Understanding Marine Insurance

Marine insurance is a type of coverage designed to protect against loss or damage of cargo, ships, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.

How It Started?

Marine insurance began in ancient civilizations with informal risksharing agreements among traders. In the 17th century, Lloyd's of London formalized it, offering organized policies for maritime risks. Over time, it evolved with global trade, advancing to today's sophisticated practices with modern technology and regulations.

WHO NEEDS?

Transit insurance is crucial for protecting your goods during shipping. Whether you’re sending a valuable antique or a large shipment of widgets, this insurance safeguards against loss or damage. Don’t risk a disaster—ensure your items are covered with transit insurance for peace of mind and financial security.

TYPES

There are mainly 2 types:

1.MARINE OPEN POLICY

Marine open insurance, or a floating policy, covers cargo in transit for an entire year, eliminating the need for separate policies for each shipment. This simplifies the process by avoiding repeated research, paperwork, and premium payments. It protects your business from financial losses due to risks such as fire, explosion, theft, volcanic eruptions, and lightning. Ideal for companies involved in the movement of goods—like import-export firms and shipping agencies—this policy provides coverage for multiple dispatches until the sum insured is exhausted, the policy expires, or is canceled. It ensures financial protection and peace of mind against unexpected transit risks.

Marine Open Policy is further divided into two categories:

• Sales Turnover Policy

It provides coverage based on the value of goods shipped within a specified period, typically a year. This policy is designed for businesses with fluctuating shipment values and offers flexibility by insuring cargo up to a certain sales turnover limit. It simplifies the insurance process by covering all consignments within the period without requiring individual declarations. The policy protects against risks such as theft, fire, and damage during transit, ensuring financial security for businesses involved in regular and varied shipments. It is ideal for import-export companies and merchants with high and variable cargo volumes.

• Open Policy

An open policy provides year-round coverage for cargo in transit without needing separate policies for each shipment. This type of policy simplifies the insurance process by covering all consignments made within the policy period, typically one year, up to a specified sum insured. It protects against risks such as theft, fire, and damage during transit. Ideal for businesses with frequent shipments, such as import-export companies and merchants, an open policy ensures continuous coverage, reduces administrative hassles, and offers financial protection against unexpected transit-related losses.

2.MARINE OPEN COVER

Marine open cover, also known as an open marine policy, offers continuous insurance protection for goods in transit over a specified period, typically one year. This type of policy eliminates the need to arrange separate insurance for each shipment, streamlining the process for businesses with frequent or regular consignments. It covers a broad range of risks, including theft, fire, collision, and damage during transit by sea, air, or land.

The policy provides coverage up to a pre-agreed sum insured, accommodating varying shipment values without requiring individual declarations. This flexibility simplifies administrative tasks and reduces paperwork. Ideal for import-export firms, shipping agencies, and merchants, marine open cover ensures ongoing financial protection and peace of mind against unforeseen transit-related losses. By offering comprehensive and continuous coverage, it supports efficient risk management and operational convenience for businesses engaged in regular goods transportation.

Exclusions

• Leakage in Goods

Liquid goods and products are prone to leakage during international shipping, which can reduce their weight and value. Such incidents are common due to the high risk of outflow associated with liquids. Consequently, many insurance companies exclude coverage for losses resulting from leakage

For instance, companies exporting soft drinks by sea often encounter leakage issues upon arrival at the destination. This leakage, often caused by weather conditions, is a foreseeable risk. As a result, insurance policies typically do not cover losses due to leakage. Therefore, policyholders should carefully review the leakage-related clauses in their marine insurance contracts to ensure they understand the coverage exclusions.

• DELAYS

Cargo can be delayed for various reasons, such as weather conditions like rain, which may cause late departure or postponed transit. Such delays can result in losses, especially for perishable items that may deteriorate over time. This can lead to a reduction in their value, affecting the financial outcome for the policyholder.

However, delays are a common occurrence in maritime transport and are typically excluded from marine insurance policies. As a result, the insured cannot claim compensation for damages resulting from delays. It is important for policyholders to understand that such delays are generally considered exclusions in marine export and import insurance policies.

