PARA 13.2|IC 67, Marine Insurance One Liner|Chapter-3 | UNDERWRITING (PART 1)
Insurance exams offered by the Insurance Institute of India (III), consist of various papers either in Life or Non Life or Combined. Here we are providing ONE LINER IC 67, Maine Insurance Chapter 3 “UNDERWRITING (PART 1) ” for para 13.2 and III exam . These questions will be very helpful for upcoming promotional exam in 2020.
IC 67, Maine Insurance is a very important topic in insurance promotional exam. This IC 67, Maine Insurance paper comes in all GIPSA exams which makes it very important.
♦Chapter 3 “UNDERWRITING (PART 1)
1.An underwriter is an insurer or an official of an insurance company who has the authority to accept the risk detailed in the proposal and decide the terms and conditions as also the premium which may be adequate to insure the risk offered.
2.a proposal in the form of a suitably designed proposal form which is also called Declaration
3.Under Reserve Bank of India Regulations (General Insurance Memorandum) on exports and imports premium can be collected in Indian Rupees only if Declaration.
4.Premium is the consideration which the insurers receive for accepting a risk.
5.Acceptance of risk without receiving full premium in advance is prohibited under Insurance Act 1938, Section 64 VB.
6.The cargo “liner” loads at an advertised berth and runs to an advertised schedule between her home port and her overseas terminus.
8.The “tramp”, on the other hand, carries mostly bulk cargo.
9.Tramps will carry any cargo anywhere so long as adequate freight is offered.
10.A cargo “liner” is a better risk than a “tramp”.
12.IRS: Indian Register of Shipping.
13.Age of the vessel is generally restricted to 10 years for Tankers.
14.Bulk Carriers and Combination Carriers and 15 years.
15.Containerized vessels operating as liners are accepted up to 30 years.
16.liner” vessels operating to regular advertised itineraries the age limit is extended to 25 years.
17.FOC: Flag of Convenience.
18.By registering his vessels in F.O.C countries, the shipowner enjoys tax advantage and is able to effect considerable savings in tax.
19.the standards of safety and crew competence required by FOC countries are below the high standards set by other countries.
20.FOC COUNTRIES: Costa Rica, Maldives islands, Sri Lanka, Singapore, Greece, Panama, Morocco etc.
21.When a vessel is not on a regular trading pattern and is over 15 years old will attract extra premium.
22.Where the vessel is not a mechanically propelled steel vessel will attract extra premium.
23.Where a vessel is chartered and she is not classed and is 15 year old will attract extra premium.
24.When the vessel is on a regular trading pattern, but is over 25 years old.( 30 years in case of containerized vessels will attract extra premium.
- Under the Transit Clause of ICC , there is no cover during any period before transit actually commences, such as, whilst the goods are in transit to and in a packer’s premises, unless a special provision is made in the policy, in which event, underwriters may also consider including a period in the packer’s premises.
- The longer the voyage, longer the cargo on board will be exposed to the accidents and perils of the sea
- “liner” service is a better risk than carriage by other vessels in general trade.
- Each transhipment involved will mean additional handling, storage and mode of on-carriage from the transhipment port or place and so there will be greater exposure to loss or damage.
- Monsoons are a feature to be carefully considered, particularly for country craft and coastal voyages between ports in India
- On-deck cargo, that is, cargo stored on deck is a substandard risk for two reasons :
- It is more exposed to weather; and
- There are virtually no prospects of recovery from carriers, under subrogation, as deck cargo does not come within the purview of the Carriage Of Goods by Sea Act, 1925
- A good underwriter must be well informed of current world events, like the prevalence of hostilities between countries, political tensions, civil wars, riots, strikes and labour disturbances.
- A good underwriter should be well versed in geography and should have a keen interest in world affairs, both political and economic.
