In our business, we talk a lot about the global underinsurance crisis, and with more than 60% of cargo in transit today being under or uninsured, it’s easy to see why. As well as tackling the symptoms of the problem, it’s vital that we also understand the driving factors behind it. Perhaps one of the most significant causes is a misunderstanding of carrier liability insurance, and the parameters of the coverage it offers.

So what exactly is a carrier liability policy?

As the name suggests, carrier liability insurance only covers cargo for losses caused by negligence of the carrier. Most carriers have liability policies in place, but they’re designed to protect themselves from fraudulent claims made against missing or damaged cargo.They’re not intended to protect the owner of the goods.

This type of insurance plays a vital role in our economy but inevitably causes some blind spots and misunderstandings. Cargo is only covered for incidents that occur in a specific set of circumstances, and the owner of the goods will need proof of carrier negligence to successfully get a settlement. Plus, the exclusions in carrier liability policies mean that if cargo is damaged by some other means – there are no grounds for a claim. That includes losses caused by:

• Acts of God, like natural disasters and extreme weather events
• Inadequate wrapping and packaging
• Careless loading or unloading
• Theft, unless the carrier was demonstrably negligent

These restrictions leave cargo exposed to a wide variety of risks, and on top of that, there’s the issue of how much carriers are actually required to pay. If negligence is proven the payout is usually capped – it’s calculated based on the weight or size of the load, rather than the specific value of the shipment. So even if the owner of the goods manages to get proof the carrier is at fault, they won’t be fully compensated for their loss.

How is this different from all-risk insurance?

By contrast, “shipper’s interest” all-risk insurance is more comprehensive. Terms and conditions will vary from policy to policy, but shippers can usually count on being covered for damages resulting from almost any external cause, including acts of God.

The problem is, many SMBs assume they’re already covered in an “all-risk” capacity by their carrier liability policy, and then struggle to recover from losses when they’re unable to make a valid claim. This misunderstanding is a big contributor to the underinsurance crisis.

Despite offering greater coverage, all-risk policies have their downsides too. While the payouts tend to be quicker than carrier liability cover, claimants with all-risk insurance still wait an average of 30 to 60 days from the date of the claim to the date of the settlement, leaving them to absorb the loss internally in the meantime.

They’re also a fairly expensive option, and the insurance is quoted and sold via a manual process that relies on conventional methods of underwriting, which can take days to review, price and issue. They are broad policies that attach across all of the shipments of an insured and that bears an increase in price as well.

Thankfully, there’s a different freight insurance solution on the market: Loadsure. We offer a new form of cargo insurance that’s more convenient than traditional all-risk insurance.

Loadsure’s AI engine facilitates hyper-accurate dynamic pricing, so no one ever overpays for cover, and we can generate quotes for per-load policies in as little as 40 seconds. We offer up to $2 million for any single mode of transport, or $100K for LTL freight, so the full value of the load is covered, and in the event of a claim, the owner shouldn’t be out of pocket. This is the insurance you need when you really need it.