Brexit-induced controls at the UK/EU border creates an opportunity for goods in transit (GIT) insurers to adapt their products as the nature of risks change, while increased red tape will drive premiums up, says GlobalData, a leading data and analytics company.
According to GlobalData’s report, ‘Brexit in Insurance – Thematic Research’, GIT insurance, which provides cover for products transported by vehicle from one location to another, has traditionally focused on protecting hauliers and logistic companies from damage or loss of goods resulting from theft, vehicle accidents, or breakdown, including that of refrigerators. However, the introduction of exhaustive border controls is disrupting supply chains, with logistic companies facing new challenges.
Beatriz Benito, Senior Insurance Analyst at GlobalData, comments: “Increased border controls post-Brexit was always bound to cause hurdles for logistic companies. Delays at the UK/EU border have taken hold ever since the transition period came to an end, with such delays particularly increasing risks to businesses that are vulnerable to the deterioration of stock while in transit. Food logistics companies such as seafood traders have been among the worst hit by the ongoing delays at the border. In some instances, the delays have rendered the goods of these companies unusable, given the shorter shelf life of perishable goods.
“It is a huge blow for such businesses – not only because of damage to their goods, but also due to their inability to recover financial losses through their GIT insurance provider, with policies most typically having exclusions for delays at the border. Meanwhile, the COVID-19 pandemic adds an extra layer of bureaucracy as hauliers must show proof of a negative test before crossing the border, further extending the time to do so.”
The end of the Brexit transition period saw the introduction of new checks on exported goods. However, the UK Government has announced import declarations will be delayed from July 2021 to January 2022 over fears of food shortages in supermarkets.
Benito continues: “Postponing full checks on food imports can be advantageous to insurers. It buys them time to better assess the impact of Brexit on trade in order to adapt their products to deliver a level of risk mitigation for delays at the border. Those that adjust their products quicker to reflect the new realities are likely to fare better, not only by attracting new customers, but also by retaining existing ones.
“In addition, bureaucracy at the border will ultimately increase the expenses associated with transporting goods in and out of the UK into the continent. The cost of this added paperwork on trade will eventually be passed on to consumers, with the price of imported goods from the EU into the UK set to rise. This will naturally drive GIT insurance premiums up – an increase in the price of goods means that hauliers risk higher losses, while insurers will face claims of higher value.”