Marine Insurance Policies

Most of the world's business in marine insurance is centred in London though there are other important markets.

At the heart of these activities is Lloyd's, a London corporation of insurers who issue most kinds of policy but are especially active in marine insur­ance.

Lloyd's membership comprises insurers (or underwriters as they are called) and brokers. The underwriters work in syndicates specialising in different types of risk.

All insurance business with an underwriter member must be placed through Lloyds brokers, but anyone who chooses to place business with insurance companies rather than with Lloyd's may employ any broker, or may deal with the matter directly.

Under the Marine Insurance Act of 1906 all marine insurance contracts must be in the form of a policy.

Marine policies may be either valued or unvalued. A valued policy1 is the one based on values agreed in advance, that is on the stated value of the invoice, plus insurance, freight, and an extra percentage of 10%, 20%, or 30%, etc. profit margin for the consignment.

An unvalued policy is the one, when the value of the goods has not been agreed in advance and is assessed at the time of loss (within the limit of the sum insured). This means the consignor will, if his goods are damaged or destroyed, get the market price as compensation. The owner of the bill of lading has the right to claims of compensation. All consignments can be covered against all risks in the form of a valued or unvalued policy. These policies are subdivided into voyage policies, time policies, mixed policies and floating or open policies.

Voyage policy, like a voyage charter, covers a particular ship for a stated voyage (e.g. London to Melbourne,).

Time policy insures goods or, the vessel for twelve months, e.g. 1 September 2004 to 31 August 2005.

Mixed policy combines the features of both time and voyage poli­cies. It covers a voyage from A to В and then for a further period of time. This may be used when a ship is going from, say, Southampton to Bermuda, then doing a series of trips from Bermuda to ports along the North American coast.

Floating policies are sometimes used by merchants engaged in regular overseas trade. A policy of this kind covers a number of shipments by any ship to any port or ports that may be agreed. The merchants take out a policy for a round sum, say $ 100000. As each consignment is shipped it is declared on a special form provided by the underwriter who records the value on a duplicate copy of the policy and issues a certificate "of insurance stating that the consignment is covered. When the sum insured has been fully declared (or, used up), a new policy is taken out. Floating policies are sometimes referred to as "Open" or "Declaration" policies; but they are not greatly used today, being largely replaced by long-term policies issued on open cover.

Open cover policies extend the floating policy principle and cover all shipments for certain voyages or trades for an extended period, usu­ally a year, irrespective of their aggregate value, which may not be known, but with a specific limit for each shipment. The arrangement avoids any risk that a shipment will be left uninsured through over­sight.

Questions:

1. What is Lloyd's? How do they operate?

2. What is a valued/unvalued policy?

3. What are the above policies subdivided into? Characterise them.

Claims

Claims for loss or damage should always be made promptly by letter and supported by whatever information or evidence can be offered at the time.
If a claim relates to goods delivered it should be made immediately the loss or damage is discovered:

1. To the insurer, if the goods have been insured by the buyer.

2. To the seller, if the insurance has been taken out by them.

Companies and individuals make claims for loss, damage or accident by filling in a claims form, which tells the insurance company what has happened. If the insurers accept the claim, often after an investigation, they will then pay compensation.

Policies may be issued to cover "All risks", or they may contain clauses! relieving the underwriter of certain risks.

If the insurers cover consignments under all risks policies they will allowl compensation in the event of war, strikes, civil disturbances, etc. The premium for an all-risks policy is naturally higher than that for a policyl with exemptions.

The compensation which is paid for loss or damage depends on types! of risk the insured is cpvered against.

As we have seen, all risk policies generally cover against every eventuality. However, clauses should bе studied carefully. Average is a term used in marine insurance to refer to partial losses, Particular average means partial loss or damage caused by accident to the ship or to some particular cargo.

Such losses are borne by the owner of the particular property suffering the damage.

General average on the other hand refers to loss or damage carried out intentionally for the common good at the time when a ship and its cargo are in danger, as when the cargo is thrown overboard to save the ship in a storm. Losses of this kind are shared by all who have financial interest in the venture in proportion to the value of their interests. As a rule, the manufacturer or merchant insures goods "against all risks" and receives a WA policy containing a "with average clause". This means that the underwriters pay for partial losses. Under an FPA policy, which contains a "free from particular average" clause, the underwriters pay only for total losses. An FPA policy will therefore be issued for a lower premium than a WP policy.

If a policy is free from particular average, in the case of deliberate damage, i.e. damage caused to save the rest of the cargo, as in, say, the case of a fire in a ship, only total loss will be paid by the insurance com­pany, and partial loss in the case of major disasters, e.g. fire or collision. If the policy has a with particular average clause, then partial loss will be compensated. Therefore, a policy with a WPA clause will cost more. As in the case of large claims in non-marine insurance average adjust­ers, i.e. assessors, are called in to examine damage and estimate com­pensation. In a c.i.f. transaction, the exporters transfer their right to com­pensation, as the importer holds the bill of lading. In f.o.b. and c. & f.. transactions importers hold the insurance policy as they arrange their own insurance.

Questions:

1. How soon should claims be made?

2. What is the procedure of getting compensation for loss, damage or accident?

3. Why do some companies prefer to have an all-risks policy?

4. What does a premium depend on?

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