Indirect Insurance

Indirect Insurance is an insurance arrangement in international trade where the actual insured does not directly enter into a contract with the insurance company, but instead arranges insurance through an intermediary (such as a freight forwarder, exporter, or importer), or one party insures for the benefit of another. It is commonly seen under terms such as FOB and CFR where the buyer or seller is responsible for insurance, but in practice, the freight forwarder often arranges a blanket policy and collects premiums from the cargo owner. Use cases include: small and medium-sized exporters entrusting freight forwarders with insurance to simplify procedures; letters of credit requiring an insurance policy but the beneficiary is not the direct insured; or group-wide insurance that is later allocated to subsidiaries. Precautions: it is necessary to clarify the insurance beneficiary, the claims path, and the differences from direct insurance, to avoid claim delays or rejections caused by intermediary links. The difference from Direct Insurance is that direct insurance involves a contract directly signed between the insured and the insurance company, while indirect insurance involves third-party intervention. In addition, indirect insurance may affect letter of credit negotiation, as banks usually require the insurance policy to show the beneficiary as the party specified in the letter of credit. Foreign trade practitioners should ensure that the ownership of insurance interests is clear and specify the insurance arrangement in the contract.