Marine Insurance Types

7/31/2019 Marine Insurance Types

1/79

NATURE OF MARINEINSURANCE CONTRACT


2/79

definition


3/79

MARINE INSURANCE IS A CONTRACT UNDERWHICH THE INSURER UNDERTAKES TOINDEMNIFY THE INSURED:

IN THE MANNER AND TO THE EXTENT THEREBY

AGREED AGAINST MARINE LOSSES, INCIDENTALTO MARINE ADVENTURES.

IT MAY BE DEFINED AS A FORM OF INSURANCECOVERING LOSS OR DAMAGE TO:

VESSELS OR TO CARGO DURING TRANSPORTATION


4/79

Marine insurance

marine insurance business means the business

of effecting contracts of insurance upon vessels ofany description, including cargoes, freights andother interests which may be legally insured in or

in relation to such vessels, cargoes and freights,goods, wares, merchandise and property ofwhatever description insured for any transit byland or water or both, and whether or notincluding warehouse risks or similar risks inaddition or as incidental to such transit and

includes any other risks customarily includedamong the risks insured against in marineinsurance policy.

Section 2(13)A of the insurance act 1938


5/79

Section 2 (13) A of the

Insurance Act 1938 definesmarine insurance as

follows:-


6/79

Marine insurance business

means the business of

effecting contract ofinsurance upon vessels of

any description, includingcargoes, freights

CARGO REFERS TO:

THE GOODS AND COMMODITIES CARRIED

DURING TRANSIT BY: RAIL, ROAD, SEA OR

AIR FROM ONE PLACE TO ANOTHER.

THE CARGO TRANSPORTED BY SEA

IS SUBJECT TO MANIFOLD RISKS SUCH

AS:

LOSS OR DAMAGE AT THE PORT AND

LOSS OR DAMAGE DURING THE VOYAGE.

Freight is to be payable for the

carriage of cargoes or if the vessel, is

chartered, the money to be paid for the

use of the vessel.

The carriage is unable to earn freight if

the goods or properties are not safelytransported


7/79

and other interests which

may be legally insured in orin relation to such vessels,

cargoes and freights, goods,

wares, merchandise andproperty of whatever


8/79

description insured for any

transit by land or water or

both, and whether or notincluding warehouse risks or

similar risks in addition or asincidental to


9/79

such transit and includes

any other risks customarilyincluded amount the risks

insured against in marineinsurance policies.


10/79


11/79

HULL INSURANCE

Insurance of vessel and its

equipments are included under hullinsurance.


12/79

CARGO INSURANCE

The cargo maybe of anydescription, for example,

wares, merchandise,property, goods and so on.


13/79

FREIGHT INSURANCE

Freight is to be payable for

the carriage of cargoes or if

the vessel is chartered, the

money to be paid for the useof the vessel.


14/79


15/79

LIABILITY INSURANCE

The marine insurance policymay include liability hazards

such as collision or running

down.


16/79

ELEMENTS OF MARINEINSURANCE CONTRACT


17/79

The marine insurance has

the following essential

features which are also

called fundamentalprinciples of marine

insurance.


18/79

Features of General

ContractInsurable Interest

Utmost Good Faith

Doctrine of Indemnity


19/79

Subrogation

Warranties

Proximate cause

Assignment and

nomination of the policyReturn of premium


20/79

FEATURES OF GENERALCONTRACT


21/79

PROPOSAL

The broker will prepare a

slip upon receipt ofinstructions to insure from

ship-owner, merchant or

other proposers. Proposalforms,


22/79

so common in otherbranches of insurance, are

known in the marineinsurance and only the slip

so called the original slip is

used for the proposal


23/79

The original slip is

accompanied with othermaterial information which

the broker deems necessary

for the purpose.


24/79

ACCEPTANCE

Underwriters or other

insurers or to the Lead ofthe insures, who initial theslip and the proposal isformally accepted.


25/79


26/79

The slip is an evidence that

the underwriter has

accepted an insurance andthat he has agreed

subsequently to sign apolicy.