• IMPROPER PACKAGING

Exporters must ensure goods are properly packaged, as they are highly vulnerable during sea transport. Improper packaging can lead to deterioration, with goods potentially tearing or becoming damaged. Perishable items, in particular, are at greater risk of damage during the rainy season and require careful packaging.

Damage caused by inadequate packaging is the exporter’s responsibility and is typically excluded from marine export and import insurance policies. To avoid such exclusions and potential financial losses, exporters need to ensure their goods are packaged with the utmost care.

• WILLFUL MISCONDUCT

The insured must exercise the highest level of care when exporting goods from the warehouse. Using methods that could damage the goods, despite being aware of the potential consequences, may be viewed by the insurer as intentional misconduct.

If the insured continues to use damaging practices, the insurer may deny coverage for any resulting damage. Consequently, the insured could forfeit any insurance benefits when filing claims under the marine insurance policy. It is crucial for the insured to follow proper procedures to avoid claim denials and ensure coverage.

MAIN COVERS

What is Covered?

Marine insurance covers a range of risks and losses associated with transporting goods. Here’s a summary of what it includes:

• Theft/Pilferage: Coverage for loss or damage to goods due to theft
• Total Loss During Loading/Unloading: Protection for loss or damage occurring while goods are being loaded or unloaded.
• Malicious Damage: Coverage for damage caused by intentional actions of third parties, excluding the policyholder or their employees.
• Collision of Vessels: Insurance for loss or damage resulting from the collision of two ships.
• Fire, Lightning, and Explosion: Coverage for damage caused by fire, explosions, lightning, and similar severe incidents.
• Land Conveyance Accidents: Protection for costs and damages from collisions, overturning, or derailment of land transport vehicles carrying the cargo.
• Bridge Collapse: Coverage for damage if a bridge collapses while the vehicle is crossing it.
• Overturning of Cargo Vehicle: Insurance for loss or damage caused by the overturning of the cargo-carrying vehicle.
• Stranding, Grounding, or Sinking: Coverage for loss or damage due to the vessel becoming stranded, grounded, or sinking
• Earthquake or Volcanic Eruption: Protection against damage caused by earthquakes or volcanic eruptions during transit.
• Water Ingress: Coverage for damage caused by water entering the vessel from seas, rivers, or lakes, but not rainwater.
• General Average and Salvage Charges: Coverage for costs related to general average sacrifices and salvage operations made during maritime emergencies.
• Protection Against Natural Calamities: Insurance for losses caused by natural disasters like earthquakes and lightning.
• Jettison: Coverage for cargo intentionally thrown overboard to safeguard the vessel or other goods.
• Washing Overboard: Protection for goods lost due to being swept away by waves.
• Delivery at Alternative Locations: Coverage for goods unloaded at a different location due to bad weather, with prior notification to the insurer.
• Contact with Structures or Animals: Insurance for damage resulting from the vessel striking structures or animals.

These coverages ensure a broad range of risks are addressed during maritime transport.

What is Not Covered

• Unsuitable & Insufficient Packaging: No coverage for loss or damage due to improper packaging.
• Unfit Container: No coverage if the container used is inadequate for safely transporting the goods.
• Willful Misconduct: Loss or damage caused by intentional actions of the policyholder is not covered.
• Mishandling of Goods in Transit: The policy does not cover loss or damage resulting from mishandling during transport.
• Damage Due to Inherent Vice: Damage from the natural properties of the goods causing self-destruction is not covered
• War Risk**: Loss or damage due to war or war-related risks is excluded
• Over-Dimensional Cargo: No coverage for damage to goods that exceed the container’s carrying capacity.
• Bulk Cargo: Loss or damage to unpackaged bulk cargo (liquid or dry) is not covered.
• Temperature Sensitive: No coverage for goods sensitive to temperature fluctuations.
• Weapon, Radioactive, or Nuclear Fission: Damage from radioactivity or nuclear fission is excluded.
• Ordinary Wear & Tear: The policy does not cover damage due to normal wear and tear.
• Delay: No coverage for loss or damage due to delays in transit.

