Insurance for mailing packages

[The_Animus]

Maybe it's just me but I think it's rediculous that package delivery service providers (or PDSP's because its much shorter) now all charge you an additional fee to ensure that your package arrives where it is supposed to and arrives intact. Isn't that what you were paying for in the first place? You go to USPS or UPS and others to send a package to another location. The entire point in giving them your business and money to do this is for the purpose of having your package arrive in tact and at the destination you wanted.

It's like if mcdonalds decided you could pay an extra .50 to ensure your meal is hot. Or if a construction company had the option for you to pay more to ensure that your building doesn't fall over or leak.

It just seems rediculous. Anyone else feel like this?

[Foolmewunz]

I don't feel it's ridiculous at all. I feel that you're confusing two items, though: guaranteed timely delivery and cargo insurance.

Welcome to my world. Shipping.

If you pay for insurance, you're not insuring that a package will arrive there and arrive in tact, you're insuring the contents of that package.

Insurance for shipping is based on the value of the article (up to certain maxima in most cases, but even that can be waived for a high enough premium). If the post office had to insure the contents of every envelope, for the price of a stamp, they'd be out of business. Their service merely offers that they will move letters or parcels between points A and B at a certain price. They cannot determine if that letter has a note from nephew Timmy or a savings bond in it. If you have something in there that you want to insure, then insure it.

If carriers were required to have complete liability and cargo coverage for everything they haul, there would be no reasonably priced mail or parcel services, and container freight would be so high that your 9.95 pajama tops at Target would be 34.95. All shipping companies have limits to their liability, and if you want to push those limits, you can - for a price. Or you can buy insurance on the wholesale market (we call it an "open cover"), and shop for the best freight prices you can find, knowing that your insurance company will have your back.

The other part of your contention is that you pay a premium to get it there on time.... Yes, that's why they have the service. Because people are willing to buy it. If you want a guranteed overnight delivery before the clock hits whatever it is you don't want it to hit, then you can buy that service. If you want it just delivered within the next working day (any time up to 5 PM), you can buy that service. If you want it in 2-3 days, UPS and the US Post Office offer that service. If you can wait a week, send it regular mail. If you are sending it overseas, you can actually still send things by surface mail instead of air mail, and your package can take over a month to get to the destination.

In short, you get what you pay for. Maybe you're paying 0.50 for the privilege of the hot meal at Mickey D's, but not because it's hot... McD isn't selling just "hot". They're selling a brand that says, "hot, cheap, fresh, reliable, quick". And maybe the place that's 0.50 cheaper is going to sometimes have a stale bun, and sometimes cold fries and warm milkshakes. Same with the post office or UPS. You don't really go to them for their guaranteed service, do you? Not likely. You go to them because they're the most economical option that you can find and because their track records are pretty good for envelopes or pouches full of papers.

Those places (and FedEx and DHL) specifically warn you not to ship negotiable instruments (bonds, shares, cash, etc...). With those sorts of items, you'd be foolish to risk the mass market carrier.

In my job I've bought every service imaginable for clients.
Most ludicrous - Speed: A First Class ticket LAX to Auckland for a replacement gasket for a plant that was going to be shut down by the environmental folks for missing a deadline.
Equally ludicrous - Expensive: A DC8 charter for a piece of cargo of less than one kilo. (Radioactive - no one else would touch it at the time.)
Opposite End of the Spectrum: A client who found a bargain on jewel boxes (the plastic CD cases), but only if he took the whole stock at once. He couldn't sell them, so he wanted me to use the ocean as a warehouse and literally find him a slow boat from China, with as many transshipments and delays as possible.

And, oh yes, I mentioned in the cliche thread.... I have shipped coals to Newcastle.

[196]

One time I was shipping a fountain pen to the factory to have the nib adjusted, the fountain pen equivalent of a brake adjustment. The man at the FedEx counter refused to sell me insurance because the package was addressed to the "repair department". He said, "we don't insure broken items". I tried to explain that the pen wasn't broken, and even offered to open the box and show him the letter where I asked for an adjustment of the nib, but he just kept repeating "we don't insure broken items". I had to go next door to the Canada Post outlet.

