In marine insurance, the main risk elements are loss or damage to insured cargo and hull due to various mishaps resulting in the total or partial loss claims. The extent of the loss or damage is the main factor that influences the level of claims. Various documents were provided by the Insurance company for underwriting, claims handling and other operational procedures entailing to Marine Cargo. These were evaluated and are described in this section.
Marine Cargo Underwriting
Conditions of Insurance
As a matter of maintaining a good flow of policy wordings, the cover is always represented in the policy as per Standard Institute Clauses. Occasionally, however, it may be necessary to issue tailor made policies to suit the requirements of major clients. In such cases, also, standard conditions are not altered without Head Office approval.
It is important to make sure that the quality of risk and previous experience (loss and insurance history) of clients are given due consideration while pricing and deciding the scope of cover and terms. In order to avoid any ambiguities, only relevant Conditions, exclusions and narrative are included as far as possible in the schedule.
Marine Cargo Open Cover
Marine Open Cover is mostly, but not always, an annual contract wherein terms and conditions are agreed to Cover shipments which fall within agreed parameters, The Assured has an obligation to declare shipments on an agreed frequency, for an example individually, weekly, fortnightly or even monthly. Even if there is no shipment within the agreed period, it is declared as "Nil" to avoid any Omissions. It is very important to ensure that the goods which are intended to be covered under the open policy are falling within the description of Interest under the policy.
An Open Cover is more beneficial to a Trader who has frequent shipments along with a sizable insurable turnover. For a insurance company having a lower turnover, it is advisable to offer an open cover with an Annual Minimum Deposit Premium.
Marine Cargo Single Policies
Single Policies / One off Policies are issued to cover only a particular shipment. Clients who do not have regular movements are offered single policies and Shipment Advice is sent to Underwriters prior to commencement of the transit and terms & conditions are agreed in advance.
For high value shipments, it is recommended to obtain proper underwriting information prior to quote. Our maximum underwriting limit as authorized should not be crossed. It is also Inquired whether any oversized cargo is involved in order to decide applicable Oversized Cargo Warranties,
Stock Throughput Insurance
Customers who import, store and redistribute cargo benefit from an extended insurance protection for goods from origin all the way to destination under a single policy. Cover is attached by the Insurance company from the Manufacturer's warehouse or Originating Port (depending upon the countries involved) till the goods are redistributed to final customers in the destination including storage cover, prior to distribution, for an agreed period. Since the Insurance company covers Storage Risks within nominated Warehouse (s), a pre-acceptance warehouse Survey is compulsorily required.
All requests and enquiries on Stock Throughput Cover are referred to Marine Underwriting department in the Head Office.
Goods In Transit Process
Goods in Transit Policies provide cover against loss of or damage to cargo carried by road and rail. Annual Policies are issued under which transits are automatically covered, subject to terms & conditions. A deposit premium is charged at the inception of the policy calculated on the Estimated Annual Carryings. The premium so charged is then adjusted at the expiry of policy period based on Actual Turnover. No individual declarations are required as the cover is automatic and premium is paid upfront.
Branches are authorized to underwrite direct Marine Cargo Open policies, Single policies and Land – Transit Covers as per the limits defined in Delegation of Underwriting Authority. Covers in excess of the limits defined in Delegation of Underwriting Authority are referred to the Head Office. All reinsurance protections including Facultative Reinsurance and Facultative Incoming business are handled only by the Head Office.
Renewal terms under Open Covers are sent to insured, at least one month prior to expiry of the policy after the following have been reviewed:
- Frequency and severity of claims: Head Office is notified if loss record is above 60% under expiring policy. It is also checked whether the client has achieved the Estimated Annual Turnover
- Any alteration in the risk profile
- Whether there were any shipments beyond the agreed open cover parameters
- New acquisitions of the assured and the increase of Estimated Turnover if any
- It is also important to implement our wordings/clauses are mentioned in our wordings, For Example – Sanctions Limitation and Exclusions Clause –
The following actions is taken after renewal review:
- If the loss ratio is below 40%, renewal is invited at expiring terms and conditions.
- If the loss ratio is above 40%, suitable increase in rates and/or modification in existing conditions/warranties is considered
Web Cargo Facility
Web Cargo is a very important tool for our customers and brokers who can obtain marine cargo insurance certificates under their open policy online. This online facility provides speedy and convenient service and it is required to ensure that our clients and brokers are utilizing this facility constantly. It is also to be ensured that the online facility meets the requirements of the users and remains competitive and convenient in comparison to the online facilities of the competitors.
Important aspects of risk evaluation in marine cargo individual / open policies concern the Assured, the goods to be insured and the insured value.
Regarding the insurance value, the Insurance company gives particular attention to high value single shipments particularly when the assured is new and unknown, and insists on invoice / Packing List / Vessel Details for high value shipments
In the case of Open Covers, it is checked whether the Insured Value is within the Limit of Liability for any one vessel/aircraft/conveyance agreed in the open Cover
The Carrying Conveyance
Ownership of the vessel is checked as well as Age, Classification, ISM and P&J of the sea vessel. It is also noted whether the vessel is chartered only for the subject consignment which is to be insured. Then more details of ownership/management/charter agreement of vessels are sought in view of any potential recovery in the future in the event of loss.
It is noted whether it is a regular airline or a chartered one. It is also checked whether the aircraft is chartered only for the subject consignment which is to be insured. Then more details of ownership/management/charter agreement of aircraft are sought in view of potential recovery in the future in the event of loss.
Road Transportation: Limit per conveyance:
It is considered by the Underwriting department that are vehicles/trucks suitable for the intended voyage/transit, whether open or closed truck, whether carried in own vehicles or hired vehicles. Moreover, if hired then whether vehicles owned by a registered transportation insurance company as well as existence of a Liability Cover as this is important for in case of potential recoveries in the future in the event of loss.
It is very important to check DDPH (Departure/Destination/Policy Holder) when any Marine Cargo Risk is ceded to the Insurance Company’s Marine Cargo Treaty because the treaty covers shipments provided either Departure/Destination/Policy Holder is within the country or region.
Claims Processing, Approval, Settlement and Settling Authority
No claim is settled unless the Loss Adjuster/ Surveyor has submitted his final report with his opinion on the cause of loss and the extent of loss quantified, in claims where Loss Adjuster has been appointed.
Upon receipt of the final report, claims are processed subject to the terms, conditions and exclusions of the policy and the Standard Operating procedures prescribed by the insurance company.
All documents in support of the claim necessary for the processing of the claim are obtained from the parties concerned, prior to processing the claim for settlement.
To ensure all documents essential to pursue recovery, post settlement of claim is obtained prior to placing the claim for approval and settlement.
Scrutiny of all documents submitted is performed for its validity and correctness prior to processing for settlement.
Any deviations observed are referred to the insured/Surveyor immediately for their necessary clarification prior to approval for settlement.
The insurance company endeavors to settle claims net of salvage wherever and whenever possible. Where the insured agrees to retain salvage, the salvage price is determined by the Loss Adjuster and mutually agreed by the Insurer and the Insured.
Where the Insured is not willing to retain the salvage, and agrees for disposal of the same, arrangements are made to dispose of all salvage as expeditiously as possible to ensure maximum salvage realization and to avoid storage cost in incurring the incidental costs of disposal.
To co-ordinate with the surveyors for their periodic and timely updates on salvage disposal, measures are taken by the Insured for safe custody of the salvage, the market for the salvage and the price it could be expected to fetch.
The insurance company takes over salvage only where there are no other options to dispose of the same in the market, after evaluating that the salvage has no inherent cost such as demurrage and disposal costs.