You are on page 1of 31

General Insurance Business

INTRODUCTION TO GENERAL INSURANCE


General Insurance sector in India dates back to 1850, when Tritron Insurance company, for general insurance was incorporated in 1907, the Indian Mercantile Insurance Co. Ltd was set up. Insurance Act was passed in 1928 but subsequently reviewed in 1938 In 1968, the Insurance Act, 1938 was amended.

CONTD.
Prior to 1973, general insurance was urban-centric 107 insurers including branches of foreign companies operating the country were amalgamated. GIC was incorporated as a company in 1972 GoI subscribed to the capital of GIC. GIC, in turn, subscribed to the following four companies :i) National Insurance Co. Ltd ii) New India Assurance Co. Ltd iii) Oriental Fire and general Insurance Co. Ltd iv) United India Insurance Co. Ltd

CONTD.
New players have also ventured into general insurance business. They are :i) Tata AIG General Insurance Co. Ltd ii) Bajaj Allianz General Insurance Co. Ltd iii) Reliance General insurance Co. Ltd iv) Royal Sundraram General Insurance Co. Ltd v) IFFCO TOKIO General Insurance Co. Ltd vi) ICICI Lombard General insurance Co. Ltd

Fundamental principles of General Insurance


Principle of co-operation Principle of probability Insurable interest Utmost good faith Indemnity Subrogation Causa- proxima Contribution

WHAT IS MARINE INSURANCE ???


A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the assured in a manner and to the extent thereby agreed, against marine losses i.e, the losses incidental to marine adventure.

Definition
Sec 3 of Marine Insurance Act,1963 defines a contract of marine insurance as an insurance cover for marine cargo, air cargo and post parcels. Thus marine insurance is used to cover transportation by any of the following modes of transit singly or jointly:-Sea, Air or Land -Inland water voyages -Rail/Road -Air -Post

Marine insurance is a contract under which the insurer undertakes to indemnify the insured against losses, caused due to perils of the sea. Here perils of sea include:-Sinking of ship -Damage to ship and cargo due to dashing of waves. -Dashing of the ships on the rocks. -Fire or Explosion on the ship. -Spoilage of cargo due to sea water. -Destruction of the ship and cargo by crew, captain, piracy etc..

HISTORY OF MARINE INSURANCE


Ocean marine insurance is one of the earliest forms of insurance Coincident with the development of trade in the Mediterranean Sea 2000 years before the birth of Christ, insurance transactions emerged as distinct commercial agreements Bottomary was a transaction protecting an owner from financial loss if his ship was destroyed Today, marine insurance is essential to international commerce

TYPES OF MARINE INSURANCE


Ocean marine insurance

Inland marine insurance

OCEAN MARINE INSURANCE


Ocean marine insurance is one of the forms of transportation insurance The ocean marine contracts are incredibly complex, reflecting basic marine law, trade customs, and court interpretations of the various policy provisions

BASIC CLASSES OF OCEAN MARINE INSURANCE


HULL INSURANCE

CARGO INSURANCE

PROCTECTION AND INDEMNITY (P& I) INSURANCE

FREIGHT INSURANCE

INLAND MARINE INSURANCE


Inland marine insurance grew out of ocean marine insurance. Inland marine insurance developed in the 1920s to cover property being transported over land, means of transportation such as bridges and tunnels, and property of a mobile nature.

History
a)
Historically marine insurance were of two types: Bottomary loan which was a transaction protecting an owner from financial loss if his ship was destroyed. Premiums were calculated on the basis of intuition instead of mathematical estimates. Respondentia loans were comparable to bottomary loans. The difference being a merchant would take a loan using cargo as a collateral. The money lender for a premium in addition to the regular interest charged, agreed to forgive the loan if the cargo was lost.

b)

History
The Indian Marine Insurance Act came into operation on August 1, 1963 and is a comprehensive document containing all regulations of marine insurance business in India. Prior to this Act, the insurance business was conducted on the basis of the principles of General Contract Act and English Marine Insurance Law. Marine insurance includes two types of insurance i.e. Cargo insurance and hull insurance.

History
The cargo insurance includes the goods in transit from the place insured to the sea and from sea to the exporter. The hull insurance is concerned with body, the machinery and technical know-how, stores tools etc of the ship. Marine Insurance covers the loss or damage of ships, cargo, terminals and any transport or property by which cargo is transferred, acquired or held between the points of origin and final destination. Marine Insurance has been made mandatory in exportimport business.

Advantage to Business
Marine insurance also provides liquidity to the exporter as he can discount his bills with local banker without waiting for the bills being by the overseas importer which is usually after they receive the goods which may take months in ocean transit.

Types of Marine Insurance


There are four types / classes of marine insurance: a) Hull Insurance: covers physical damage to the ship or vessel. In addition it contains a collision liability clause that covers the owners liability if the ship collides with another vessel or damages its cargo. b) Cargo Insurance: covers the shipper of goods if the goods are damaged or lost. The policy can be written to cover a single shipment. If regular shipments are made, an open cargo policy can be used that insures the goods automatically when a shipment is made. The open cargo policy has no expiration date and remains in force till it is cancelled.