ITC A (Inland Transit Clause A)

This clause provides coverage against all risks of damage to goods while they are in transit, whether by railway or road. Inland marine insurance coverage begins when the goods are ready to leave the warehouse or storage location and ends immediately upon delivery. Coverage remains active during deviations, forced discharges, or delays in delivery.

The Inland Transit Cover (ITC A) terminates under the following conditions:

1. Upon successful delivery of the goods to the final warehouse, consignee, or storage location as specified in the policy document.
2. After one week from the arrival of the wagon at the designated railway station, if the goods are transported by train
3. After one week from the arrival of the vehicle at the specified destination, if the goods are transported by road.

ITC B (Inland Transit Clause B)

Inland Transit Clause B is an insurance provision designed to cover goods while they are in transit overland, whether by road, rail, or inland waterways. This clause offers protection against various risks associated with the movement of goods within a specified geographical area, typically within a country or between neighboring countries.

The coverage provided by Clause B generally includes risks such as damage, loss, or theft during transportation. However, it often excludes certain risks, such as those arising from inadequate packaging, inherent defects in the goods, or gradual deterioration. The clause usually specifies the maximum amount that can be claimed under the insurance policy for inland transit losses, setting clear limits on the insurer's liability.

ITC C (Inland Transit Clause C)

Inland Transit Clause C is an insurance provision that provides coverage for goods during inland transportation, typically involving land transport such as road, rail, or inland waterways. This clause is more restrictive compared to Clause B, offering a lower level of coverage and usually including more specific exclusions.

Clause C generally covers losses or damages due to specific perils, such as fire, explosion, or collision, but it may exclude broader risks that are included in Clause B. For example, it might not cover theft, weather-related damages, or losses resulting from inherent defects in the goods. The coverage limit is often lower compared to Clause B, reflecting the narrower scope of protection.

ICC A (Institute Cargo Clause A)

Institute Cargo Clause A provides extensive coverage for goods in transit by sea, air, or land, offering protection against nearly all risks of physical loss or damage. This clause is the broadest of the Institute Cargo Clauses, covering perils such as theft, collision, and weather-related damage. It also includes protection during loading and unloading. However, exclusions typically involve losses due to inherent defects, poor packing, or gradual deterioration. Coverage applies from the point of origin to the final destination, including intermediate stops. The clause specifies insurance limits and the claims process, including required documentation. Ideal for high-value or sensitive cargo, Institute Cargo Clause A ensures comprehensive protection and is commonly used by businesses seeking robust insurance against a wide array of transit-related risks.

ICC B (Institute Cargo Clause B)

Institute Cargo Clause B offers a more limited scope of coverage compared to Clause A. It protects goods in transit by sea, air, or land against specific risks such as fire, explosion, vessel or vehicle collision, and theft. This clause also covers damage during loading and unloading. However, it excludes broader risks like weatherrelated damage, inherent defects in the goods, or gradual deterioration. The coverage under Clause B is less comprehensive than Clause A, making it suitable for lower-value shipments or situations where extensive coverage is not necessary. The clause details the geographical limits of coverage, from the point of origin to the final destination, including intermediate points. It also outlines the insurance limits and claims process, including documentation requirements. Institute Cargo Clause B is ideal for those seeking essential protection without the broader scope provided by Clause A.

ICC C (Institute Cargo Clause C)

Institute Cargo Clause C offers the most limited coverage among the Institute Cargo Clauses. It provides insurance for goods in transit by sea, air, or land against specific risks such as fire, explosion, vessel or vehicle collision, and theft, but with notable exclusions. This clause does not cover broader risks like weather damage, inherent defects, or gradual deterioration. It also excludes losses due to inadequate packing or handling. Clause C is generally used for lower-value cargo or when comprehensive coverage is not deemed necessary. The insurance is effective from the point of origin to the final destination, including any intermediate points. The clause specifies the maximum amount payable for claims and outlines the required documentation and claims process. Overall, Institute Cargo Clause C provides basic coverage at a lower cost, making it suitable for situations where a more extensive insurance policy is not required.