision, overturning, etc. of a vehicle.

• Fire & Theft: insures the transporting vehicle from these perils (but not the contents of the car or truck).

• Cargo Coverage: provides for damage to cargo being hauled for hire. Certain commodities may be excluded from coverage, such as goods being hauled illegally.

Perilous-Geographical Concerns

Certain areas of the world are considered particularly prone to loss by insurers, while others are not. For example, in Mexico, with its abundance of truck hijack and theft experience, if the insurance company provides transport theft coverage at all, it is prohibitively expensive.

Peter Weber of Mexican insurance broker Proteccion Dinamica explains, "The perils are obviously theft, hijack and especially traffic accidents which result in breakage, missing merchandise, et cetera. There is no real target merchandise, not even if the product being stolen cannot be sold quickly. In many cases the thieves do not even know what they are stealing. If they cannot re-sell the goods, they sometimes call the producer or insurer directly, claiming to have found the merchandise roadside."

Weber claims that, while there are several ways for truckers transporting goods through Mexico to reduce losses, such as escort services and global positioning systems that track the trucks, it is impossible to prevent some types of theft. "We have found that most thefts are inside jobs," he says. "We therefore recommend to our clients that they investigate all employees prior to hire, and also that they reduce the number of people who know what merchandise will be sent and where. Give instructions at the last minute, so the chance of outsiders finding out details is less. Also send an empty truck occasionally as a decoy."

Other regions, such as Western Europe, are of less concern to underwriters. Bea Kroon of Dutch insurance broker Meijers in Amsterdam says, "In our country, covering inland transit risk is not a problem. Holland is a small country with a good infrastructure. The biggest problem, not specific to Holland, is probably theft by the drivers." Kroon adds that most insurance companies will provide coverage at a relatively low premium rate, depending on the insured goods and maximum amount per truck or rail.

Coverage for Common Carriers

If a company sends most of its shipments of merchandise to customers with a common carrier such as Federal Express, coverage is available to the sender at a reasonable cost to cover the goods while in transit. Many mail-order companies, and now online retailers, cover goods shipped to their customers in this manner.

For example, Preston Bealle, president of Babygear.com in New York, a company that sells baby products online, comments, "We use UPS almost 100 percent, and we rely on their own insurance." In such situations shipments are relatively small, with lower values than what is shipped by rail or truck. If a company outgrows common carriers and begins shipping its own merchandise by truck and the merchandise is valued at $10,000 or $25,000 or more, then separate placement of inland marine coverage is recommended.

Protecting Internet-Transmitted Data

It should be noted that, traditionally, inland marine policies have been used to insure computer equipment and media, both while on the insured's premises and while in transit. Such policies have traditionally been considered broad enough to cover loss or damage to the equipment or data in transit. Technically speaking, this includes coverage for transport of data over the Internet; however, it is recommended that the policyholder not rely upon inland marine policy to cover this exposure, because the world of cyber insurance is rapidly evolving. Within the past year, major insurers such as AIG, Chubb/Executive Risk, St. Paul, and others have developed new insurance products specifically designed to cover risks associated with "cyber-liability": unauthorized access (hackers), virus, and other perils specific to a firm's MIS system. With little or no case law, this area of insurance is evolving so quickly that it is recommended the insurance buyer consider the many available specialized technology insurance products to cover these exposures.

Assessing the True Risks Involved

When it comes to shipping goods, by whatever mode, the key for the client and the insurance broker is to identify and control risk. Bill Moretti, transportation practice leader at Toronto, Ontario, insurance broker Hunter Kielty Muntz & Beatty, comments that risk is an integral consideration within the business of transportation and logistics. "The invasion of Normandy was not undertaken without a thorough analysis of the risks associated with managing supplies, personnel, facilities and transportation," he says. "As these concepts are applied to your bottom line, the concept of minimizing risk influences your decision-making process. For example, the use of a multi-temperature truck allows for transport of items requiring various conditions, with the objective of reducing the risk of spoilage during the trip. The risk still exists, but has been minimized."

So although inland marine coverage is still readily available from most major insurers at reasonable cost, it is recommended to the client that they work closely with their insurance broker and carrier in identifying risks and controlling them with insurance or other means