5th Interactive Session: Yegor Vishnevsky

Yegor Vishnevsky
Deputy General Director, INGOSSTRAKH, Russian Federation

MULTDIMENSIONAL ROLE OF INSURANCE IN THE AREA OF COMMERCIAL TRANSPORTATION IN ASIA AND EUROPE

Dear Sirs,
It is not a secret that Russia actively participates in the formation of the common transportation area of CIS countries and the EEC, and in the creation of the integrated transportation system of the Asia-Pacific Region and Shanghai cooperation organization. Special attention is devoted to the creation of an All-European Transportation area, including cooperation with the European Union. The cooperation to establish the transportation aspect of the trade and economic links of countries with no access to the sea will be enhanced.

In this area, we have witnessed the onset of a new approach to the insurance of freight traffic, including transits. Obviously, so far, many transportation companies have been holding a certain amount of funds as a reserve in case of force majeure and for possible court costs, virtually depriving themselves of any possibility of freely utilizing those funds. Apparently, it would be a lot simpler and cheaper to invest acceptable amounts of funds into insurance and eliminate the headache, shifting all in- and out-of-court troubles to reliable insurers. However, not every transportation company does this (unless, of course, the conditions of participation tend to force them to secure insurance for certain risks). The largest problem is misunderstanding the role and essence of insurance, for many potential policyholders perceive an insurance premium as an additional tax or wasted money.

Another factor is a lack of trust of insurance companies, although those very financial institutions suffered the least from the crisis that affected the economies of Russia and Asian countries at the end of the 1990s.

Nevertheless, in the last 10-12 years we have been observing a steady growth of insurance volume among transporters in all kinds of transportation. Despite the fact that an area such as freight insurance has shown very modest growth and in some markets we have even witnessed stagnation and decrease, the insurance of motor truck cargo liability is developing rapidly. This growth is particularly evident in the territories of the former USSR, where, during its 70 years of existence, the state assumed all the risks. Now, in the conditions of a market economy, where every participant in the transportation market independently makes a decision about the methods of protection of their businesses, insurance has become an inseparable part of transportation services, and far greater numbers of transporters have come to understand that.

Admittedly, so far, in the eyes of the majority of foreign freight owners, land passage from Russian far eastern ports to the Baltic has been a terra incognita with obscure laws, unpredictable delays and unclear possibilities in the area of claim handling. This lack of clarity has been the primary factor of high risk. Hence, excessively high rates of insurance premiums follow that are set by foreign insurers for freight transportation by routes involving 'Russian transit". This affects the total amount of freight charges, and in situations when the guarantee transit time is problematic and the related services are poorly developed, the majority of freight owners prefer the longer but safer passage through southern seas and oceans.

We who have dealings in the motor truck transportation field are all interested in the development of Trans-Eurasian land transportation corridors. A new system of insurance can be created by leading insurance companies in order to establish Euro-Asia transit. Several specific parts of this system have already been implemented; however, the formation of a new range of insurance services, including insurance of various risks and additional services, including services of average commissioners and surveyors at destination points (ports and railway stations) and along the entire route, remains highly relevant. Therefore, insurance may be a part of transportation services that gives freight owners confidence in the safety of freight during transportation and in the efficient reimbursement of losses, should any accidents incur.

The broad spectrum of risks covered by Russian insurers may become a serious argument not only for freight owners, but also for foreign insurers of freight transportation, because in cases where losses of transported freight occur, the possibility of efficient claim handling and presentation of recourse claims may become a reality.

The Ingosstrakh insurance society is the leader in insurance of domestic and foreign trade freight and has already been engaged in transportation company liability insurance for more than five years. Presently, Ingosstrakh is the largest Russian company offering national and foreign transporters and exporters the full range of quality services and has a 40% share of insurance in the related segment of the market.

Presently, Ingosstrakh offers motor truck cargo transportation companies the coverage of risks such as:

• Liability for wrecks, damage or loss of freight for any reason.

• Liability for financial losses (delays in freight shipment; shipment of freight in violation of the quoted delivery time; fares, customs fees and duties).

• Responsibility before customs - in case of failure to deliver freight at the destination to customs.

• Liability for inflicting damage on the lives and health of people by the transported freight and for inflicting damage on the environment as well.

Specialists in our company take an individual approach to solutions for every client's problems, with consideration of all the needs of the insured and their financial situations, working to provide a complex approach and secure the financial stability of the transportation company.

The key feature of insurance at Ingosstrakh is the constantly developing and improving system of service. Dumping rates, used by some insurers, made us consider an alternative choice: either to reduce rates or to offer more services for the same price. We decided to enhance the area of services, while keeping the rates reasonably low. The program of services includes issues related to customs; legal expenses; inspection of damaged freight; protection and veterinary problems; fuel, repair and information services. All of the offered services have their specialised characteristics and are tailored to each given case; they are strictly confidential in accordance with professional ethics and include not only consulting services but also aid in the implementation of specific projects.

Naturally, the primary objective is the solution of key problems that present obstacles to Eurasian transit loading, and many others with not only economic but also political aspects. This is, first and foremost, the solution of the problems of roads and the unpredictability of Russian authorities, return and loading of empty containers to meet export demands and many others. The participation of insurers in the establishment of transit transportation and the solution of the above-mentioned problems is becoming increasingly important. In order to provide the service portion of the insurance coverage offered to transportation companies, insurers need to establish cooperation with Russian ministries and departments (MinTRANS, FCS, RTI and others) for fast and efficient solutions to transporters' problems that emerge in the process of freight transportation.

A financially stable transporter, confident about the future, guaranteeing not only performance in transportation but also (thanks to insurers) the reimbursement of losses sustained by freight owners and offering competitive rates for the transportation of freight, can become a serious argument in support of Russian transit.

Our countries have chosen the market path of development, and our transportation companies must independently provide transit services 'from door to door" and assume liabilities on their own - with reliable insurance companies. Only then can a Eurasian variant become a sound alternative to the existing waterways from Asia to Europe.

We cooperate not only with European insurers, but also with insurers from countries of the Asia-Pacific region. Our contracts link us to prominent Chinese insurers such as PICC and China Re, with the Japanese corporations 'Mitsui Sumitomo Insurance Company Ltd." and 'ITOCHU Corporation", as well as Iranian and Indian insurance companies. We are confident that this cooperation will be enhanced and strengthened with insurers from other Asian countries.

In partnership with the China Road Transport Association (CRTA)

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