[whazor]

Shipment insurance is normally an optional add-on. IMO, if the shipper doesn’t get it, it is on them.

It is nicer for the shipper to decide the value and pay the corresponding price for that. Because you need to know the replacement value of that lost item. This is dependent on all kinds of factors.

[gambiting]

Is there any scenario where someone would knowingly decide not to take insurance on a 400k shipment? What would be the reason for doing so?

In this case the shipper is the company behind the Playdate, so it seems weird to me they wouldn't insure their own stock. But maybe there's a good reason why this isn't done?

[soneil]

It's not unusual to effectively self-insure for shipping.

If insurance costs you more than lost shipments, it stops making sense to pay for insurance. If insurance costs less than lost shipments, it stops making sense for the insurer to offer you insurance at that rate.

Insurance works when the loss is disruptive to your cashflow. If I can't afford to absorb that loss right now, it may be worth finding an insurer that can. If I can afford to absorb that cost, it's almost always better to leave my money working for me, than working for the insurer.

If you're shipping in volume, self-insurance almost always works out better. You can bet amazon don't insure their shipments to you. If they take the potential cost of insurance, stick it in a pot, and dip into it when there's a shipping issue - that pot should never run dry. If that pot runs dry, it means insurers are operating at a loss, and they're not going to stay in business long.

[sakjur]

I’m not sure about Playdate, but for a larger company, it’ll be beneficial to stop paying fpr the insurance after a while — the insurance companies bank on the difference between risk tolerance for individuals and in groups. Your liquidity might not be able to survive an event that is fairly insignificant in the context of a larger group (say your house burning down — devastating for you, but zooming out to a city-level it happens occasionally).

Larger companies can develop a higher risk tolerance in-house and eliminate the middle hand, and that’ll let them siphon the excess to their shareholders rather than the insurance company.

[brk]

Package insurance is more of the exception than the norm, even for stuff like that. The insurance cost is proportionate to the value you claim, and it's not cheap (not like 10%, but still, for $400K, might be $1,000?). That cuts into margins, especially when you consider that you are expecting a global freight company to be able to globally deliver a basic freight item.