Ocean Cargo Profit Sharing Case Study

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The Policy That Was Paying Them Back. Their Broker Just Never Told Them.

Client

Importing / Distribution Company

Industry

Importing and Ocean Cargo

Challenge

A profit-sharing clause had been generating dividends for years. The client had never seen a dollar of it

The Challenge

This importer had been with the same broker for years. They paid their premiums on time, renewed without issue, and assumed everything was being handled.

When they came to us, their frustration was about service:

  • Two-week response times
  • Basic coverage errors, including being told that employers liability and employment practices liability were the same thing (they are two completely separate and distinct forms)
  • No proactive review of their program. Ever.

But the service failures weren’t the real story.

The real story was what had been sitting in their ocean cargo policy the entire time, unread, unacted on, and uncollected.

What We Discovered

The Profit-Sharing Clause

Ocean cargo is one of the few commercial lines where a profit-sharing arrangement can be written directly into the policy itself. If the policy is profitable, the carrier is contractually obligated to share a portion of that profit back with the insured.

How the Math Works

Example

Annual premium

$50,000

Approximate Net Profit (50%)

$25,000

Claims that year

$0

Carrier owes client

$12,500

The clause was in their policy. Their loss history was clean. Their estimated dividend for the current year alone was $10,000 to $12,000.

Nobody had ever told them.

Their previous broker had been renewing this policy without once identifying that the client was owed money.

The Decision That Defined This Engagement

When we took over the account, we had a choice:

Option A: Move to a competing carrier

  • Higher commission for us: 25% vs. 15% with their existing carrier
  • Client loses their earned dividend immediately upon cancellation
  • $10,000 to $12,000 gone. Not deferred. Gone.

Option B: Stay with their existing carrier via broker of record

  • Lower commission for us
  • Client keeps their earned dividend
  • We collect what they are owed

We chose Option B.

Canceling a policy mid-term forfeits every dollar of profit-sharing earned in that period. The moment we moved that account, the dividend disappears. We left the higher commission on the table because recovering what the client was owed mattered more.

Our Solution

  • Executed a broker of record with their existing carrier, no policy cancellation, no coverage disruption, dividend preserved
  • Competitively remarketed all other lines
  • Hanover delivered strong pricing across the board
  • All remaining lines moving to bind

The Result

  • Broker of record in process with their existing carrier
  • Current year profit-sharing dividend of $10,000 to $12,000 preserved and being collected
  • All other lines competitively repriced through Hanover
  • Client now has a broker who actually reads their policies

The Bigger Picture

Carriers are not obligated to remind you a profit-sharing dividend exists. They will not call you. They will not send a check unprompted.

If your broker doesn’t know the clause is there, the money stays with the carrier.

What every ocean cargo policyholder should know:

  • Profit-sharing clauses can be written directly into ocean cargo policies
  • Carriers do not proactively pay out earned dividends
  • Canceling or moving a policy mid-term voids any dividend earned in that period
  • A broker who does not read your policy cannot find what they are not looking for

If you import goods and carry an ocean cargo policy, there is a real possibility this clause exists in your program right now and has never been acted on.

Could This Be Happening to You?

If you carry an ocean cargo policy and have never been told whether it includes a profit-sharing provision, it is worth finding out. You may be owed money you don’t know about.

We offer complimentary policy reviews for importers and distribution companies.

Schedule a call

95 years of experience protecting businesses nationwide. Let’s make sure you are not leaving money on the table.

A Note From Gordon Coyle

I have spent 40 years learning how to read a policy and see what is actually there, not what someone says is there, not what the renewal confirmation says, but what the actual language of the document says.

When I reviewed this ocean cargo policy, the profit-sharing clause was right there. What wasn’t there was any evidence it had ever been acted on.

The carrier was not going to volunteer it. That is not their job. It is ours.

We also had the option to move this account to a carrier that would have paid us more. We chose not to, because doing so would have cost the client the dividend they had already earned. That is not a difficult decision when you are actually working for the client.

If you carry ocean cargo coverage and want to know whether your policy has a profit-sharing provision, reach out. No obligation, just an honest look at what you have.

Gordon Coyle | Founder & CEO, The Coyle Group 40+ years in commercial insurance

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