Insurance and ad valorem charge audit

Ad valorem is not insurance

A declared value charge works through the mechanism of the carriage conventions: the sender declares a value exceeding the convention's limit of liability and pays a surcharge, and the declared value is substituted for that limit.

Which means that having paid ad valorem you are not insured. You hold a higher limit of liability for the event that the carrier turns out to be liable.

If the loss arose from circumstances for which the carrier is not liable under the convention, nothing is payable, even though the charge was paid. Insurance works differently: it pays under the terms of the policy, regardless of whether anyone is liable.

We establish which product you are paying for from your documents. Whether you need cargo cover, and which, is a question for your insurance broker; we do not assess cover and we express no view on it.

Two cases where the charge bought nothing

The declared value is absent from the transport document. The mechanism operates only where the value is entered in the consignment note or the air waybill. If the charge was paid and the field is empty, the limit was never raised. What we find here is the whole charge, not a difference.

The convention limit already exceeds your goods' value per kilogram. In carriage by road the limit is 8.33 SDR per kilogram — roughly ten euro. That is an indication, not an applicable figure: under the convention the SDR is converted not on the date of the shipment but on the date of judgment, and the rate moves daily. If your goods are worth a couple of euro per kilogram, there is nothing to raise: the limit will never bite, however large the loss.

The second case matters most for heavy, inexpensive cargo: building materials, timber, metal, packaging.

Why we compare per kilogram

There is a detail in the arithmetic here that is easy to get wrong.

The limit of liability applies to the weight of the cargo lost or damaged, not to the whole consignment. If one hundred kilograms out of twenty tonnes are damaged, the limit applies to those hundred kilograms.

Comparing the total limit with the total value of the goods would therefore be a mistake: the total limit almost always looks large. The correct comparison is value per kilogram against limit per kilogram, and it does not depend on what share of the cargo is affected.

At sea it is different

In carriage by sea the limit of liability is low — 2 SDR per kilogram or 666.67 SDR per package, whichever is the higher. That is roughly a couple of euro per kilogram, and again only an indication, because the date of conversion is not the date of the shipment.

At sea, therefore, raising the limit often does have a real function, and such cases will be few. By road and by air, where the limits are considerably higher, there are more of them. The air limit is reviewed periodically, so we apply the figure in force on the day, not one held in memory.

The package limit at sea matters separately: for small, light but valuable packages the limit per package can be significantly higher than the limit by weight, so we compute both.

Air freight invoice audit

What else we check

Insurance charged, no policy. Where the documents show neither a policy nor any declared value markings, this is a charge for a service of which there is no evidence.

Double insurance. If you hold your own open policy covering the same consignment, the forwarder's insurance is a second one for the same thing.

Over-insurance. Insurance is a contract of indemnity: the payout does not exceed the actual loss. Insuring above the agreed basis means the premium on the excess cannot be paid out.

Basis and rate. Whether the insured value was computed on the agreed basis, whether the rate matches the quotation, and whether anything that should not be there was included in the basis.

Incoterms. Under CIP the seller must insure with the widest cover — your additional insurance is then likely to be duplicative. Under CIF the seller's obligation is only minimum cover, so your additional insurance is not duplication but an extension of cover. We do not conflate the two.

What this audit does not do

We do not assess insurance cover and we express no view on it. We do not say whether your cover is adequate, and we give no advice on what to buy — that is the work of an insurance broker or an insurer.

We classify the charge from the documents and check how it was calculated. If we establish that the charge raises a limit of liability rather than being a contract of insurance, that is a factual classification from the documents, not a proposal to acquire a different product.

Nor do we check whether the rate is at the market level — we hold no database of market rates.

Price

Included in the freight invoice audit. There is no separate activation and no separate subscription: our fee on the amount actually recovered is the same as across the freight invoice audit — 25 %.

Classification outcomes — those where we establish that you are paying for a different product than you thought — do not enter the fee base. That is information, not a recovered amount.

How we compute the result and what we treat as checked is set out in the methodology.

We enable this service only after discussing the scope — it relies on external data that we do not have in every market. We check first whether your case is covered, so that we do not sell what we cannot deliver.

Discuss the scope Pricing model