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Manufacturing
Protecting Inventory and Business Relationships with a Stock Throughput Policy
When claims occur while inventory is in transit, ugly disputes tend to follow. All too often, the contract doesn’t define the chain of custody clearly or adequately. When something goes wrong, both parties may say the other party was responsible for securing insurance. In the end, there’s no coverage for the loss, ruining a previously great business relationship. A stock throughput policy (STP) is a simple solution to prevent this type of situation.
What Is a Stock Throughput Policy?
Stock throughput insurance is a policy that covers goods both in transit and in storage. It provides an alternative to traditional fragmented coverage that uses a marine cargo policy for goods in transit and a separate property insurance policy for the same goods while they are in storage. This often-overlooked insurance solution provides many advantages, including:
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Seamless, End-to-End Coverage
When you use multiple policy types, coverage gaps may occur during hand-offs or location changes. For example, a fire may break out at the port, destroying the inventory while it is changing hands. If it’s unclear who is responsible for the product at the moment of loss, disputes may follow.
Stock throughput policies solve this problem by providing “cradle-to-grave” coverage. The policy covers goods from supplier to customer (including all transit legs and storage points) as well as losses that occur while loading, unloading, or processing stock. This eliminates coverage gaps that are common with other insurance solutions, resulting in more robust coverage and fewer disputes.
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A Simplified Claims Process
Claims are more complicated when you have to deal with two different insurance companies. Reporting the claim to the wrong insurer will result in your claim being delayed. Even worse, it’s possible that both insurers will argue the other insurer is responsible, leading to longer delays and threatening your coverage.
Stock throughput policies avoid this issue. Since you only have one policy, you only have to deal with one carrier, one adjuster, and one point of contact. You can also secure coverage for expediting expenses, which makes it even easier to recover from the loss.
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Better Pricing
You can often save money by bundling insurance products, and that is often true with stock throughput policies. In many cases, this coverage is less expensive than it would be to buy separate marine and property insurance policies.
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Broader Protection
Property insurance policies often have exclusions that may leave you without the coverage you need for your inventory. For example, property policies typically exclude certain perils, such as earthquakes and floods. To secure this coverage, you need to buy additional insurance policies, which leads to even higher costs and more complicated claims processes.
A stock throughput policy provides broader coverage. It’s typically written on an all-risk basis and often includes earthquake and flood coverage for no additional charge. This reduces the risk of a claim denial due to excluded perils or a narrow list of named perils that is the case for standard property policies.
Stock throughput policies may also provide better coverage for high-value, low-weight items. Some policies pay claims based on the weight of the cargo rather than its value. While this may be fine for some types of shipments, it may be inadequate for inventory like electronics. Once again, stock throughput insurance provides superior coverage.
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Inventory Turnover Flexibility
Your inventory may change over time with seasonal fluctuations or high inventory turnover. It’s important to have insurance coverage that provides adequate coverage at reasonable prices. This may be a challenge with some insurance policies, but stock throughput policies often base premiums on a combination of annual sales and your peak and low warehouse values, making this ideal for businesses that require flexibility.
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Enhanced Global Reach
Stock throughput policies are particularly valuable for global supply chains and cross-border logistics. With a single policy, you can cover your goods worldwide. You can also negotiate receiving your sales price for goods versus your cost, which may help offset the cost of a delay in receiving new products from overseas.
Who Should Consider an STP?
A stock throughput policy is a smart coverage option for companies with high volumes of goods in transit and storage and for companies that manage multiple warehouses, third-party logistics, or international shipments.
Industries that often benefit from stock throughput coverage include:
- Manufacturers
- Distributors
- Consumer goods
- Food and beverage
- Electronics
- Pharmaceutical
- Industrial equipment
Policy Terms
It’s important to verify that the policy you have in place meets your needs. Since policy terms vary, you should check the following:
- Policy limits. Check the limits for goods in transit versus in storage and verify that they are sufficient.
- Declare accurate values for both sales and inventory.
- Policy triggers and exclusions. Understand exactly when your policy will cover and will not cover a claim.
Since stock throughput policies are a fairly niche, less-common type of coverage, it’s important to work with a broker who is experienced in the risk management needs of global supply chains.
Are you interested in exploring how a stock throughput policy could help you achieve comprehensive coverage, fewer coverage gaps, lower premiums, and simpler claims? For more information, reach out to Propel for a review of your coverage needs.
Marie Gallanar
With nearly 20 years of experience in financial services, including a decade in insurance and eight years in banking, Marie brings a well-rounded perspective to her work with clients. She specializes in supporting manufacturers across industries, including consumer products, aerospace, and heavy industrial, including businesses with Department of Defense contracts. Marie takes pride in helping clients navigate complex risks from the shop floor to the global supply chain.