What is insurance?
Insurance is protection
against future loss
Also means
promise of reimbursement in the case of loss, paid to people or companies so
concerned about hazards that they have made prepayments to an insurance
company.
Insurance is broadly divided into two categories
General Insurance -:
General insurance or non life insurance policies includes automobile and
homeowner policies provides payment depending on the loss from a particular
event.
Marine Insurance -:
Marine insurance covers the loss or damage of ship, cargo, and any transport or
cargo by which property is transferred between the points of origin and final
destination.
Protection
and Indemnity Clubs (P&I clubs)
What are P & I
clubs?
Protection
and indemnity insurance more commonly known as P & I club. Insurance which
is a form of marine insurance provided by a P & I club and is a mutual
insurance association that provides cover for its members who typically be ship
owners, ship operators etc. Unlike a marine insurance company which is
answerable to its shareholders similarly P & I club is only responsible to
its members.
Following
are some of the P & I clubs
The
Standard Steamship Owners Protection & Indemnity association Ltd.
North
England P&I Association.
The
Steamship Mutual Underwriting Association.
The
Sweden Club.
The
West of England Ship Mutual Ins. Association.
Schutzveren
Detacher Raeder VAG, Hamburg.
The
Ship Owners Protection & Indemnity Association Ltd.
In
the above diagram (01) vessel operator approaches the xyz to handle their ship.
xyz looks (02) for the ship in the respective P & I clubs of which they are
representative and asks for confirmation. After they get (03) confirmation from
the P & I club they handle the ship. If the ship operator needs some survey
to be done (05) xyz gets its done and charges the ship operator for the
services (07). In case the ship operator fails to pay the amount due than xyz
seeks help from the P& I club to recover the amount due.
Diagrammatic representation of Issuance of policy
XYZ is an
intermediary to the Insurance Co. and the Insured.
If the customer
wants to insure his goods, he will contact XYZ will select those insurance
company which will offer lesser premium to insure his goods then he will be
given a Proposal Form by the XYZ, in this form insured have to fill all the
information of the goods, its value, and the owner of the goods and all the
information required before getting the policy.
After the
Proposal Form is submitted then the cheque will be issued by the Insured to the
XYZ and then the cheque will be transferred to the Insurance Company. After the
submission of the cheque, then the Insurance Company will issue the policy to
the XYZ along with the receipt. XYZ will then retain the Original copy with
them and issue a duplicate copy to the insured.
Renewal
of the Policy: Renewal notice is send to the
insured one month before the expiry of the policy, just in case if the insured
forgets he comes to know that he has to renew the policy. Renewal notice
includes insured name, policy no, sum insured, premium expiry date and Description.
Types
of Insurance Policy
1.
Declaration Policy:
This policy applies to marine open cover and minimum sum insured is 01 core and
as per policy one can get maximum 50% of refund.
2.
Floater Policy:
floater policies applies to those goods which are stored in warehouses but in
different locations.
3.
Valued Policy:
This policy applies to only those goods which can be valued.
4.
Unvalued Policy:
This policy applies to unvalued goods.
Section 64VB
Section 64VB
states that unless and until you will not pay the premium the risk will not be
covered. So if the insured does not pay the premium and his goods gets damaged
than his claim will be conceded.
Principles of
Insurance:
Utmost Good
faith: The insurer while taking the policy should declare all the necessary
information to the insurance company and should not hide anything.
Subrogation:
when there is total loss insured gets all his cover but in return he gives the
damaged property to the insurance company, this is called surrendering your right.
Contribution:
means insurer insures his property with two different insurance company this is
called co-insurance, here one of the insurance company is lead company with
greater share of sum insured.
Insurable
Interest: means the one who has taken the policy should suffer the actual loss
and the property insured must be his own property and not someone else
property.
Indemnity: this
means when one suffer loss the insurance company bring him back to the original
position before the incident happened.
Proximate Cause:
proximate cause is the actual cause why the insured suffered the loss or
damaged his property.
Some important terms in
Insurance
Cover
note / Held cover letter: is issued in time of
urgency, when issuing of policy takes time due to some reason or so and is only
valid for two months and the insured cannot claim for damages or loss of goods
on basis on cover note or held cover letter. This is only to certify that one
has taken insurance policy.
Enhancement
and Endorsement: Enhancement means increase in sum
insured and Endorsement means any change in name, place etc.
Under
insurance: when the declared value of the property
is less than the market value of the property it is said to be underinsurance.
NCB:
NCB means no claim bonus. You get this bonus only on motor insurance policies
and the maximum limit of discount one can get is 50% on premium.
Reinsurance:
reinsurance is done when one insurance company exceeds its capacity to insure
the property and insures the property with another insurance company.
Calculation of premiums
Transit
Insurance Premium = Sum Insured * 10% *
Rate (given by insurance co.) * Service
Tax (12.36%) + Rupee 1 for Stamp Duty.
Motor
Insurance Premium = Sum insured * Rate * IMT23% * NCB – Dedctables – Third
Party + legal liability * service tax.
Inland Transit Clause
Here the Insurance of the Goods are done
only during transit period. The policy starts when the goods are dispatched and
ends after the goods get delivered to their destination.
There are different terms in this policy:
ITC-A
= Here insurance of New goods are done during the transit. As the goods are new
pre dispatch survey is not required unless the goods have been unloaded in
between.
ITC-B
= Here the insurance of second hand goods are done, and in this case pre
dispatch survey is must before sending the goods.
ITC-C
= Here goods which has to be repaired are sent and pre dispatched survey is not
required.
