Legal
Can a freight forwarder increase an insurance premium?
Some parties believe that it is illegal to increase an insurance premium, whilst others argue that forwarders can do what they like. While there is little legal clarity about the situation, there are some key points to bear in mind
S ome Members bene fi t from having an Open Marine Policy with an insurer and then provide a value-added service to their customers by offering to insure their cargo. This can be a valuable tool for relationship by providing insurance cover that might otherwise not be in place. BIFA is quite often asked whether it is permissible to increase the original premium charged by the insurer to the freight forwarder. Opinions on this subject diverge sharply; some believe that “it is illegal” whilst others argue that Members “can pretty much do what they like”. Subsequent conversations and investigations indicate that neither view is entirely correct. Little clarity both the forwarder and the customer, enhancing and protecting the commercial Legally, it appears that there is little clarity around this point. However, the following key factors did become clear during discussions. While there is no law covering how much a premium may or may not be uplifted by, it was advised that: The traditional viewpoint is that the BIFA Member should not uplift the insurance premium charged by the insurer when selling to its customer. It is argued that the freight forwarder should rely on any commission paid to it by the insurer and/or charge an administration fee to its customer. However, information received by BIFA highlighted that the Member should be aware that alongside
this traditional approach, the forwarder can use an alternative approach of uplifting; we have touched on both approaches below: 1. The first approach is for the forwarder to provide the insurance facility to its customer at cost. To cover its own costs in providing the facility, the forwarder can transparently charge a separate administration fee. This charge should be shown as a separate item on the forwarder’s invoice to its client. 2. BIFA guidance for the second scenario is that where the forwarder decides to uplift the premium charged to its client, this should only be done with the consent and knowledge of the insurer or broker. It is important for the BIFA Member to establish that the wording of the Open Marine Cover policy permits such an uplift and also to fix some parameters regarding by how much. It would be wise, from both parties’ perspective, to
document any such agreement. Members should remember that whilst freight forwarders work in a largely unregulated business environment, the financial sector is regulated by the Financial Conduct Authority. Expert guidance It is strongly recommended that forwarders offering or wishing to offer such a facility engage with their insurance broker who will be able to provide expert guidance. In reviewing this topic, it became apparent that there are different approaches being taken across the industry. If Members have further queries about their current or proposed approach to providing such a facility, then it is recommended that they seek
“ Members should remember that whilst freight forwarders work in a largely unregulated business environment, the fi nancial sector is regulated by the Financial
expert guidance from their insurance broker or solicitor.
Conduct Authority
BIFA would like to thank Salvus Law Solicitors and the TT Club for their assistance in preparing this article.
10 | March 2025
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