Field Underwriting is the process of screening out unacceptable risks. You do this every day when prospecting for clients. When you see or sense something is wrong, you correct the problem or walk away.
Analyzing risks and exposures, taking steps to avoid or reduce risks, considering loss control efforts, and submitting risks properly to markets, are all a part of Field Underwriting.
As a Forwarder who moves goods, whether you offer cargo insurance to your clients or not, you accept the responsibilities of Field Underwriting.
Accepting poor risks prone to losses is known as "Adverse Selection." Avoid "Adverse Selection." Insurance can only work when risks are distributed fairly.
If you offer cargo insurance to your clients, you accept the responsibility to the Insurer to avoid "Adverse Selection" of poor risks with higher chances of loss, unless those higher risks are communicated clearly and fully to the Insurer. With complete information the Insurer may make an informed decision on whether or not to accept the risks involved and, if so, under what terms and conditions.
Claims Management is a part of Field Underwriting. Be careful to follow the instructions given you precisely. All rights to the determination of the settlement of a claim reside with the Insurer or its assigned representatives.
If you are not sure what to do, contact the Claims Office of the Insurer and allow them to direct your efforts. Failure to follow instructions correctly may adversely affect claims settlement.
Failure to properly oversee and manage a claim may leave you exposed to financial obligations.
The first step to dealing with risks is to identify and analyze loss exposures and then evaluate alternatives to dealing with them.
As a Forwarder, keep in mind the economic realities and the best interests of your client.
It is often advantageous to avoid or reduce risks. You should encourage objective and well-informed decisions by your clients based on a complete understanding of the coverage, versus the probable and the possible financial impact of assuming the risks. If you have explained the exposures to your client, and the client refuses insurance, responsibility for a loss rests with the client. Failure to outline possible exposures to your client might result in a claim of "Omission" against you.
1. Can your client withstand the cost of a loss or General Average claim? If not, some way to alleviate the cost is wise.
2. If your client cannot afford Full Cover insurance, then perhaps Catastrophic coverage, which is limited but would pay in the event of a severe loss, is a safer alternative.
NOTE: It is our strong recommendation that, for your own protection, if your client refuses insurance you would be wise to have a record of such refusal in writing. In the event of a claim, it is unlikely you would be held liable for the loss, for your client refused coverage.
Field Underwriting is Critical. You could be liable for damage to a shipment even if you insure the cargo. Let's imagine that a client delivers a last-minute shipment to you only hours before the flight it must move on. This is a daily occurrence for many Forwarders.
The shipment is poorly packed and you tell the Shipper the packing is bad.
The client insists you must accept the goods and move the goods on time or lose the account.
The client requests and pays for insurance.
You move the goods and the goods arrive damaged
The surveyor reviews the damage and cites poor packing as the reason for the claim.
The insurer can, at its discretion, refuse payment because you, as the forwarder, should have known the packing was not acceptable.
The Shipper may be able to hold you liable for the damage because you accepted the shipment.