- In cargo insurance, the nature of the product or commodity insured, from the point of view of its susceptibility to damage through various causes, is a vital consideration for an underwriter to take into account
- All policies exclude ordinary or inevitable losses, such as: Ordinary leakage; Ordinary breakage; Ordinary loss in weight or volume; or Ordinary wear and tear of the subject matter insured
- “Lloyds Survey Handbook” which lists a number of commodities and their individual characteristics and susceptibilities to loss or damage
- The purpose of packing goods for transit overseas or inland is to ensure as far as possible that the goods reach destination in the same perfect condition in which they were when they left the shippers’ premises
- Insufficient, inadequate, improper, unsuitable and defective packing is a source of much concern to an underwriter, because it can turn what might have been a small loss into a large one
- 39. In no case shall this insurance cover loss, damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured (“packing” shall be deemed to include stowage in a container or lift van, but only when such stowage is carried out prior to attachment of this insurance or by the assured or their servants (Packing exclusion)
- under the 2009 clauses, if packing is done by independent contractors the packing exclusion is not applicable.
- Corrugated fibreboard (cf) boxes / cartons: CF Boxes and Cartons are light in weight and economical. Though they may be adequate for domestic use and for air transit, they are not always suitable for export cargo on ocean voyages or for shipments likely to be exposed to much moisture.
- CF boxes should not be used for pilferable products.
- Wooden boxes/cases: A wooden box is strong and in many ways the most convenient packing for many commodities provided the wood is of appropriate quality, thickness and correct moisture content.
- Bags: Coffee and cocoa beans are carried in sacks. Cements and chemicals in granules or powder form can be carried in multi-ply paper bags. Polythene-lined jute bags are often used to pack chemicals.
- The two main hazards to bagged goods are:1. Exposure to weather; and 2. Tearing of bags.
- Bales: Goods which cannot be damaged by impact or knocks are usually packed in bales, e.g. cotton and wool.
- bales require special attention to minimise losses, particularly from hooks, country damage, water damage and pilferage. It is advisable to use an inner wrap of waterproof paper below a primary cover of fibreboard over which a heavy jute or hessian wrapping can be provided before strapping
- Unitising the packages: Many products and commodities can be economically palletised or unitised to facilitate handling, stowage and general protection of cargo
- “Palletising” is the assembly of one or more packages on a pallet (platform, usually wooden) base and properly secured to it.
- “Unitising” is the assembling of one or more packages or items into a compact load, secured together and provided with skids for easy handling
- 51. Palletising and Unitising have following advantages:
- They eliminate the multiple handling of individual items.
- They speed up loading and unloading operations.
- They compel greater use of mechanical handling, reducing possible damage from multiple manual handling.
- They facilitate applications of waterproofing protection for the entire load.
- They reduce the incidence of lost or straying items.
- Speedy loading and discharge operations lead to improved “turn around” of ships and savings in dock dues for the shipowner
- Pallets: Packages are fastened to a platform and firmly secured to it through the transit. The platform is called a “pallet” and is lifted into and out of the ship as a complete unit.
- Fork lift trucks are used for moving the pallets in the dock areas and within a ship’s hold
- Lift van: the lift van could also be loaded directly on to the ship from the flat, the holds are not designed to take the lift vans. So the lift vans have to be stowed on deck
- Bulk cargo: Cargo which is normally not packed and carried either full load in vessel or even container, without any packing, is called Bulk Cargo. Fertilizers, cement, grains, sugar, liquids etc., are carried as bulk cargo
- Container transport: “Containers” in this context mean large boxes of regulated sizes, constructed of strong light-weight metal, specifically designed for carriage by custom built cellular container ships.
- A fully laden container ship will normally include one or two tiers of container cargo “on deck“.
- Containerisation is a wider application of the concept of unitisation
- Generally accepted standard sizes by the ISO (International Standards Organisation) are: 8 or 8.5 feet high by 8 feet wide and 10 or 20 or 30 or 40 feet long.
- The main standard used is 20 feet in length expressed as TEU (” Twenty Foot Container Equivalent Unit”). Such containers fit into the specially constructed holds of container vessels as well as in the holds of most conventional ships and can be placed on a suitable transport for rail or road haulage.