This incident made me suspect that there is a big list of rules and regulations about insuring packages that will only be brought out in the event of a claim.

[Foolmewunz]

One time I was shipping a fountain pen to the factory to have the nib adjusted, the fountain pen equivalent of a brake adjustment. The man at the FedEx counter refused to sell me insurance because the package was addressed to the "repair department". He said, "we don't insure broken items". I tried to explain that the pen wasn't broken, and even offered to open the box and show him the letter where I asked for an adjustment of the nib, but he just kept repeating "we don't insure broken items". I had to go next door to the Canada Post outlet.

This incident made me suspect that there is a big list of rules and regulations about insuring packages that will only be brought out in the event of a claim.

Actually, you're fortunate that the guy even told you. He could've taken your premium and then "caveat emptor".... the claim would've been thrown out on the basis of the fine print if they lost it.

Their "freight" division would've accepted it and insured it, but at a hefty rate.* I've shipped very high-end clean room computers back from Asia to the USA for total refit. Value: 2.0 million USD. Since you can't insure for the thing not turning on, you're basically insuring for F.P.A. (Free of Particular Average) which means that if the entire shipment gets washed overboard or crushed and melted, you can claim the insured amount. But if you open the container and four panels are bent and it costs you four thousand bucks to fix them, you're out of luck.)

*The integrators (the preferred industry term for PDSP) don't have the expertise at their counter locations to determine if a broken or non-functioning item has any value, so they just put the rule in for any ad hoc (personal) shipment. If you have a corporate account, you can insure even damaged or broken items being sent back for warranty repair.

[The_Animus]

Actually, you're fortunate that the guy even told you. He could've taken your premium and then "caveat emptor".... the claim would've been thrown out on the basis of the fine print if they lost it.

That's ridiculous. He wasn't fortunate. That should be how it is. To have rules that are unknown and knowingly taking money for a service they wouldn't provide is called fraud. I can't believe what companies get away with these days. It's pathetic. Just look at the BBB. They have files of companies that have the worst rating possible with hundreds of complaints because the companies take your money and don't send the product but they are not shut down. They get to keep their website and keep legally stealing from people.

If you pay for insurance, you're not insuring that a package will arrive there and arrive in tact, you're insuring the contents of that package.

That is just wordplay right there. The contents of the package is obviously what you want delivered and intact, not whatever box or paper is used to cover it. When I go to the USPS and ship something media mail I am PAYING them money to to bring my package from point A to B in tact. Why else would I pay them at all? If they cannot get my package to the correct address or without breaking it why should I give them any money in the first place? You wouldn't, which is why they have the initial charge. That is what you are paying for. Some packages may contain expensive things like a laptop. But regardless the company should handle the packages carefully. If they break it they should pay for it because it was their own lack of care and negligence. I shouldn't have to pay them extra not to break my package. That's what it seems like to me. It's a tax to not break or lose the package even though that is why you are paying them in the first place.

Insurance is just a way for the company to be lazy and not have to take responsibility for poor service. I returned a box set of movies to the company I bought it from. The address was clearly labeled in big letters on the front of the package. I paid the USPS around $4 to ship this package back and it never got there. What did I give them $4 for? To lose my package?

Maybe I should start my own delivery service and I'll just charge .50 to lose your package for you.

[Thanz]

That is just wordplay right there. The contents of the package is obviously what you want delivered and intact, not whatever box or paper is used to cover it. When I go to the USPS and ship something media mail I am PAYING them money to to bring my package from point A to B in tact. Why else would I pay them at all? If they cannot get my package to the correct address or without breaking it why should I give them any money in the first place? You wouldn't, which is why they have the initial charge. That is what you are paying for. Some packages may contain expensive things like a laptop. But regardless the company should handle the packages carefully. If they break it they should pay for it because it was their own lack of care and negligence. I shouldn't have to pay them extra not to break my package. That's what it seems like to me. It's a tax to not break or lose the package even though that is why you are paying them in the first place.
Foolmewunz has already explained things fairly well, but I'll try again. You acknowledge that any particular box may contain something expensive or something worthless. It could be grandma's pearls or it could be a box of rocks. The shipping fee is usually based on weight (sometime on cube size) so the shipping fee for the pearls and the rocks would be the same.

