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CHAPTER 7- INSURANCE & CLAIMS

JLB40103- ELEMENTS OF SHIPPING

By
Rayner W S Tan (CMILT,UK) (MLogM)
Senior Lecturer
UniKL Mitec

For your info,


This is a BASIC learning / understanding on
Marine Insurance purposes.
To master in this field, further training by
experts in Insurance field are needed, is a long
process.

In actual Shipping industry practices,..


Most of Liners / Ship=owner / Shipping
Co. are well equipped with all clause, to
avoid claims and protecting interest.
E.g.: FCL status of Bill of Lading have
stated Shipper Load & Count.
Claim limitation stated.

Marine Insurance
Codified in the UK Marine Insurance Act 1906
(MIA)
Institute Cargo Clauses (A), (B) & (C)
Institute Time Clauses Hulls
Valued Policy, Unvalued Policy & Open Cover

MARINE CARGO INSURANCE


Codified in the UK Marine Insurance Act 1906
(MIA)
Institute Cargo Clauses (A), (B) & (C)

Valued Policy, Unvalued Policy & Open Cover

Institute Cargo Clause (ICC) (ICC)A


all risks "cover

highest premium
Cl. 1: covers all risks or loss or damage to cargo
Exclusions: Cl. 4-Cl. 7 e.g.. Ordinary wear & tear

ICC (B)
mid-range cover

Cl. 1: covers specific perils e.g.: fire/jettison


Exclusions: Cl. 4 - Cl.7 e.g. Inherent vice

Why Insure ?
Common practice in the commercial world
Protection against financial losses
resulting from damage, pilferage, theft and non
receipt of entire or part of a consignment.
Protection against financial claims that
can be made against the owner of goods on
board a vessel in case of a declared general
average (the goods themselves being
undamaged).

CONTRACT OF INSURANCE
In between the insured and insurer
INSURED:-

INSURER:Policy:-

Party effecting insurance,


(Individual, Company, Firm,
Corporate body etc., with
legal status)
Party granting the protection
under an insurance policy.
Is the evidence of contract

Fire On Board

CASUALTY AT WHARFTSIDE

What is Particular Average and


General Average?
Particular average means damages sustained by
goods only, or by the ship only.
General average means the loss and the
expenditure, voluntarily incurred, to
prevent the entire loss of a vessel and her
cargo on board.
Example: Fire on board, heavy weather disabling
the ship All the expenses resulting from the event
will be shared between the owner of the ship and
owners of the cargo.
Assessment done by Average Adjuster

Definition of General Average


Modern definition of general average is all loss
which arises in consequence of extraordinary
sacrifices made or expenses incurred for the
preservation of the ship and cargo losses within
general average, and must be borne
proportionately by all who are interested.

What to Insure?
Value of insurance calculate as below:
Cost of goods + freight and shipping cost
PLUS an uplift of 10% to cover administrative
expenses and increases in price of goods have to be reordered.
Insurance Value= (Value of goods + Cost of Transport) x 1.10
Additional risks is vary from commodity, they are not same for iron
pipes and vehicles for instance.

Insured at maximum extend if buyer negotiating a floating policy


where all usual risks and special coverage are included.
If coverage is arranged case by case, the request coverage should
specify what is required; normally all risks, war, strike and civil
commotions.

How To Insure?
Through Supplier
Contract placed CIF (Cost Insurance Freight) ,
relieves buyer of the task of making insurance
arrangement.
Disadvantage:
Supplier obliged only buy the cheapest insurance
coverage.
Consignee no continuity or standardization in
procedure. Insurance contract is placed with a
different company by someone acting on behalf of
the buyer only.

How To Insure?
Self Insurance
When buyer decides not to insures outside and
choose to bear risks of transportation.
Common practices- small consignment with low
value.
The overall risks should be limited, so there are no
disastrous consequences in case of loss.
This type usually gives problem in yearly budget
as settlement of claims can drag for years.

How To Insure?
Floating Policy With An Insurance
Company
Adopted by many commercial firms with regular
flow shipment.
Floating (an open) policy is the results of
negotiation between parties.
The larger amount of business for the insurer, the
better the terms they are prepared to offer.
Consignee benefits with dealing with the same
insurance agent., under same terms with
standardization of reporting claims.

Insurance Documents
Insurance Certificates-

A furtherance of the policy to cover consignment in


transit, to describe them, the journeys, the amount covered,
agents to contact destination and other details that relevant
to the insurance.
Insurance certificates signed by insurance
underwriters.
Original certificates normally required in the set of
documents presented to a bank for transaction covered by
letter of credit.
When not required for bank purposes and to cut
administrative work certificates change to simpler
notice where only agent to contact at the destination need
to be added. This usually arranged by agreement between
the holder of a long term agreement and insurance
company.

Insurance Documents
Survey Report
Documents established by insurance
companys agent at destination when
consignment received in bad order.
Since its expensive should be requested when
it is expected loss or damage will exceed the figure
considered reasonable by the underwriters or
when a survey report registered by the insurer.
Basis of settlement of an insurance claim
and can be accompanied by an estimate of
repair approved by the surveyor.

Making a Shipping Claims

Insurance Claims
Documents required to Process Claims:
1- Survey report or Senior Officers report,
according to the extend of damages.
2- Estimates and/or invoices for the cost of
repairs, goods which have to be procured
and send for local purchase of replacement
parts, whenever possible, approved by the
surveyor to facilitate settlement.
3- Copy of the invoice for the original
shipment.
4-Copy of claim letters to the responsible
party and response(s) and
5-Short landing certificates or certificates
of loss when entire cargo is missing.

DEFINE YOUR CLAIM


Who are you claiming against ?

Under which contract are you claiming ?


What is the breach ?

CLAIMS PROCESS AND STRATEGIES

INCIDENT
CAUSING LOSS

IS THE
PROXIMATE
CAUSE
AN INSURED
PERIL or
EXCEPTED
UNDER POLICY ?

MITIGATING
LOSS

CLAIMS PROCESS

CLAIMS
SUBMISSION

CLAIMS
INVESTIGATION

CLAIMS
APPROVAL
or REJECTION

MARINE CARGO INSURANCE


The contract of marine insurance is a special
(insurance) contract of indemnity which
protects against physical and other losses to
moveable property and associated interests, as
well as against liabilities occurring or arising
during the course of a sea voyage.
S. 1 of MIA 1906: A contract of marine
insurance is a contract whereby the insurer
undertakes to indemnify the assured, in manner
and to the extent thereby agreed, against marine
losses, that is to say, the losses incident to
marine adventure.

WHO CAN INSURE?


Insurable interest S5 MIA
(1) Subject to the provisions of this Act, every
person has an insurable interest who is
interested in a marine adventure.
(2) In particular a person is interested in a
marine adventure where he stands in any legal
or equitable relation to the adventure or to any
insurable property at risk therein, in
consequence of which he may benefit by the
safety or due arrival of insurable property, or
may be prejudiced by its loss, or by damage
thereto, or by the detention thereof, or may
incur liability in respect thereof.

Marine Cargo Insurance


( Compensates Cargo Owner)

Marine Hull Insurance


( Compensates ship-owner)

The End, Thank you students.