Procedures of Marine Insurance Usually insurance is arranged by the exporter (under CIF terms etc. ) or the importer (under FOB, CFR terms etc.) approaching an insurance company which has a department specializing in cargo insurance. They may start by inquiring and choosing the right coverage and then negotiate insurance premium rates. Sometimes, brokers may be utilized whose assistance can be of enormous benefit as they are highly skilled specialists and can obtain sound and reliable coverage, together with competitive premium rates. In export trade, who will effect insurance depends on the particular trade terms adopted. Under CIF terms, it is the seller who arranges insurance with an insurance company. Under the terms as FOB, CFR, the buyer effects insurance, but he may ask the seller to arrange insurance on behalf of the buyer. An insurance policy is issued when goods are insured, but it is also usual for certificate of insurance to be issued for documentary purposes. An insurance policy is acrually a contract, serving as evidence of the arrangement between the insurer and the person taking out insurance. It forms part of the shipping documents.
In completing the insurance contract-the insurance policy-either party, buyer or seller, will undergo different steps, they are :
1. To apply for marine insurance
In some countries, the first step the insured party should take is to apply for insurance from a certain insurance company. The applicant should fill in the special form-the proposal form, which gives all the details concerning ownership, value, time span insurance will be for, risks and coverages, etc.
2. To determine the insurance value of the goods to be insured
Cenerally speaking, the value to be insured is based on the value of the commercial invoice; the need for maintaining adequate insurance has already been stressed. The recommended minimum amount is the total CIF value plus 10% for other fees and normal margin of profit. Probably the best way of determining needed insurance is to estimate the market value of the goods at the port of destination and to obtain coverage for that amount. Other methods of arriving at a valuation of goods may also be agreed,as determination of the value to be insured varies from country to country.
3. To determine the insurance average and coverage
Determining the right coverage sometimes can be easy, and sometimes difficult. The decision can be made only on the basis of the following factors : the nature of the product; packing considerations such as difference of air and sea transport; shipping route and ports consideration such as any transshipment on the way to the final port, etc. Based on the above factors , the insured may consider the averages and coverages. The average is closely linked with the goods and the goods,in return, are related with the coverage.
4. To determine insurance premium rates
The rates charged by the insurance company depend on many factors. The important determinants include the type of coverage desired, shipping routes, types of conveyances, duration of the voyage , and nature of the goods. Also important is each individual shipper's past loss experiences. Af'ter a period of favorable experience, rates may be lowered. Conversely,a shipper with a bad loss record may find his premiums increased. Generally, the greater the risks that the consignment is exposed to,the higher the premium will be. Premium for sending goods through the Persian Gulf,where the area is at a war, are much higher than sending oil through the Suez Canal. More exactly, the factors determining the insurance premium rates include the carrying vessel, nature of' the packing used, type of merchandise involved, nature of transit and related warehouse accommodation, previous experiences , the extent of cover needed and the volume of cargo involved.
5. To sign an insurance policy
Before filling in and signing an insurance policy, it is important to know what an insurance policy is and the kind of insurance policies. The most common policies being used now in the world today are msurance policy, insurance certificate and open policy , etc.
6. To lodge an insurance claim
Whenever an actual loss occurs ,it is important that the one having an interest in the goods can get fair, efficient, and rapid adjustment of his claims. A basic prerequisite for having a claim recognized by the insurance company is that the one making the claim has an insurable interest in the goods. Susceptibility to financial loss by the claim, if the shipment is lost or damaged,is sufficient to demonstrate an insurable interest. Claims can be made by the shipper,the buyer or even a carrier that has first lien on goods for unpaid freight charges. The one who registers a claim is not so easy. It needs patience, evidence and knowledge.
Most insurance company policies require that immediate notice be given to the nearest branch or agency in the event of damage giving rise to claim under a policy on goods. When notified of damage, the company's agent appoints a suitable surveyor to inspect the goods and to report on the nature and extent of damage. A common practice is for a report or certificate of loss incorporating the surveyor's findings to be issued to the consignees , the latter paying the fee. This certificate of loss is included with the claim papers and, if the loss is recoverable under the insurance cover,the fee is refunded to the claimants.
In some circumstances , the claim pap ers are returned to the place where the insurance was effected and subsequently to the underwriters. However, especially where goods are sold on CIF terms and the policy is assigned to the consignees;arrangements are made for any claims to be paid at destination. In such cases, the consignees approach the agents named in the policy for payment of their claims. Of course, the claims procedure will vary by circumstances but undoubtedly a quicker settlement should be secured in the event of loss or damage.
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