27/79

ISSUE OF POLICY

Having effected the

insurance, the broker will

now send his client a cover

note advising the terms andconditions


28/79

on which the insurance has

been placed. The brokers

cover note is merely aninsurance memorandum and

naturally has no value in

enforcing the contract with

the underwrites.


29/79

INSURABLE INTEREST

An insured person will have

insurable interest in thesubject matter where he

stands in any legal or

equitable relation


30/79

to the subject matter in a

such a way that may benefitby the safety or due arrival

of insurable property or may

be prejudiced by its loss,


31/79

or by damage thereto or by

the detention thereof or mayincur liability in respect

thereof. Since marineinsurance is frequently

effected before the

commercial transaction


32/79

to which the apply are

formally completed it is notessential for the assured to

have an insurable interest at

the time of effectinginsurance,


33/79

though he should have an

expectation of acquiringsuch an interest. If he fails to

acquire insurable interest indue course, he does not

become entitled to

indemnification.


34/79

. Since the ownership and otherinterest of the subject matter

often change from hands tohands, the requirement of the

insurable interest to be present

only at the time of loss makes amarine insurance policy freely

assignable.


35/79

EXCEPTIONS

There are two exceptions of

the rule in marine insurance.


36/79


37/79

In such cues the assured

and the under writer are

ignorant about the safety orotherwise of the goods and

complete reliance wasplaced on the principle of

Good Faith.


38/79

The policy terminated ifanyone of the two parties was

aware of the fact of loss. In

this case, therefore, the

insurable interest may not be

present at the time of contractbecause the subject-matter

would have been lost.


39/79

P.P.I. POLICIES

P.P.I. ( Policy Proof of

Interest), i.e. interest proof

policies.

The insurable interestmarine insurance can be of

the following forms:


40/79

1.ACCORDING TO

OWNERSHIP

The owner has insurableinterest up to the full value of

the subject-matter. The owners

are of different types accordingto the subject-matter.


41/79

IN CASE OF SHIPS

The ship-owner or any

person who has purchased

it on character-basis can

insure the ship up to its fullprice.


42/79

IN CASE OF CARGO

The cargo-owner can purchase

policy up to the full price of thecargo. If he has paid the freight

in advance, he can take the

policy for the full price of thegoods plus amount of freight

plus expense of insurance.


43/79

IN CASE OF FREIGHT

The receiver of the freightcan insure up to the amount

of freight to be received byhim.


44/79

INSURABLE INTEREST IN

RE-INSURANCE

The underwriter under a

contract of marine insurance

has an insurable interest in hisrisk, and may re-insure in

respect of it.


45/79

3. INSURABLE INTERESTIN OTHER CASES

In this case all thoseunderwriters are included

who have insurable interestin the salary and own

liabilities.


46/79

. For example, the master or any

member of the crew of a ship hasinsurable interest in respect of his

wages. The lender of money on

bottomry or respondentia hasinsurable interest in respect of the

loan.


47/79

UTMOST GOOD FAITH


48/79

The doctrine of caveat

emptor (let the buyerbeware) applies to

commercial contracts, butinsurance contracts are

based upon the legal

principle of uberrimae fides

(utmost good faith).


49/79

But the duty of disclosure of

material facts rests highly on

the insured because he is

aware of the material

common in other branches

of insurance are not used inthe marine insurance.


50/79

DOCTRINE OF INDEMNITY


51/79


52/79

EXCEPTIONS

There are two exceptions of

the doctrine of indemnity in

marine insurance.


53/79

PROFITS ALLOWED

Actually the doctrine says

that the market price of the

loss should be indemnifiedand no profit should be

permitted, but in marineinsurance a certain profit

margin is also permitted.


54/79

INSURED VALUE

The doctrine of indemnity isbased on the insurable

value whereas the marine

insurance is mostly basedon insured value. The

purpose of the valuation isto predetermine the worth of

insured.

WARRANTIES


55/79

WARRANTIES

A Warranty is that by which

the assured undertakes that

some particular thing shall ofshall be fulfilled or whereby he

affirms or negatives theexistence of a particular state

of facts.