- The contents of a container are described as Full Container Load (FCL) or a Less-than-Container Load (LCL).
- FCL implies a full load for a single shipper.
- LCL is the term used for a smaller consignment consolidated with goods of other exporters to fill the container.
- Containerisation in India: In India, advanced container handling facilities exist in major ports like Mumbai, Chennai, Kochi, Haldia and Kolkata. Jawaharlal Nehru Port at Nhava Sheva off Mumbai has one of the most automated container terminal management systems in the world.
- The port has three container berths, 2 bulk carrier berths and one repair berth.
- Inland Container Depots (ICD) were established mainly through the initiative of Indian Railways at Delhi, Bengaluru, Coimbatore, Guntur, Ludhiana, Amingaon and other places ( 246 places) for serving the shippers and consignees located in different parts of India’s hinterland
- Advantages of Container
- Quick and efficient carriage of cargo (especially when door-to-door) by custom- built container vessels between custom – built container terminals.
- Multiple handling is minimised or eliminated, particularly for FCLs and door – to -door containers
- Theft and pilferage risks are reduced though not entirely eliminated.
- Economies in individual packing contents.
- Protection against external contract damage.
- Protection against sea and / or fresh water damage.
- A container is a better protection against fire risk as well as against water damage during fire extinguishing operations.
- Reduced risk of misdelivery
- Disadvantages of Container
- Containers shipped to the deck are exposed to the elements and to the risk of being washed overboard in severe weather.
- There are problems of container maintenance, when inadequate inspections for condition may leave damaged containers in service, thus negating the potential benefits and exposing the contents to water damage in particular.
- The concentration of values in a single container load of consumer goods has become a convenient target for thieves and hijackers.
- Inadequate or defective ventilation may increase the risk of sweat damage and condensation.
- Container shipments may encourage a lower standard of individual packing of contents and this could spell disaster particularly when LCL containerload is involved and transit is not door-to-door.
- Incomplete filling of a container or defective stuffing may allow excessive free movement of contents in transit resulting in self-damage.
- A large variation in weight, where containers are stowed on deck, can effect stability and unevenly weighted containers can cause problems for the driver of a truck during inland transit.
- Bulky goods cannot be reasonably carried economically in containers.
- Contamination risks, if incompatible cargo is stowed in the same container.
- Transhipment problems, when a container is damaged in transit and another container is not available.
- Damage to the contents of a container remains concealed until arrival at final destination.
- In the event of a major casualty at sea, say, a stranding or collision, cargo can only be moved by specially equipped salvage vessels or floating cranes, if at all they become available in time soon after the mishap.
- Apart from losses, often heavy, recovery prospects from the carriers became difficult. In such a situation the underwriter prefers to charge possibly higher rates and leave the experience to show whether a reduction in rate is justified.
- Moral Hazard relates to honesty and integrity of the insured whereas Morale hazard relates to the attitude of the insured. An honest insured, if negligent or careless towards losses, is equally bad compared to a person with bad moral hazard.
- The aim of the underwriter is to achieve a reasonable margin of profit in relation to the net premium, taking into account affordable loss minimisation measures and prospects of recovery from carriers and bailees.
- In Marine cargo insurance insurable interest is required at the time of loss. At the time of taking the insurance insured may or may not have the same.
- If there is no insurable interest at the time of loss, the contract is void and insurers cannot pay any claim to the insured
- generally the standard forms of contracts which are entered into are in the form of International Commerce Terms (INCOTERMS). The latest version is 2000, which is in force from 1st January 2000
- The contract is written only in three letters and obligations of buyer and seller along with price formation is decided by the term selected
- There were 13 INCOTERMS in the ‘2000’ set while there are only 11 in the ‘2010’ set. 2010 INCOTERMS are effective from 1st January 2011.
- in case of any dispute the matter is to be decided by the court and not by ICC.
- the marine policy covers insured’s insurable interest in the goods in transit and not the goods
- Under a ‘warehouse to warehouse’ policy goods are insured for full duration of transit but the cover is available to insured only during the duration when the goods are at his risk.
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