Any business that operates as a haulage company or a freight forwarding firm – one that either carries out or arranges for the movement of heavy loads by road, sea or air – is likely to benefit from specialist insurance cover. This is because there are certain liabilities that such companies will have in the event of errors or losses that other sorts of firms will not. This is the case whether you are talking about some of the globe’s biggest international shipping operators – which might also need specialist marine cargo insurance – or smaller road haulage firms that only operate in the domestic UK market. It is worth bearing in mind that haulage insurance or truck HGV insurance, for example, are types of goods in transit insurance. As such, these financial products are designed to meet specific requirements within the freight forwarding and haulage sectors.
Although some other policy types may provide a certain degree of cover, registered freight forwarders and road haulage firms should always seek out insurance that is designed to meet their particular commercial needs and to provide cover for the sorts of risks they are exposed to. In other words, freight and haulage insurance is what the insurance industry offers the freight sector at the bulk end of the market unlike courier insurance, for example, which tends to be aimed at last-mile delivery providers. Read on to find out everything you need to know about haulage and freight insurance today.
What Is Freight Insurance?
In common with other insurance policies, freight insurance is a financial product. Usually, it can be procured in one of two ways. Firstly, consumers can add it to their consignment costs when they turn to a haulage firm or freight forwarding company – unless they offer insurance as standard, that is – so that their goods are covered for certain undesirable eventualities when they are en route from one location to another. The other, more common, definition of freight insurance is an overall level of cover that freight companies themselves take out to provide protection against losses to their clients’ cargo loads while they’re shipping them. Without freight insurance, a road haulage firm, a logistical company or a freight forwarding business could be sued for negligence if, for example, their customer’s goods were to go missing, be involved in an accident or suffer from damage.
What some freight and haulage businesses do is take out freight insurance to provide them with a certain level of cover to protect them in the eventuality of a loss. They then either build the cost of this cover into their standard delivery rates for their clients or, in some cases, offer cargo insurance to their customers as a surcharge. If their customer takes out this ‘freight insurance cover’, then they are protected by the cover provided. If not, they may not be able to make a claim even if there were losses that occurred. As such, the term freight insurance is used in both the consumer and professional markets. In the main, hauliers and freight forwarders use the term freight insurance to refer to the latter. That is to say that freight insurance is commonly regarded by insurance companies as meaning policies that are designed for freight forwarding and haulage firms, not companies and individuals who outsource their logistical operations to such firms.
Of course, businesses that manage their own supply chains, especially international ones that rely on containerised shipping methods, may also benefit from freight insurance. When such firms have their own, in-house logistical teams, they effectively become their own freight forwarders even if road haulage or ocean-going shipping is outsourced. Under such circumstances, such firms – usually very big multinational corporations – can benefit from the sort of protection that commercial freight insurance affords.
Is Haulage Insurance the Same as Freight Insurance?
The answer to the question of whether haulage insurance is the same as freight insurance is basically, yes it is. That being said, it is also important to note that haulage services are not the same as freight delivery services in all corners of the logistical sector. Typically, the term haulage has two meanings in the UK. The first is road haulage, the sort of thing that most hauliers in the country are associated with. The other is rail haulage, a more specialist service that is typically reserved for heavy cargoes of raw materials rather than finished and semi-finished products. Both rail freight companies and road haulage firms will need haulage insurance if they are to be properly protected against financial losses due to problems that may occur while they undertake their work. As such, some freight insurance is marketed as haulage insurance so that it will appeal to operators in this sub-sector of the supply chain industry.
