Business Business Risk Risk

ManagementManagement(marine (marine

insurance)insurance)

Meaning of marine insuranceMeaning of marine insurance

Marine insurance is a contract Marine insurance is a contract whereby the insurer undertakes to whereby the insurer undertakes to indemnify the assured, in manner indemnify the assured, in manner and to the extent thereby by agreed, and to the extent thereby by agreed, against marine losses, i.e. the losses against marine losses, i.e. the losses incident to marine adventureincident to marine adventure

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Why Marine Insurance should be done?

Once the goods are moved out from the warehouse of the seller, they are no more in the custody of the seller or the buyer. They are rather in the hands of a third party called the carrier. During the transit loss can arise from:

Fire, explosionContact with waterBreakageAccidentDerailment of conveyanceTheftPilferageNon-deliveryExposure to these risks and the fact that the goods are in possession of a third party enhances the chances of loss.

Principles governing the Principles governing the contract of insurancecontract of insurance

Principle of utmost good faithPrinciple of utmost good faith Principle of insurable interestPrinciple of insurable interest Principle of indemnityPrinciple of indemnity Causa proximaCausa proxima

Marine PolicyMarine Policy MeaningMeaning :- :- The terms and conditions on which a The terms and conditions on which a contract of marine insurance is entered contract of marine insurance is entered into between the assured and the into between the assured and the insurer are incorporated in a document.insurer are incorporated in a document. It must be signed by or on behalf of It must be signed by or on behalf of the insurer [Sec.26(1)].the insurer [Sec.26(1)]. It must be duly stamped under the It must be duly stamped under the Stamp Act, 1899.Stamp Act, 1899.

It must specify It must specify - -1.1. the name of the assured, or of some person who the name of the assured, or of some person who

effects the insurance on his behalfeffects the insurance on his behalf2.2. the subject-matter insured and the risk insured the subject-matter insured and the risk insured

againstagainst3.3. the voyage, or period of time, or both, as the the voyage, or period of time, or both, as the

case may be, covered by the insurancecase may be, covered by the insurance4.4. the sum or sums insuredthe sum or sums insured5.5. the name or names of the insurer or insurersthe name or names of the insurer or insurers

Types of Marine PoliciesTypes of Marine PoliciesSome important types of policies are:Some important types of policies are:I. I. Voyage Policy Voyage Policy :-:- Where the contract is to insure the subject-Where the contract is to insure the subject-

matter at and from or from one place to matter at and from or from one place to another or others [Sec.27(1)].another or others [Sec.27(1)].

II. II. Time Policy Time Policy :-:- Where the contract is to insure the subject-Where the contract is to insure the subject-

matter for a definite period of time matter for a definite period of time [Sec.27(1)].[Sec.27(1)].

It can’t be for a period more than a year It can’t be for a period more than a year [Sec.27(2)].[Sec.27(2)].

It may, however, contain a ‘continuation It may, however, contain a ‘continuation clause’.clause’.

III. Valued Policy: is a policy in which the value of the goods are not fixed, (eg., things like painting, historical coins, work of art, ancient things) and the prices agreed to both the parties is fixed for this.

IV. Unvalued Policy: is the policy in which the value of the subject matter is not decided at the time of issuing the policy however it is ascertained in the event of loss. When the loss occurs the value is decided by taking into account the cost of goods as per he invoice and does not include any anticipated profit.

V. V. Floating PolicyFloating Policy :- :- It only mentions the amount for which It only mentions the amount for which

the insurance is taken out, and leaves the insurance is taken out, and leaves the name of the ship or ships and other the name of the ship or ships and other particulars to be defined by particulars to be defined by subsequent declarations, which will be subsequent declarations, which will be declared by the assured by declared by the assured by endorsement on the policy or in other endorsement on the policy or in other

customary manner.customary manner.

WARRANTIES IN A CONTRACT OF WARRANTIES IN A CONTRACT OF MARINE INSURANCEMARINE INSURANCE

The term warranty in case of The term warranty in case of MARINE MARINE INSURANCE ACTINSURANCE ACT means that the means that the assuredassured undertakes that some undertakes that some particular thing shall or shall not be particular thing shall or shall not be done , or that some stipulation shall done , or that some stipulation shall be fulfilled , or that a particular state be fulfilled , or that a particular state of facts does or does not existof facts does or does not exist..

Types of warrantyTypes of warranty

Expressed warranty Expressed warranty – Date on which the ship will sailDate on which the ship will sail– Place and manner of loadingPlace and manner of loading– Statement that the cargo is lawful Statement that the cargo is lawful

merchandisemerchandise Implied WarrantyImplied Warranty

– Seaworthiness of the shipSeaworthiness of the ship– Legality of the voyageLegality of the voyage– Proper documentationProper documentation– Clauses of marine insurance actClauses of marine insurance act

LOSSESLOSSESUnless the policy otherwise provides, the Unless the policy otherwise provides, the insurer is liable for any losses insurer is liable for any losses proximately caused by a peril insured proximately caused by a peril insured against. against.