56/79

SEAWORTHINESS OF SHIP

The warranty implies that the

ship should be seaworthy atthe commencement of the

voyage, or if the voyage iscarries out in stages at the

commencement of each stage.


57/79

LEGALITY OF VENTURE

This Warranty implies that the

adventure insured shall belawful and that so far as the

assured can control the matterit shall be carried out in the

lawful manager of the country


58/79

OTHER IMPLIED

WARRANTIES

There are other warranties

which must be complied in

marine insurance.


59/79


60/79

PROXIMATE CAUSE

According to Marine

Insurance Act, Subject to

the provisions of the Act and

unless the policy otherwise

provides the insurer is liablefor any loss


61/79

proximately caused by a

peril insured against, but

subject to as aforesaid he isnot liable for any loss which

is not proximately caused bya peril insured against


62/79

The insurer is not liable for

any attributable to thewillful misconduct of the

assured, but unless the

policy otherwise provides,

he is liable for any loss

proximately caused by aperil insured against.


63/79

The insurer will not be

liable for any loss causedby delay unless otherwise

provided.


64/79

The insurer is not liable for

ordinary wear and tear,ordinary leakage and breakage,

inherent vice or nature ofsubject matter insured, or for

any loss proximately caused by

rats or vermin, or for any injury

to machinery not proximately

caused by maritime perils

NATURE OF INSURANCE


65/79

NATURE OF INSURANCEOF FIRE INSURANCE

DEFINATION AND

NATUREFire insurance is a device to

compensate for the loss

consequent upon

destruction by fire.

FUNCTIONS


66/79

FUNCTIONS

The system of fire insurance

cannot save the society fromthe economic loss to the

community to the extent ofthe property lost by fire,


67/79

but it compensates

someone and this saves himfrom a ruinous loss, at the

cost of group of some

others.


68/79

CAUSES OF FIRE

Fire waste is the result oftwo types of hazard viz.,

physical and moral.


69/79

PHYSICAL HAZARD: It refers

to the inherent risk of fire in theproperty which may occur due

to inflammable nature,construction, artificial lighting

and heating, lack of

extinguishing apparatus use ofthe property etc.


70/79

MORAL HAZARD: The moral

hazard depends upon the manas physical hazard depends on

the property. The property may

be set on fire by the owner or

by any person with his

willingness, carelessness andlack of sense of duty may also

increase the fire waste


71/79

Sometimes, when market price

is going down the owner canwillingly set fire on the property

and gain from the payment ofinsurance money. Thus, where

the property was destroyed with

the willingness of the property

owner, moral hazard exists.


72/79

PREVENTION OF LOSS

Insurance is meant forindemnification of loss and not

for prevention of loss althoughevery reasonable step can be

taken to eliminate it or minimize

it through the agencies engagedin prevention of loss.


73/79

INDEMINIFICATION OR

CURATIVE EFFORTS: Theinsurance provides protection

by indemnifying the financialloss suffered by insured

person which occurred

beyond the control of insured

and insurer.


74/79

PREVENTIVE EFFORTS: Fire

insurers stimulate the installationof protective device and better

types of construction throughgranting credit. They help in

installation of fire-fighting

apparatus, water supply and

engineering services.


75/79

REINSURANCE

Reinsurance is an arrangement

whereby an original insurer

who has insured a risk again

with another insurer, that is to

say, reinsures a part of the riskin order to diminish his own

liability


76/79

Insurance is a contract

between the insurer and the

original insured.

Reinsurance is a contract

between the reinsured (theinsurer) and the reinsurer.


77/79

REINSURANCE

Reinsurance is the transfer

of insurance business fromone insurer to another.


78/79

The insurer transferring the

business is called thePrincipal or ceding or

original office and the officeto which the business is

transferred is called for

reinsurer or guaranteeingoffice


79/79

ADVANTAGE OF

REINSURANCEReinsurance makes it possible

to accept each risk for the veryamount desired by the

proposer and to transfer the

excess above the retention

limit to another insurer.

Marine Insurance Types

Documents

Transcript of Marine Insurance Types