At least 80% of all insurance claims that come out of the supply chain could be avoided, according to the specialist transport and logistics insurer, the TT Club.
As the company, a mutual society that is owned by those insured by it, prepares to try to attract more members from the freight forwarding sector, it has recently released a detailed analysis of claims in the supply chain.
Covering the past six years, the study analysed every one of the 1,850 claims made for over $10,000, which altogether totalled $120m, and found that the vast majority of incidents were the result of either operational errors or poor maintenance. See the tables below for a breakdown.
The TT Club has good form on this. In recent years it has been almost evangelical in improving safety standards in the port industry after undertaking a similar in-depth analysis, and its global director of risk assessment, the affable Aussie Laurence Jones, has spent several years globetrotting and speaking at industry events to reinforce his message to terminal operators.
Its supply chain investigation found that almost all claims, barring acts of God such as earthquakes, tsunamis and volcanic eruptions, could be avoided with the creation of “efficient and well-constructed processes” coupled with a far greater probity about who logistics companies partner with.
The second highest cause of claims within operational error is theft, with 62% of all theft claims made about goods in transit. However, the overwhelming majority, 87%, of those occurred where a TT Club member had sub-contracted the transport operation.
Risk management director Peregrine Storrs-Fox said: “Much is stolen to order, as is evidenced by the patterns you can see in certain areas of the world for certain types of cargo.”
Mr Storrs-Fox’s central conclusion however, was that not only would eliminating poor practices result in less claims, but it would ultimately improve a company’s performance.
“Supply chain risk management focuses on the slickness of an operation, but it should go beyond just cost calculations,” he said.
TOTAL CLAIMS
| Type of claim | Percentage of all claims | Total cost of claims |
| Operational error | 63% | $76m |
| Poor Maintenance | 33% | $40m |
| Other (weather-related) | 4% | $5m |
OPERATIONAL ERRORS
| Cause of claim | Percentage of claims | Cost of claims |
| Systems & Processes | 45% | $33.4m |
| Theft | 29% | $20.8m |
| Truck/vehicle | 10% | $7.6m |
| Other | 7% | $5.3m |
| Lift Truck | 5% | $3.8m |
| Cargo loss or damage | 4% | $3m |
TOP FOUR MOST FREQUENT CAUSES OF SYSTEMS & PROCESSES GOING WRONG
| Cause of claim | Percentage of claims | Cost of claims | Number of claims |
| Bad stowage & handling | 35% | $12.8m | 357 |
| Customs | 17% | $6m | 104 |
| Clerical errors | 14% | $5m | 128 |
| Contractual issues | 13% | $4.5m | 65 |
THEFT CLAIMS
| Type of theft | Percentage of claims | Cost of claims |
| Theft in transit – contractor | 54% | $11.2m |
| Theft from own premises | 13% | $2.7m |
| Theft from contractor’s premises | 12% | $2.5m |
| Theft in transit – own | 8% | $1.7m |
| Stocktaking loss | 7% | $1.5m |
| Others | 6% | $1.2m |
