Insurance in Exports

An exporter cannot get an insurance unless he has an insurable interest. A person is said to have an insurable interest when he will benefit from the safe arrival of the cargo, or when he will be prejudiced by its loss, damage or its detention. As owner of the goods, the exporter is obviously interested in the goods until the title of the goods passes to the buyer. Most often the obligation to buy marine insurance is laid down in the contract itself. Thus under a c.i.f. contract, it is the exporter who is required to take the marine insurance. But even when there is no obligation on the exporter to buy insurance when his ownership ends, it would be wise for him to protect himself by taking insurance for the whole voyage for many reasons: (1) the buyer’s insurance may be inadequate, (2) the buyer may become insolvent and the claim paid in respect of the goods may go to the creditors in the importing country instead of to the exporter, and (3) foreign exchange problems could complicate the transfer of claims paid by the foreign insurance company.

How to Insure:

It is possible to arrange specific marine insurance policies only when they are needed. But this practice is hardly adopted except by individuals shipping household gods or personal effects. By far the greater volume of marine insurance is now undertaken under what is known as open policy. These are insurance contracts which remain in force until cancelled and under which individual successive shipments are reported or declared.

The shipper gains many advantages from the use of an open policy:

(1) He has automatic and continuous protection. If there is a delay in making a declaration or even if it is entirely overlooked the shipment is still covered, if the delay or oversight is unintentional.
(2) He is relieved of the trouble of arranging insurance each time he makes a shipment.
(3) He has prior knowledge of the premium to be paid, and this helps him in making correct price quotations.
(4) The use of an open policy creates a long business relationship between the shipper and the insurer which permits the latter to learn the special requirements of the shipper so that he can provide tailor-made protection to fit the specific situation.

Under an open policy, a brief declaration giving the basic facts about the shipment would do. But in most cases the exporter must furnish evidence of insurance to his customer to banks or to other third parties in order to permit the collection of claims abroad. This requires a special marine issuance policy, also sometimes referred to as a certificate. The marine policy is prepared in four or more copies. The original and duplicate are negotiable and are forwarded with the shipping documents to the consignees. The remaining two serve as office copies of the shipper and the insurer. The policy must be prepared with care and the shipment should be described in sufficient detail to make identification clear.

Risks Covered:

Risks covered by marine insurance are usually determined by an agreement between the parties concerned. At times, coverage is tailor made to suit a particular trade. But in general the following risks are covered under marine insurance.

(1) Perils of the Sea include out-of-the-ordinary wind and wave action, stranding, lighting collision and damage by sea water when caused by perils such as opening of the seams of the vessel by stranding or collision.
(2) Fire includes both direct fire damage and also consequential damage, as by smoke or steam, and loss resulting from efforts to extinguish a fire. It covers explosions caused by fire.
(3) Assailing thieves refer to a forcible taking rather than clandestine theft or mere pilferage.
(4) Jettison is the throwing of articles overboard usually to lighten the ship in times of emergency
(5) ‘Barratry’ is the willful misconduct of master or crew and would include theft, wrongful conversion, intentional casting away of vessel or any breach of trust with dishonest intent.
(6) The clause: “All other perils” does not really mean all the perils that can befall a shipment but sea perils of the sort listed in the clause .