Hacker News Reader

Comment by PeterisP | Hacker News Reader

In any shipping, part of the risk is that your cargo may arrive late, damaged or never - you may get insurance for that, but that risk exists.

GA means that if due to some issue they throw away half of the cargo to save the other half (which is a good thing - you want them to be permitted to do that without going bankrupt, because otherwise there is no motivation to save the half that can be saved) then instead of some people getting their cargo and some losing it, those whose cargo was saved pay a proportional value to those whose cargo got thrown away, so after the settlement all of them get the same average lost cargo value.

View on HN

There's an interesting wrinkle: the system works on self-declared value of cargo, and is set up in such a way that people have an incentive to declare the true value of the cargo.

Basically, if you declare a value that's too low, you don't get enough money when your cargo gets thrown overboard. If you declare too high, you pay more, if somebody else's cargo gets thrown overboard.

That's true for insurance in general.

To a certain extent, yes.

The beauty of General Average is that (in insurance terms) the thing you are insuring is also the premium you pay.

> which is a good thing - you want them to be permitted to do that without going bankrupt, because otherwise there is no motivation to save the half that can be saved

You also don’t want them to have any incentive to treat one customer’s cargo more carefully than another’s. You want them to jettison cargo indiscriminately with the only incentive being to save the ship.

There is some incentive to discriminate - it is advantageous to everyone to jettison the cheapest cargo in order to save the more valuable cargo, no matter to whom which cargo belongs.

For some ratio of cost to weight, with consideration as to where on the ship it is... if you have time to calculate such things. In this case they probably do, if they really care to.

At the scale of these ships, though, if you have to jettison cargo you're probably looking at hundreds of containers or more. At that point it probably doesn't make that much difference which containers you jettison, it'll mostly average out.

If you have a container of iPhones, you might want to save those.

Reply on news.ycombinator.com