Types of Marine Insurance


c) Protection and Indemnity (P&I) insurance: is usually written as a separate contract that provides comprehensive liability insurance for property damage or bodily injury to third parties. P&I insurance protects the ship owner for damage caused by ship to piers, docks and harbor installations, damage to ships cargo, illness or injury to the passenger or crew and fines and penalties. d) Freight Insurance: indemnifies the ship owner from the loss of earnings if the goods are damaged or lost and are not delivered.

Marine Adventure
There is a marine adventure, when1. Any insurable property is exposed to marine perils. 2. The earning of freight, passage money, commission, profit or other pecuniary benefit or security for any advances, loans or disbursements is endangered by the exposure of insurable property to maritime perils. 3. The owner of or other person interested in or responsible for insurable property by reason of maritime perils may insure any liability to the third party.

Voyage
Voyage is the journey that the vessel undertakes. The ship could carry on the voyage in the specified route which is mentioned in the policy. Change of voyage is permitted only in a few specified circumstances.

Maritime Perils / Perils of the Sea


Maritime Perils are also called Perils of the Sea. It means the perils consequent on or incidental to the navigation through the sea for example- fire, war perils, rovers, thieves, captures, seizures, jettisons, barratry and other perils. The term Perils of the Sea refers only to fortuitous accidents or casualties of the seas and does not include the ordinary action of winds and waves.

Types of Risks/ Perils covered by the Marine Insurance Policy


1) Sinking, stranding and grounding of ship/vessel/boat or craft. 2) Collision or contact of vessels, ships, boats with internal and external objects. 3) Discharge of cargo at a port of distress. 4) Average general sacrifice. 5) Volcanic eruption or lightning or fire or explosion. 6) Loss of goods or packages containing goods or articles, dropping of packets or package during loading or unloading while on board or off the broad.

Types of Risks/ Perils covered by the Marine Insurance Policy


7) 8) 9) 10) 11) Loss caused by delay, wrongful delivery, malicious damage. War, sea pirates, other perils like cyclones, typhoons, spirals. Strikes, riots, lockout, civil commotions & terrorism. Theft, pilferage, breakage & leakage. Loss caused by heating due to the closure of ventilators to prevent the entry of sea waters. 12) Loss caused by rats i.e. a hole made in the bottom of the ship, through which sea water enters the ship and damages the cargo. Marine insurance apart from indemnifying the assured against the maritime perils also includes liability of the third party incurred by the owner of the ship or other person interested in the property assured on happening of the maritime event.

Types of Risks/ Perils covered by the Marine Insurance Policy


Thus marine insurance includes: 1) Insurance of vessels (hull) of any description. (Hull insurance is concerned with body, the machinery & technical know how, stores tools etc. It also includes ships, mechanized boats etc and consignments transported by rail and road.) 2) Insurance of cargo in vessels ( Cargo insurance includes goods in transit from the place of insured to the sea and from the sea to the exporter. 3) Freight paid or received by the assured. 4) Insurance of third party liability

Types of Risks/ Perils covered by the Marine Insurance Policy


4) Insurance of transactions which are incidental to the marine adventure or marine transport or transport of cargo from go down to the vessel. 5) Insurance also includes all perils and risks incidental to money, documents, securities & other valuable goods in the ship. 6) Other incidental activities concerned with building, launching of ship or transport of stores concerned.

Warranties
According to Marine Insurance Act, a warranty means a stipulation or term, the breach of which entitles the insurers to avoid the policy altogether and this is so even though the breach arises through circumstances beyond the control of the warrantor. Warranties can be expressed (written) or implied.

Express Warranties
The expressly stated written warranties and may be like 1. The ship is safe on a particular day 2. The ship & goods are neutral and continue to be so 3. The ship will proceed to its destination without any deviation 4. The ship will sail on or before a certain date

Implied Warranties
There are certain warranties which are implied in every contract of marine insurance unless excluded expressly. These are: 1. Warranty of sea worthiness 2. Warranty of non deviation from path 3. Warranty as to the legality of the voyage 4. Proper documentation related to the ship

Insurable Interest
According to Marine Insurance Act 1963, every person has an insurable interest who is interested in a marine adventure. The following persons have insurable interest in Marine Insurance. Owner of the Ship Owner of the Cargo Creditor who has advanced money on a ship or cargo to the extent of his interest in such ship or cargo Mortgager Mortgagee Master and crew for wages Bottomry bond hold Person who pays advance freight is recoverable on loss

1. 2. 3. 4. 5. 6. 7. 8.

Insurable Interest
9. Shipper and their Agents 10. Persons contingent interest such as the buyer, though the goods may be at sellers risk and though he may have right to reject the goods, but has paid. 11. Trustee 12. Bailee 13. Insurer- he can reinsure 14. Assignee of bill of lading