Please note that freight tends to have a wider meaning in the UK than haulage does. As well as referring to the movement of goods by rail and road, freight tends to encompass commercial airborne logistical services – air freight – as well as cargo movements by sea and, in many parts of the world, inland waterways, such as canals. Therefore, freight has a wider definition than haulage in many people’s eyes. Consequently, freight insurance tends to be more widely used by the insurance and underwriting industry for goods in transit cover when larger loads are being shipped. Nevertheless, you will also hear of haulage insurance policies that cover air freight and sea freight. Indeed, terms like cargo insurance, shipping insurance, commercial transit insurance and transport insurance are all used by insurers today. When you boil it down, all such policies provide similar cover for haulage firms and freight forwarders alike. However, the individual clauses of each and every policy on the market should be examined to gain a full understanding of exactly what sort of cover is provided regardless of the terminology used to market such insurance.
Do Courier Firms Need Freight Insurance?
Courier firms certainly need insurance to carry out their work legally. Any business that moves commercial goods around in exchange for money is required by law in the UK to have class 3 business use insurance. This is in common with other business models that use vehicles on the road to provide services, such as taxi companies, for example. However, it is worth noting that class 3 business insurance does not necessarily mean that taking out freight insurance is needed. In fact, it probably won’t be depending on the exact nature of the business and the sort of goods that are being moved.
Typically, courier firms – and self-employed delivery drivers who work for them on an ad hoc basis – will only be handling smaller packages and consumer goods. Although boxes, parcels and even items that are only used in domestic settings are types of freight, they are not generally considered to be heavy cargo, the sort of thing a haulage company might convey. In addition, courier firms typically operate with vans, cars, motorbikes and bicycles, not large lorries or articulated trucks. Therefore, general goods in transit with combined public liability insurance or specialist courier insurance that provides adequate class 3 business use coverage is generally enough for such business models. Always check the specific policy coverage and limitations to be sure, however.
Where it becomes something of a grey area is when courier firms also provide cargo or heavy freight services to their clients. Unlike last-mile delivery services of the sort usually provided by courier firms, heavy freight services are characterised by one or two types of load per shipment and for the customer’s requirement to be one that involves collecting the consignment from one place and for delivery to one, single location. This is in stark contrast to a multi-drop delivery service, for instance. When a courier firm is asked to undertake such a delivery, especially when a vehicle larger than a Luton van might be needed to carry it out, it is effectively operating as a haulier. Under such circumstances, courier insurance may not provide adequate cover for the commercial activity being undertaken. Depending on the exact nature of the policy, therefore, further cover with proper freight or haulage insurance may be advisable.
Is Haulage Insurance the Same as Hire and Reward Insurance?
No, it isn’t. Haulage insurance is a specialist form of cover that is designed for road and rail freight hauliers as well as freight forwarding firms that procure the services of intermodal logistical operators to convey heavy cargoes by land, sea or air. On the other hand, hire and reward insurance is a type of cover that is designed to meet the needs of class 3 business users on the road. To give you a clearer distinction between the two, hire and reward insurance is recommended for sales representatives who spend a long time on the road moving between appointments even if they only have a few samples of their firm’s products in their car boot. Haulage or freight insurance, by contrast, covers tonnes of goods and the vehicles conveying them whether they are being loaded onto an articulated truck at a container port or being conveyed from Holyhead to Belfast, or example, on the back of a low loader via a roll-on, roll-off ferry service.
That said, all commercial activities that result in the movement of freight on the UK’s road network should be covered by insurance that is appropriate for the size of the vehicle and the load it is conveying. Therefore, although hire and reward insurance isn’t needed by haulage firms which use HGVs to move cargo loads around the country, the insurance they take out should provide a similar level of cover to protect them if their truck were to be involved in an accident, stolen or broken into.
What Does Freight Insurance Cover?
In common with other types of insurance policies, freight insurance covers potential financial losses that may occur from undesirable outcomes. In the case of haulage or freight insurance, what is covered is primarily the goods that are being conveyed at the time of an incident. In other words, haulage companies will still need to have adequate vehicle insurance for the drivers they employ. Equally, freight forwarding firms will still usually benefit from some public liability insurance, too. Although policies differ from freight insurance provider to freight insurance provider, there are three typical events that are covered by these types of financial products.
