Logistics industry clouded by insurance storm

A lack of insurance is threatening to bankrupt small freight forwarding companies in Dubai, experts have warned.

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By  Robeel Haq Published  July 2, 2006

A lack of insurance is threatening to bankrupt small freight forwarding companies in Dubai, experts have warned. Leading professionals from the international logistics industry expressed shock at a recent seminar organised by the NAFL (National Association of Freight and Logistics), when findings revealed only 10% of freight forwarders routinely purchased liability insurance. “These are shocking statistics,” said Thomas Gutruf, chairman of the Swiss Freight Forwarding and Logistics Association. “Up to 90% of the freight forwarders in Dubai are operating without any liability insurance.” Unless the situation is addressed, these damaging figures could threaten Dubai’s position as a regional logistics hub, especially in the face of increasing competition from neighbouring countries. “Freight forwarders have not kept pace with the fast growth in Dubai, especially when it comes to liability and best practice. It’s now time for the industry to change its attitude,” added Gutruf. Around 200 freight forwarders are currently estimated to operate within Dubai. Although none of these companies have previously applied for major claims in terms of damaged or lost consignments, the overall damage caused if such a case occurred in the future could be extreme. According to Gutruf, such a situation could potentially bankrupt small freight forwarders and deter international companies from using Dubai as a logistics hub. “To sustain its position as a cargo hub, Dubai must seriously consider introducing best practice, liability insurance and education,” he explained. However, Dubai is already taking its first steps to control the situation. NAFL has been handed responsibility to create a set of industry guidelines for introducing liability insurance. In addition, the organisation is planning to hire a specialist team of experts from Singapore to conduct various training programmes in Dubai. “There is more pressure than ever before for businesses to increase accountability and professionalism,” said Issa Baluch, chairman of NAFL’s executive committee. “This underlines the importance of accountability, professionalism and training within the logistics industry.” As part of its mission to create a set of industry guidelines for best practice, NAFL is currently holding discussions with relevant authorities. The talks will focus on methods of effectively making liability insurance mandatory and ensuring freight forwarders financially protect their businesses by purchasing insurance. In addition, NAFL is hoping to negotiate with the insurance industry to offer its members better coverage and more competitive rates. “There is an urgent need for Dubai to come up to speed with major European and Asian countries by introducing mandatory liability insurance,” said Baluch. “At the moment, rather than spending money on securing adequate cover, the majority of local freight companies merely cross their fingers and hope they will not be hit by major transportation disasters." “Getting insured is basic practice around the world and the fact we are discussing the lack of liability insurance really shows the current state of the industry in this region,” he added.

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