Or, you can take the total lost cargo, divide it by the total value shipped, and send a QuickBooks invoice to everyone.
So long as the risk pool is large enough, and everyone involved is fairly trustworthy, it makes sense. Definitely unparalleled on land, to my knowledge!
Yeah my point is/was that you can just use regular insurance. That's my point. Or at least I don't see why not. Presumably the shipping industry has a reason.
Long story short: your travel insurance has all those complicated things, and you pay for it. And you also pay for the convenience of not seeing that complexity.
The cost of explicitly covering only costs incurred on accidents, like in the shipping industry OP case, would give you a much much lower cost on your travel insurance (technically no longer an insurance). But then you would have to pay irregular amounts on irregular occasions. You also pay a premium to get a fixed budgetable amount.
If they ship millions of containers, surely they can work out an efficient solution.
Yes, at some point they need a lawyer and what not. But not every single time somebody wants to ship a container. They work it out once and that's it. Even if the lawyer costs 100 million dollars, if they ship millions of containers every year, they can scale the cost down to one dollar per container in the end.
The system to only ask for money in case of accidents doesn't actually make it cheaper or less complicated. There simply is the inherent "cost" (a ka expected loss) of accidents, that you have to pay one way or another. There may also be people who don't want to pay, and then you still need your lawyer.
My travel insurance is very cheap, by the way.
Insurance is an old and established business, many learnings already exists. The industry presumably is quite good at estimating and pricing risks.
This discussion is going circular. The "estimating and pricing risks" IS the premium. Which is all anyone in this thread has been saying.
I agree that insurance is cheap for the piece of mind. Which is why I have all kinds of insurance. Still most people get nothing out of an insurance, and some people get more than they've paid.
I'll try to summarize it in another way:
For regular insurance, what is paid in by buyers is X. And what is paid out is X - premiums (overhead, risks, estimates, etc etc etc). That is much less than 100%.
In the case of the shipping scenario, ~100% of what is paid in, is paid out to affected parties.
That seems pretty effective, albeit all participants now own the risk, but save on all other premiums.
If you think there's a better way, I'm sure you can take a smaller premium than the alternatives and make a lot of money.
Eg the shipping operator doesn't have to trust the customers: possession in nine tenths of the law, and the former already possess the latter's cargo.
Similar, the declaration of value is somewhat self-enforcing: if you declare a high value, you get paid out more if your stuff drops into the ocean. But you also pay a bigger share, if someone else's containers drop in the ocean.
Actually a mutual insurance policy, since the insurers and insured are the same group of people.