Cargo Insurance: Important Export Support Service
In addition to e-commerce and logistics cargo insurance is an important export support service. In the context of intensive global economic integration, Vietnam's export value has been increasingly expanded. This is an opportunity for freight export and import insurance sectors to develop.
Types of cargo insurance in Vietnam
Cargo insurance is one commercial insurance form. This type of insurance is characterised by voluntary, subject-specific risk-specific and commercial features
The insured is goods in transit by road, water, rail and air in the country and the world. The insured in different contracts will vary.
Enterprises can buy cargo insurance for the following two modes of transportation: Inland cargo insurance and Import/export cargo insurance. The latter is considered a necessary condition in international business contracts.
In fact, export-import insurance has been available in Vietnam for a long time. According to the Insurance Association of Vietnam, in the first six months of 2017, cargo insurance premiums reached VND1,159 billion (US$50 million), accounting for six per cent of total insurance premiums and rising 10per cent from a year earlier. Major insurers like Bao Viet Insurance, PVI Insurance Corporation, Post and Telecommunication Joint Stock Insurance Corporation - PTI, Bao Minh Insurance Corporation, and PJICO Insurance are seeing the strong rise of foreign insurers. Data from the Insurance Association of Vietnam showed that the insurance market maintained its growth momentum, featured by premiums of VN D37,1 41 billion in the first four months of 2018, up 24.5 per cent from a year-ago period. Of the sum, non-life insurance premium was VND14,519 billion (US$623 million), up 13.8 per cent, and cargo insurance premium contributed significantly to this.
But, it can be seen that cargo insurance will have more room for development in the coming time for the following reasons:
Firstly, given ongoing deep ninternational economic integration and the entry to many free trade agreements (FTAS) with big trade partners, Vietnam's trade value has been growing. This is the opportunity for the domestic export and import insurance sector to develop. The report of the Insurance Regulatory Authority showed that, with about 30 non- life insurers active in the Vietnamese market, the market will draw fierce competition among large, medium and small insurers.
Secondly, the government has business support policies for importers and exporters. Insurance for imported and exported goods, of course, also benefits from these policies
Thirdly, importers and exporters have been growing. More and more businesses are realising the importance of buying cargo insurance
However, besides these opportunities, Vietnam's insurance industry confronts many difficulties. Particularly, in addition to habitually buying CIF and selling FOB (purchasing at ports of arrival and selling at ports of departure) by Vietnamese fims, the operating capacity of Vietnamese insurers is limited, not international. Objectively, foreign exporters and importers do not actually feel assured of buying insurance of Vietnam and this reduces persuasiveness when negotiators require foreign partners to give Vietnamese enterprises the right to buy insurance.This is one of major concerns that need to be addressed in the coming time.
Benefits of cargo insurance
In order to ensure the absolute safety of imported and exported goods, buying cargo insurance in transit, production and business is essential.
At the macro level, buying domestic insurance helps improve the national balance of payments. When exporters and importers buy freight for FOB and CF prices and sell at CIF and CIP prices, it is likely that there is a fair competition among domestic and foreign cargo insurance. With domestic cargo insurance, individuals and enterprises do not have to buy insurance abroad while not having to export and import goods without guarantee.
For businesses, joining cargo insurance brings a lot of benefits:
First, it reduces the risk of loss to merchandise by minimising losses with increased preservation and testing, while combining preventive measures and loss mitigation.
Second, businesses which buy cargo insurance will be financially covered for damage if fitting terms and conditions in insurance contracts.
Third, when exports and imports risk damage, involved parties shall be legally assisted by insurers in the event of disputes with such parties.
For foreign importers and exporters, if insurance policies are signed with Vietnamese insurers, they will avoid complicated legal, linguistic and geographical hardships that they may encounter when insurance incidents occur. In particular, customers can pay fees in Vietnamese dong to reduce foreign currency spending if working with domestic insurers.
Insurers, in order to promote the sustainable insurance market and catch up with global development trends, are constantly striving and effectively carrying out international economic integration commitments and Cooperation programmes with international organisations and partners, especially insurance services in free trade agreements to which Vietnam is a signatory, to meet integration requirements.
INDOCHINE VINA INTERNATIONAL TRADE PROMOTION Co., Ltd
Address: Pearl Plaza - 561A Dien Bien Phu Street, Ward 25, Binh Thanh District, Ho Chi Minh City, Viet Nam
Hotline: VN speaking +84 28 665 49 208 _ English speaking: +848 22 660 356