Introduction (History)
The origins of the marine insurance industry are found in Greek and Roman. The concept of maritime loan was the foundation of marine industry there. Around the 14th century in Genoa insurance contracts were entered into. Later on it spread across Northern Europe.
The LLOYDS of England were the ones who initiated the Marine insurance business. Their location for the business was LLOYD’S COFFEE HOUSE. The reason for initiating such a business was the increasing rate of industrialization.
This led to need for some assurance if the ships did not reach the shore and got damaged or sunk during their voyage.
The LLOYDS and Institute of London u/w came together in the end of the 18th century and created clauses for marine insurance which are applicable even today.
Marine Insurance
Marine insurance ensures the insurer of coverage of his losses in case the ship, cargo, freight and liability are damaged or sunk or the contract is not obeyed.
The major types of marine insurance are :
- Cargo
- Freight
- Liability
- Hull
Cargo Insurance
It covers the goods insurance that is carried on the ship. This insurance caters to protect the ship owners against the loss occurring from goods and services on the voyage.
Freight Insurance
It covers the losses occurring from the money lost while transporting the cargo. Hence it is the profit lost due to some damage to cargo.
Liability insurance
It covers the losses occurring from the damage of ship or loss of ship due to collision or crash. Hence the loss from the damage to the ship is reimbursed.
Hull Insurance
It covers the front and back of the ship along with some parts of furniture attached to the ship. All the technology that is included in the ship along with the machinery and propellers is covered in this type of insurance.
Marine insurance covers certain perils which are :-
- Fire and protection
- Perils of the sea
- Jettison (throwing of the cargo if needed)
- Breakage
- Accident
- Theft
- Barratry (fraud or gross negligence of a ship’s master or a crew at the expense of its owners)
- Non-delivery
- Pilferage (stealing things of little value)
Features of an Insurance Contract
- Acceptance
- Proposal
- Consideration
- Issue of policy
- Utmost good faith
- Indemnity and subrogation
- Proximate cause
- Return of premium
- Insurable interest
- Warranties (the person insured should take care that minimum loss occurs in every situation and that no loss is done voluntarily or else he/she might not get the claim)
Hull Insurance
As mentioned above hull insurance is related to vessels carrying cargo which includes the ship, propellers system and navigation system.
Ship that is a vessel is the main body or the main boat or fairy on which the entire journey is done.
Propellers are attached at the bottom end and they are fan-like structures which are essentially important.
Navigation system is the important part of a ship on which the entire direction is based, that is to say the ship moves on the basis of the direction shown by the navigation system.
Types of Hull Insurance Policies :
- Value policy – This policy keeps a note of the calculations of the cargo and ship before it gets on voyage. Hence by this way the valuations are decided upfront before sending the ship sails.
- Time policy – Every policy is valid for a specific time period. This mentions the same.
- Single vessel policy – It is applicable for small ships which have less cargo.
- Fleet policy – This policy covers multiple ships under one owner name. Hence it is the complete opposite of Single vessel policy.
- Voyage policy – It is a policy applicable per journey or one voyage in particular.
Cargo Insurance
Cargo insurance is related to the cargo which is laid on the ship and transported for the cause of freight and trade. As mentioned above it can be stated that it protects the interest of cargo holders in case of any negligence by crew or any other sea peril or catastrophic events. It is the lifeline of marine insurance as most of the part of marine insurance is covered by cargo. Cargo eliminates a major financial burden from the marine industry. The coverage is necessary because of many rules about the ship’s liability. Cargo insurance covers loss from specific Even the place where the cargo is stored decides the amount of coverage whether it is the deck or the storage (below deck). Hence many factors play a role in marine insurance. Perils covered usually include:-
Sinking
If any cargo is sunk due to negligence of crew it will be covered
Heavy weather
If the cargo gets dumped in sea to balance the ship or it gets damaged all due to bad weather it will be covered
Burning
Cargo burnt will be covered due to the negligence of the crew
Collision
In case of collision if any damage is caused to cargo it would be compensated
Earthquake
If due to earthquake there is any damage to cargo while transporting through road from port to godown
Derailment
While transporting the goods through train from port to port if loss occurs it will be covered
Theft
If the cargo gets stolen while the voyage or before reaching the destination it will be reimbursed
Non-delivery
If the cargo arrives late or the delivery is not done if in both cases there is a loss to the holder it would be reimbursed.
Policies Under Cargo Insurance
Floating policy – In this kind of policy the only thing mentioned is the amount of insurance. The cargo carried or not is not at all mentioned. Also all the other details are omitted. This type of policy is feasible for frequent travellers.
Open policy – This policy has a very unique feature. Here the amount of ship or consignment is not at all described. The amount is taken into note once any incident or loss happens. Inspection is carried out and the ship and its cargo are valued and reimbursed.
Block policy – The policy has multiple usage. It covers every cargo dispatched through Air, Road and Waters. Hence it has all three types of damage protection available.
Conclusion
Insurance is always availed by all ships going into the sea due to high risk and huge amounts.
Perils are important for cover clauses
Negligence of crew also induces the insurer to cover the claim
It is not done by only one company in any contract. There is always a partnership of two or more companies as the amount involved is very huge and risk too is high.
Cases from History
Roro Ferry
It is a unique fairy between DAHEJ and GHOGHA. It is mainly for the transport of vehicles and till today no tragedy has taken place but yet it is a unique ferry between both the places and resulted in time reduction of travel by 4 hrs. I included it as cargo is not only related to goods and luxury items but also about the vehicles. Also as mentioned in above case cargo is inclusive of luggage of the customers. Hence the scope of cargo is really wide and the amount it encounters in premium is really huge.
Costa Concordia
This is the biggest insurance coverage case in the entire case of marine hull insurance history. The claim was of approximately 2 billion dollars which is almost 3 times the construction cost of the ship. The amount was inclusive of the damages in the ship and the compensation provided to the survivors. The reason for the damage was navigation system failure.