Now, in any organization, there can be mistakes. A large courier will deal with millions of packages a day. Even if 99% of all shipments go off without a hitch, that 1% still represents a significant number of packages that could go awry. The policy question is then what to do with allocating the cost of the risk of something going wrong to the package? The person who knows the value of the package is the shipper, not the carrier. If we put the allocation of risk on the shipper, then that person can pay the extra money required to cover the potential loss/damage to the item. If we put the risk on the carrier, the carrier will be forced to raise prices across the board (not knowing what the value of any particular package) to cover the insurance cost. In essence, forcing all shippers to buy insurance whether they want it or not. And there is no way you could pay only $4.00 to ship your box set of movies.

BTW, this allocation is well spelled out in international treaties. It is not just at the whim of the carrier companies.

[ktesibios]

One thing I learned empirically in having to ship some high-value items is that a hefty insured value makes a difference in how your package is handled.

When a 24-track headblock I had sent out for re-lapping came back, our UPS guy was a bit freaked. He came in holding this rather small box and saying "what the @#$% is in this? It's insured for $13,000!" It turned out that the local UPS depot had special procedures for handling packages like that- they were kept locked up until they went on the delivery truck and the driver had to sign for each one.

Apparently the prospect of having to pay a big honkin' claim concentrates the mind of a shipping company wonderfully. And in fairness, I really couldn't see how I could justify holding them responsible for such a valuable item had I not notified them of its value, nor why I should expect them to shoulder all the risk of loss without any compensation for it.

[Foolmewunz]

One thing I learned empirically in having to ship some high-value items is that a hefty insured value makes a difference in how your package is handled.

When a 24-track headblock I had sent out for re-lapping came back, our UPS guy was a bit freaked. He came in holding this rather small box and saying "what the @#$% is in this? It's insured for $13,000!" It turned out that the local UPS depot had special procedures for handling packages like that- they were kept locked up until they went on the delivery truck and the driver had to sign for each one.

Apparently the prospect of having to pay a big honkin' claim concentrates the mind of a shipping company wonderfully. And in fairness, I really couldn't see how I could justify holding them responsible for such a valuable item had I not notified them of its value, nor why I should expect them to shoulder all the risk of loss without any compensation for it.

Absotively, posilutely correct. Now imagine that as UPS, moving a billion pieces a day, you treated every package with that care, the care that Animus wants. In the Animus world, you'd have everyone beating a path to your door. Unfortunately, that's a dream. In reality? You'd have the price of every article in Walmart tripled. If I'm not mistaken, in order to get that special treatment, the shipper of that $13000 item paid something like .015% of the value for the insurance. By paying it directly to UPS, they're actually merely paying a higher rate (because UPS is self-insured). In this case it's just under twenty bucks, but the regular freight on that item would've been maybe six bucks! So they paid the 19.50 + 6.00 for the guarantee that their product would be replaced if something went wrong.

Animus, you also don't understand the nature of "carriage" in today's world. There are dozens of possible areas where an item can get lost or damaged. In your view that's the cost of doing business and the risk of the courier, I guess. And when a hurrican blows the delivery van off the road? How does UPS recover the cost of the van, the 600 x 13,000.00 items in the truck, and the two million dollar lawsuit filed by the deceased driver's family. Insurance. And the cost of that insurance is passed on to you, the customer, in the form of higher rates. So for that one gust of wind (and they're only on the road because you, Mr. and Mrs. Consumer, demand that they deliver on time or you want your ten bucks back), they need to have insurance coverage for about ten million bucks!

Have you ever insured a vehicle with the need for that sort of liability/coverage? Imagine that times the 350,000 or so vehicles that UPS has on the road at any time. Ergo, in order to give you a fairly good service, they limit their liabilities in the terms of their documentation. (They're on the back of that little waybill you sign when you turn in the package, by the way. They're not hiding anything.)

My company ships (as intermediary or "forwarder") over two million containers a year. We book with ocean carriers, truckers, terminal operators, and rail lines, just to move a single container from Hop Kee's garment works to Bob's King Of Pajamas. Something could go wrong at any number of points in the journey. That's why you buy insurance!