Further unless the policy otherwise Further unless the policy otherwise provides, the insurer is not liable :-provides, the insurer is not liable :-

1.If the loss is not caused by a peril 1.If the loss is not caused by a peril insured against.insured against.

2. If the loss is caused by delay, which is 2. If the loss is caused by delay, which is caused by a peril insured against.caused by a peril insured against.

3. If the loss is caused by the ordinary wear & 3. If the loss is caused by the ordinary wear & tear, ordinary leakage or breakage. tear, ordinary leakage or breakage.

A loss may be either total or partial. Any loss A loss may be either total or partial. Any loss other thanother than

Total is partial loss.Total is partial loss.

TOTAL LOSSTOTAL LOSSA Total loss may be either :- A Total loss may be either :-

1.An Actual total loss 1.An Actual total loss

2. A Constructive total loss.2. A Constructive total loss.

1.1.ACTUAL TOTAL LOSSACTUAL TOTAL LOSS :- An actual total loss :- An actual total loss occurs occurs

(a) Where the subject matter is actually (a) Where the subject matter is actually destroyed or irreparably damaged.destroyed or irreparably damaged.

(b) Where the subject matter ceases to be a (b) Where the subject matter ceases to be a thing of the kind insured.thing of the kind insured.

(c) Where the assured is irretrievably deprived (c) Where the assured is irretrievably deprived of the of the subject matter.of the of the subject matter.

2. 2. CONSTRUCTIVE TOTAL LOSSCONSTRUCTIVE TOTAL LOSS :- A constructive total :- A constructive total lossloss

occurs where the subject matter insured is reasonablyoccurs where the subject matter insured is reasonablyabandoned because its actual total loss appears to beabandoned because its actual total loss appears to beunavoidable.unavoidable.In particular there is a constructive total loss :- In the In particular there is a constructive total loss :- In the

case of damage to goods, the cost of repairing the case of damage to goods, the cost of repairing the goods will exceed their value after arrival.goods will exceed their value after arrival.

LOSSESLOSSES

Particular average lossParticular average loss The three things under risk The three things under risk

during the course of voyage are:-during the course of voyage are:-

1.1. Ship.Ship.

2.2. CargoCargo

3.3. The freight( compensation paid The freight( compensation paid for the transportation of goods)for the transportation of goods)

Cont……………Cont…………… As a general rule ,any loss to these interest As a general rule ,any loss to these interest

sustained must be borne by that interest sustained must be borne by that interest alone.alone.

For ex: if the ship is carried away by storm, For ex: if the ship is carried away by storm, then this loss is P.A.L. and is borne by ship-then this loss is P.A.L. and is borne by ship-owner alone or by the insurance company owner alone or by the insurance company which has insured the ship.which has insured the ship.

It gives no right of contribution from the It gives no right of contribution from the other parties interested in the adventure.other parties interested in the adventure.

So, particular average losses are those in So, particular average losses are those in which damage is caused by accident in the which damage is caused by accident in the marine adventure by the peril of sea.marine adventure by the peril of sea.

General average lossGeneral average loss

Where extraordinary sacrifices are Where extraordinary sacrifices are made at the time of peril for the made at the time of peril for the benefit of the whole adventure.benefit of the whole adventure.

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Marine Policy For Overseas Marine Policy For Overseas ShipmentsShipments

Institute Cargo ClauseInstitute Cargo Clause Basic Cover - ICC (C)Basic Cover - ICC (C) Inter Mediate Cover - ICC (B)Inter Mediate Cover - ICC (B) All Risk Cover - ICC (A)All Risk Cover - ICC (A)

Comparison between the institute cargo clauses (A), (B) & (C)Comparison between the institute cargo clauses (A), (B) & (C)

A comparative analysis of the institute Cargo Clauses (A), (B) & (C)A comparative analysis of the institute Cargo Clauses (A), (B) & (C)

Type of risksType of risksCovered (Covered () not covered () not covered ()) AA BB CC

Loss / damage reasonably attributable to:Loss / damage reasonably attributable to: 1. Fire or explosion 1. Fire or explosion 2. Vessel/Craft being stranded, grounded, sunk or2. Vessel/Craft being stranded, grounded, sunk or capsized.capsized. 3. Overturning/derailment of land conveyance. 3. Overturning/derailment of land conveyance.

