A forklift loads goods onto a truck in a warehouse, illustrating the risks of underinsurance during transit.

Goods in transit underinsurance

The haulage sector is going through a significant transformation. This is driven by technology, sustainability, and regulatory changes.1 On top of this, there are economic challenges.2

During this transition, it's important for hauliers to understand that underinsurance of goods in transit can pose significant risks. This is due to the uncertainties involved in transporting valuable cargo. Goods in transit insurance is not a legal requirement. But it’s highly recommended due to the potential financial, operational, and reputational risks of not having it.

Goods in transit insurance covers items being transported by vehicle from one destination to another from: 

  • theft,
  • loss,
  • and damage.

You may carry goods subject to contractual conditions. For example, the recently updated Road Haulage Association (RHA).3 These conditions and the monetary limits per tonne specified will determine the amount of cover you’ll require.

Providing essential evidence for your transit insurance limits

If you’re moving goods under these conditions, it’s crucial to have a well-defined transit insurance policy. This transit policy should include agreed limits and conditions you may have with your customers above your normal contractual terms and conditions, you will need written evidence of these agreements with your customers. It’s also essential that any subcontractors you use mirror any terms you agree to. This is so you’re not left with a shortfall if liability lies with a subcontractor you have contracted. This must be before any work takes place, and you will need to provide written evidence. If you fail to provide evidence before the agreement, this could result in significant additional liabilities. This is both from a cover and financial perspective in relation to the value of the claim and potential consequential losses.

Ensuring adequate sum insured and agreed enhancements

You may carry goods on different bases:

  • full responsibility; 
  • enhanced liability; 
  • or all-risks basis with a sum insured/limit per load. 

This may be across some or all traffic categories, and must be contractually agreed in writing. 

You must talk to your customers to ensure that the sums insured/limits per load are enough to replace any potential lost or damaged goods. If you agree on a value with the customer, again, it’s essential that you can produce evidence to this effect to avoid disputes in the event of a claim. It’s important to note that any changes to liabilities must be agreed with insurers. This is considered a material fact, and insurers can refuse to accept a claim if they haven’t agreed to enhancements.

What happens if you need to claim on your transit insurance cover?

Suppose you need to claim due to a total loss. In that case, insurers will only pay up to the monetary limit specified on your policy based on the liability or any agreed enhancements. But even if you only suffer a partial loss, insurers may only pay a share of the claim. They may reduce payment proportionately in relation to the sum insured against the total value of the goods.

It's important to compare transit insurance quotes to ensure you have adequate coverage for potential claims. This helps protect your business against damages, theft, or loss during transportation.

It’s important to remember that if you need to raise a claim with your broker and insurers, you provide them with contractual evidence that you have disclosed: 

  • your conditions of carriage; 
  • proof of delivery; 
  • invoice or consignment notes; 
  • and any other relevant information that will support your claim. 

You should also hold any sub-contractors/third parties responsible in writing for any loss/theft/damage etc. as soon as possible. This is to comply with any relevant time limits under your conditions of carriage. Failure to do this can leave you responsible for the claim.

With this in mind, we recommend you review your current processes. You should ensure all your customers know the basis on which goods are carried, and the applicable monetary limits. 

Due to the nature of some goods being considered high risk or having inherent vice, it’s important to be aware that your goods in transit insurance policy may have exclusions attached. To ensure comprehensive coverage, it is crucial to familiarize yourself with these exclusions. If you have any doubts or questions, we recommend contacting your broker. They can provide guidance and communicate with underwriters to determine if the risk associated with these goods can be insured.

1. mandata.co.uk/trends-and-expectations-for-2024-in-transport-and-haulage
2. cloudfret.com/the-10-challenges-of-road-transport-in-2024
3. marshcommercial.co.uk/2024-rha-conditions-of-carriage-key-changes-and-updates

Ben Davies
Ben Davies is the Cold Chain Federation Relationship leader within Marsh Commercial. With a focus on transport, distribution, warehousing, and cold storage, Ben brings extensive expertise to his role. As part of Marsh's UK transportation team, he specialises in risk management and develops bespoke risk solutions. Ben's primary objective is to help hauliers and warehousing businesses better understand their exposures and how to mitigate them. Known for his strong client relationships, Ben provides support and engagement to ensure the success of his clients.