The first is accidental losses of goods. Let’s say, for example, that a freight forwarding firm arranges for a customer’s shipment to be picked up from their production facility and loaded into a shipping container. It is then taken to a container port where it is unloaded and readied for international transit. If the entire container were to be misidentified at this point, all of the goods inside could potentially go missing. Accidental losses, such as these, should be covered by nearly all freight insurance policies.
There again, deliberate losses due to theft are also covered under freight or haulage insurance policies. So long as it can be established that the haulage firm was not involved in the theft of goods it was conveying for a commercial client, freight insurance should pay out in the event of stolen cargoes. Note that the complete theft of loads as well as partial ones are typically covered by such policies. Finally, losses that occur due to damage should also be covered. Good freight insurance will cover losses that occur from spilt loads – so long as wilful negligence isn’t a factor – for example. There again, shipping containers that are exposed to sea spray inside and other types of water damage are also usually covered. More specialist policies may be needed for chilled container units but some standard freight insurance products cover temperature-sensitive, perishable goods – such as food and pharmaceuticals, for instance – without the need for any extra cover. Again, it is worth checking this before assuming you do or don’t have coverage.
How Much Does Freight Insurance Cost?
The costs of freight insurance differ greatly depending on the business model concerned. Large haulage firms with an extensive fleet will need to budget for more than smaller ones with just a couple of HGVs, for example. Costs can also vary depending on the value of the cargo being conveyed. Typically, insurance will cost much less than one per cent of the value of the cargo, however. Please note that freight forwarding insurance costs may also need to take into account international risks, such as piracy and war, depending on where goods are being shipped and how, for example, by sea or air.
Which Institutions Regulate Freight in the UK and the Haulage Insurance Market?
The Road Haulage Association (RHA) is one of the best-known trade associations among hauliers in the UK. It has a set of standards that cover what is known as Conditions of Carriage, including that members need to have adequate insurance for the sort of work they are carrying out on the country’s road network. About 7,000 road haulage firms belong to the RHA. However, the RHA is not responsible for all hauliers that operate in the UK. Many European haulage firms that convey goods on British roads belong to their own trade associations. However, there is some uniformity between the UK and the rest of the continent with road-going freight under the Convention Relative au Contrat de Transport International de Marchandises par la Route. Most British hauliers refer to this simply as CMR. Any goods that are being conveyed from Britain to continental Europe and vice versa need a CMR consignment note that details the scope and responsibility of the haulage firm. This is relevant because some haulage insurance will only be valid if there is a CMR note that has been duly registered.
Please note that the Freight Transport Association – now known as Logistics UK – is one of the largest haulage trade associations in the country. It has members that convey goods by road, rail, sea, and air. Among freight forwarding firms, the British International Freight Association, is one of the best-known trade bodies. However, it is worth noting that none of these groups directly oversees haulage or freight insurance. In the UK, the Prudential Regulation Authority – a part of the Bank of England – has regulatory oversight among insurance firms with a mandate to protect policyholders. In addition, the Financial Conduct Authority has oversight of all sorts of financial institutions, including insurance companies and underwriters. Generally speaking, respected freight insurance providers will belong to a professional trade body that manages the liaison between their part of the industry and the regulatory authorities that oversee it.
Freight and Haulage Insurance In Summary
Both freight and haulage insurance are essentially the same things. The two terms can be used interchangeably by freight forwarders and hauliers. Typically, taking out specialist insurance of this type will mean:
– Losses due to theft are covered.
– Losses due to accidental damage are covered.
– Losses due to goods being mislaid are covered.
– Freight forwarding firms can provide their clients with an assurance of cover domestically and internationally.
– Haulage trade association rules governing insurance among road haulage firms are met in full.
– Heavy cargoes being conveyed between A and B – as opposed to multi-drop deliveries – are properly protected on the road.