This is the oldest branch of Insurance and is closely linked to the practice of Bottomry which has been referred to in the ancient records of Babylonians and the code of Hammurabi way back in B.C.2250. Manufacturers of goods advanced their material to traders who gave them receipts for the materials and a rate of interest was agreed upon. If the trader was robbed during the journey, he would be freed from the debt but if he came back, he would pay both the value of the materials and the interest.
The first known Marine Insurance agreement was executed in Genoa on 13/10/1347 and marine Insurance was legally regulated in 1369 there.
What Marine Insurance means - A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the insured, in the manner and to the extent thereby agreed, against transit losses, that is to say losses incidental to transit. A contract of marine insurance may, by its express terms or by usage of trade, be extended so as to protect the insured against losses on inland waters or any land risk which may be incidental to any sea voyage.
In simple words the marine insurance includes
- Cargo insurance which provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air. Thus cargo insurance concerns the following:
- Export and import shipments by ocean-going vessels of all types
- Coastal shipments by steamers, sailing vessels, mechanized boats, etc.
- Shipments by inland vessels or country craft
- Consignments by rail, road, or air and articles sent by post.
- Hull insurance which is concerned with the insurance of ships (hull, machinery, etc.). This is a highly technical subject and is not dealt in this module
Features of Marine Insurance
- Offer & Acceptance
- Payment of premium
- Contract of Indemnity
- Utmost good faith
- Insurable Interest.
- Period of marine Insurance
- Deliberate Act
|Type of contract||Responsibility for insurance|
|Free on Board
|The seller is responsible till the goods are placed on board the steamer. The buyer is responsible thereafter. He can get the insurance done wherever he likes.|
|Free on Rail
|The provisions are the same as in above. This is mainly relevant to internal transactions.|
|Cost and Freight
|Here also, the buyer's responsibility normally attaches once the goods are placed on board. He has to take care of the insurance from that point onwards.|
|Cost, Insurance & Freight
|In this case, the seller is responsible for arranging the insurance upto destination. He includes the premium charge as part of the cost of goods in the sale invoice.|
Practice in International trade
The normal practice in export /import trade is for the exporter to ask the importer to open a letter of credit with a bank in favour of the exporter. As and when the goods are ready for shipment by the exporter, he hands over the documents of title to the bank and gets the bill of exchange drawn by him on the importer, discounted with the bank. In this process, the goods which are the subject of the sale are considered by the bank as physical security against the monies advanced by it to the exporter. A further security by way of an insurance policy is also required by the bank to protect its interests in the event of the goods suffering loss or damage in transit, in which case the importer may not make the payment. The terms and conditions of insurance are specified in the letter of credit. For export/import policies, the-Institute Cargo Clauses (I.C.C.) are used. These clauses are drafted by the Institute of London Underwriters (ILU) and are used by insurance companies in a majority of countries including India.
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