4. Collision or contact of vessel, craft or conveyance4. Collision or contact of vessel, craft or conveyance With any external object other then water.With any external object other then water. 5.   Discharge of cargo at a port of distress5.   Discharge of cargo at a port of distress 6. Earthquake, volcanic eruption, lightning6. Earthquake, volcanic eruption, lightning 7. General average and salvage charges incurred to7. General average and salvage charges incurred to avoid loss from any cause except those excludedavoid loss from any cause except those excluded 8. General average sacrifice8. General average sacrifice

AA BB CC 9. Jettison9. Jettison 10. Washing overboard10. Washing overboard 11. Entry of sea, lake or river water into the vessel,11. Entry of sea, lake or river water into the vessel,

craft, hold, conveyance, container, lift van orcraft, hold, conveyance, container, lift van or place of storage.place of storage. 12. Rainwater damage12. Rainwater damage 13. Total loss of any package lost overboard or13. Total loss of any package lost overboard or dropped whilst loading or unloading from dropped whilst loading or unloading from vessel or craft.vessel or craft. 14. Piracy.14. Piracy. 15. Deliberate damage or destruction by wrongful act15. Deliberate damage or destruction by wrongful act

of any person or persons, (i.e. by malicious acts)of any person or persons, (i.e. by malicious acts) (Can be covered by malicious Damage Clause for (Can be covered by malicious Damage Clause for I.C.C (B) and (C) upon payment or extra premium)I.C.C (B) and (C) upon payment or extra premium)

16. In the event of frustration of the voyage resulting16. In the event of frustration of the voyage resultingfrom a risk covered, extra charges incurred infrom a risk covered, extra charges incurred inunloading, storing and forwarding to destinationunloading, storing and forwarding to destination

AA B B CC

17. Reasonable charges for averting or minimizing loss17. Reasonable charges for averting or minimizing loss recoverable under this insurance and also thoserecoverable under this insurance and also those incurred, to pursue recovery rights against carriers,incurred, to pursue recovery rights against carriers, bailees or third parties.bailees or third parties. 18. Other or extraneous perils all involving a fortuity18. Other or extraneous perils all involving a fortuity and from external causes, for example:and from external causes, for example: Damage as a result of shifting in heavy weather Damage as a result of shifting in heavy weather

Improper stowageImproper stowage Rough handling Rough handling Breakage, leakage, denting, scratching, crushing,Breakage, leakage, denting, scratching, crushing, crumpling, chippingcrumpling, chipping Heating sweatingHeating sweating Infestation, mould, mildew, rust, county damageInfestation, mould, mildew, rust, county damage Hook and sling damageHook and sling damage Contact with mud, oils and acids, damage byContact with mud, oils and acids, damage by other cargoother cargo Shortage, theft, pilferage, non-deliveryShortage, theft, pilferage, non-delivery Other loss/damage caused fortuitously and fromOther loss/damage caused fortuitously and from external cause or causes external cause or causes

AA BB CC 19. liability under “Both to blame collision” Clause of19. liability under “Both to blame collision” Clause of

Bill of Lading.Bill of Lading.

COMMON EXCLUSIONS Loss, damage or expenses attributable to willful misconduct of

the assured Ordinary or inevitable losses Loss, damage or expense caused by inherent vice or nature of

the subject matter insured Loss/damage due to insufficient, unsuitable or defective packing

(including stowage) Loss/damage or expenses proximately caused by delay even if

the delay is caused by a peril insured against Loss damage or expenses arising from insolvency of the

owners, managers, charters or operators of the vessel. Loss damage due to un seaworthiness of the vessel or craft,

container, lift van employed for carrying the insured matter. Wars, strikes and civil commotions unless covered under

separate endorsements.

E Commerce

E Commerce is the conduct of transactions to buy, sell, or deliver goods and services over the internet. E commerce transactions are

B to B,which involves inter firm transactions including government procurement.

B to C, between firms and individuals purchasing goods or services over internet.

and C to C, involves individual transactions via online auction.

Cross Border E Commerce

Cross border transactions accounts for 25% of all e commerce transactions.

The internet removes barriers to communication with customers and employees created by geography, time zones and location, creating a frictionless business enviornment.

E Commerce & E Business

The terms e commerce and e business are used interchangeably, however these are two different concepts.

E- commerce includes inter business or inter organizational transactions and business to customer transactions. On the other hand e- business refers to the integration of information and communication technology with business processes to enhance an organisation’s competitive strength.

E- business refers to the performance of business activities, such as designing products, managing supply chain, operations, marketing etc. it usually enhances three primary processes:

Production process: include procurement, ordering and replenishment of stock, processing of payments, electronic links with suppliers, and production control processes.

Customer focused processes: which include promotional and marketing efforts, selling over internet, processing of customer’s purchase orders and payments, and customer support and others.

Internal management processes: includes employee services, training, internal information sharing, video confrencing and recruiting.

Changes Brought About By E- Business

Physical market place to virtual market place

Physical products to digital products Mass production of standardized products

to mass customization Fixed pricing to dynamic pricing Mass marketing techniques to customized

marketing

E Business Technology and Environment

EDI (Electronic Data Interchange): Refers to the exchange of information through computers between organizations in a standard, computer process able, and universally accepted format. Used to eliminate paper work in supply chain management and getting regulatory clearances from government authorities.

Internet: the internet refers to network of networks

Extranet: internet based network between a business enterprise and its suppliers, distributors and business partners. Such systems are replacing EDI systems.

Intranet: internal private network to link various divisions of a business.

Thank You…!Thank You…!