Marine Insurance

Introduction of the subject:

— Insurance covering the consignment you are exporting by using a shipping agency is a Mandatary term you will find mentioned in Order-Sheet. And, its not expensive at all.

— by Shabab Khan
Export Entrepreneur

Importance of Marine insurance in commerce:

Marine insurance plays a very important role in the field of overseas commerce and internal trade of a country. It is closely linked with Banking and Shipping. Banks generally finance the goods which are transported by ships or by other means of transport in the case of internal trade and Marine Insurance protects such goods a Marine  Insurance  can be  divided broadly  into two  groups…

— Cargo  Insurance
— Hull Insurance

As stated  earlier,  Marine  Insurance is  closely  linked  up with the  trade  of  a  country internal  as  well  as  international.  A  sale contract  which  is  an  essential  feature in  the trade involves  a  seller  and  a  buyer, apart  from  the  other  parties  like  the  carrier, the  bank,  and the shipping agent.  Whether  the insurance  of  the  goods  in transits  is  to  be  the  responsibility  of  the seller  or  the buyer  depends  on  the type of  the sale contract  in  any  transaction.

There are different  types  of  sales  contracts  the most  important  of  which,  as  affecting  the Marine Insurance are:

-F.O.B. (  Free  on Board)  In this  case, the  seller  is  responsible  for  loss  of  or  damage  to the  goods  until  they  are  placed on board the  steamer  for  on carriage. Thereafter  the  buyer becomes  responsible  and  he  has, therefore, the  option to insure  where  he  likes.

-C.I.F. (Cost,  Insurance  and Freight)  In  this  case  the  seller  assumes  responsibility  for the  insurance  and the  insurance  charges  are  indicated in the  invoice  along  with the  other charges.

-C  &  F  (Cost  and  Freight)  In this  case, normally  the  buyers  responsibility  attaches from  the time the  goods  are placed  on  board  the vessel  and  he has  therefore to  take  care of  the insurance.

-F.O.R. (Free  on Rail)  This  is  same  as  F.O.B. but  it  concerns  mainly  the  internal  trade transactions.

Marine Cargo  Policy: This  policy covers  goods, freight  and  other  interests  against  loss  or  damage  to goods whilst being transported by rail, road, sea and/or air.

Highlights
This  policy  covers  goods, freight  and other  interests  against  loss  or  damage  to goods  whilst  being  transported by  rail, road, sea  and/or  air. Different  policies  are available depending  on  the type of  coverage required  ranging from  an  ALL  RISK  cover  to  a restricted  FIRE  RISK  ONLY  cover.

• This policy is  freely  assignable  and is  basically  an agreed value  policy.

Scope Transportation of  goods  can be  broadly  classified  into three  categories:

1. Inland Transportation:
2. Import
3. Export

The types  of  policies  issued  to  cover these transits  are:

For  Inland Transit:
a. Specific Policy  –  For  covering  specific  single  transit Open Policy.

b. For  covering  transit  of  regular  consignments  over  the  same  route: The policy  can be  taken for  an amount  equivalent  to three  months  despatches  and premium  paid in  advance.

As  each  consignment  is  despatched,  a  declaration  giving  details  of  the  despatch including  GR/RR  No. is  to be  sent  to the  insurer  and the  sum  insured  gets  reduced by  the amount  of  the  declared  despatch. The sum  insured can be  increased any  number  of  times during  the  policy  period  of  one  year;  but  care should  be taken  to  ensure that  ad insured is  available  to cover  the  consignment  to be  despatched.

c. Special  Declaration  Policy  –
equate sum For  covering  inland transit  of  goods  wherein  the  value of  goods  transported during  one  year  exceeds Rs.20 mns. Although the  premium  for  the estimated  annual  turnover  [i.e. the estimated value  of  goods  likely  to be  transported during the  year]  has  to be  paid in  advance,  attractive  discounts  in premium  are  available.

d. Multi-transit  Policy: For  covering  multiple  transits  of  the  same  consignment including  intermediate storage and  processing. For  e.g. covering goods  from  raw  material supplier’s  warehouse  to final  distributor’s  godown  of  final  product.

For  Import/Export:
a. Specific Policy  –  For  covering  specific  import/export  consignment.

b. Open  cover  –  This  policy  which is  issued  for  a  policy  period of  one  year  indicates the  rates, terms  and conditions  agreed upon by  the  insured and insurer  to cover  the consignments  to be  imported or  exported.

A declaration is  to be  made  to the  insurance company  as  and  when  a  consignment is  to  be  sent along  with  the  premium  at the  agreed. The  insurance company will  then  issue a certificate  covering  the declared  consignment.

c. Custom duty cover rate: This  policy  covers  loss  of  custom  duty  paid in  case  goods arrive  in damaged  condition.  This policy  can be  taken  even if  the  overseas  transit  has  been covered by an insurance  company  abroad, but it  has  to be  taken before  the  goods  arrive  in India. Add  on  covers Inland transit  policies  can be  extended to cover  the  following  perils  on pay ment  of additional premium :

i. SRCC  –  Strike,  riot and  civil commotion  (including  terrorist act)

ii. FOB  – Where  the  inland transit  is  required to  be  extended to  cover  the  goods  till they  are  loaded on board  the vessel, this  extension  can  be taken. Export  /Import  policies  can  be  extended to cover  War  and /or  SRCC  perils  on payment  of  an additional  premium. Who can  take  the  policy The  contract  of  sale  would determine  who buys  the  policy.

The  most  common contracts  are:

— FOB (Free on Board)

— C & F (Cost  & Freight)

— CIF (Cost,  Insurance  &  Freight)

In  FOB  AND  C&F  contracts, the  buyer  is  responsible  for  insurance. Whereas  in CIF contracts  the  seller  is  responsible  for  insurance  from  his  own premises  to that  of  the purchaser.

How to  select  the sum  insured: The sum  insured or  value  of  the  policy  would  depend upon the  type  of  contract.

Usually, in addition to the  contract  value  10 to 15%  is  added to take  care  of  incidental  cost.

How to claim:
The  following  steps  should be  taken by  the insured in event  of  a  loss goods insured :

i. Take  immediate  steps  to  minimise  loss or  damage to inform  nearest  office  of  the  insurance  company  or 

ii. Claim  settling  agent  mentioned in the  policy.

In  case  of  damage  to  goods  whilst  on ship or  port, on arrange  for  joint  ship  survey  or port  survey. Lodge  monetary  claim with  carrier  within  stipulated  time  period.

Submit duly assigned  insurance  policy/certificate  along  with  the  original invoice and other  documents  required to substantiate  the  claim  such as:

-Bill of  Lading (B/L)
-AWB/GR
-Packing List
-Copies  of  correspondence  exchanged with carriers.
-Copy  of  notice  served on  carriers  along  with acknowledgment/receipt.
-Shortage/Damage Certificate issued  by  carriers.

Survey  fees: These fees to be  paid to the  surveyor  appointed by  the  insurance  company. will be  reimbursed  along  with  the  claim if  the  claim is  otherwise admissible. Survey  report  submitted  by  Surveyor.

Hope these basic structure of Marine Insurance will help you in buying appropriate policy for your consignment, for further you are welcomed to contact at:

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khansworld@rediffmail.com
(Author is an Export Entrepreneur, Journalist, Engineer and Social Activist for Cruelty Against Animals…