There’s a fundamental divergence in objectives between insured parties and the insurance industry regarding shipping packaging standards. Our recent engagement with a freight forwarder responsible for the export logistics of a power generation equipment enterprise illustrates this issue vividly. The forwarder reported a marked increase in cargo damage rates following a change in the shipper’s packaging methodology.
Our investigation into the revised packaging design and historical claims data identified several critical factors. The new solution featured equipment components tilted at angles between 15°-45°, secured within a modular support frame designed with a reinforced base, resembling an open cage structure rather than a fully enclosed crate. This frame was bolt-connected for removability, and the entire assembly was externally wrapped in white tarpaulin.
From the shipper’s perspective, this design offered clear advantages: enhanced transportation efficiency, reduced costs, and adaptable sizing. However, from a risk management standpoint, several challenges became evident.
- The new packaging’s width (2300 mm) was critically close to the internal dimensions of a 40-foot container. This minimal clearance significantly complicated loading and unloading, elevating the risk of impact and abrasion damage. The white tarpaulin, a visually expansive colour, further exacerbated judgment errors in these tight spaces.
- Manufacturing and welding tolerances in the frame further exacerbated the narrow lateral clearance.
- The frame exhibited insufficient resistance to compressive, tensile and shear forces making it prone to deformation. This compromised its ability to withstand transit shocks and vibrations, leading to structural deviations and increased risk of impact damage to cargo edges.
We proposed several improvement strategies, including adding buffering materials, higher-rigidity frames and adopting fully enclosed wooden crates. While technically sound, these recommendations often counter the shipper’s primary objective of cost optimisation.
This case is far from unique. Shippers, as insureds, inherently seek an optimal balance between transportation costs, transit efficiency and insurance premiums. Put more bluntly, if the additional insurance premium in the following year is less than the freight cost savings, the decision to adopt lower-cost packaging is economically rational from their perspective. Conversely, the insurance industry’s objective is much more simple – to minimise claims payouts.
Bridging this inherent gap necessitates a dual shift in cooperation models and mindsets. This is why we are actively promoting joint risk assessments and educational initiatives within the industry.
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