If you are working in the marine industry, you probably understand the risks involved in transporting goods. Natural disasters, collisions, theft or accidents can delay shipments or even result in partial or total loss of cargo. For businesses and buyers, such setbacks can lead to significant financial losses. The Marine Insurance Act of 1963 addresses this and provides a legal framework for marine insurance contracts, defining the rights and obligations of both insurers and policyholders.
Understanding the Marine Insurance Act of 1963
The Marine Insurance Act of 1963 is a legislation regulating Marine Insurance contracts in India. It defines guidelines and regulations for marine insurance policies, as well as the rights, obligations, and principles related to marine insurance. The Act defines terms associated with marine insurance, sets rules for policy formation, and defines insurer and insured duties.
It also deals with insurable interest, material information disclosure, warranties and claims settlement in marine insurance.
How does a marine insurance policy work?
Like any other insurance contract, a marine cargo insurance policy assigns the responsibility of the policyholder to the insurance company. The policyholders may include any party involved in the transportation of goods.
Points showing how a marine insurance policy functions are displayed below:
- A shipper or cargo owner buys a suitable marine insurance plan from a reputable insurance provider before shipping the goods. The great thing about a marine policy is that it may be adapted to the particular party concerned.
- The key factors for the development of a suitable marine policy are the mode of transport, destination, goods type and value, and other relevant factors.
- In general, a marine policy will pay for damages or losses to the goods/cargo caused by natural calamities (earthquakes, storms, thunder, and lightning) or manmade risks (theft, fire and explosions, vandalism, etc.
- Also covered are reputable marine insurance providers for improper handling or other errors by the carrier.
- The premium of a marine insurance policy is not fixed. Instead, it is computed according to the type of policy, type, and value of goods, mode of transport, etc.
- If the cargo owner or shipper suffers damages or loses the goods in transit, they may claim the insurance under the terms and conditions of the policy.
- For any successful marine insurance claim, the insured must submit evidence of damage or loss, including luggage receipts, bills of lading, etc.
- The insurance company reviews the claim and determines compensation to be paid to the cargo owner or shipper. After everything is determined, the insurance provider makes a final settlement by offering the decided compensation to the insured.
The benefits of marine insurance in India
The following are the benefits of the coverage:
- Broad coverage: The benefit of marine insurance is that it provides protection against risks arising out of a variety of unanticipated events, including poor climate, man-made disasters, natural disasters, third-party or personal injuries, etc. You can choose from many different policies.
- Competitive advantage: Marine insurance helps shippers and vessel owners attract more customers by insuring their goods and valuables against loss.
- Conform to legal requirements: Sometimes, marine transit insurance is required for a vessel to transit by sea.
- Scope for customisation: Another advantage of marine insurance is that it is customised to your needs. That means you select the amount of coverage that fits your budget and needs.
Key provisions of the Marine Insurance Act
Below is the list of key provisions of the Marine Insurance Act:
- Insurance contract: The act defines the marine insurance contract at its core. It is an arrangement under which the insurer agrees to defend the insured against marine losses in return for a premium.
- Utmost good faith (Uberrima Fides): Both the insurer and the insured must disclose all material facts concerning the insured risk. Failing to do so may nullify the contract.
- Insurable interest: The act requires the party taking the insurance to have an insurable interest in the object of insurance when the agreement is formed and at the time of the loss.
- Indemnity: Marine insurance is an indemnity policy. This means that the insurance cover aims to restore the insured to the same financial situation as before the loss occurred.
- Warranties and conditions: Those are terms in the insurance contract that must be observed. Violation of these terms could lead to the voiding of the policy.
- Types of losses: The act further separates losses into partial and total losses and total losses into actual total losses and constructive total losses with associated conditions and implications.
What is covered under the Marine Insurance Act
Here is what the Marine Insurance Act stresses about:
- Losses covered: Insurer pays for losses directly caused by events listed in the policy.
- Total loss: Total damages or disappearance of the insured item.
- Partial loss: Damage less than total loss, such as goods with damaged labels or packaging.
- Salvage expenses: Costs to save the insured property from damage by a covered risk are claimable.
- Continued coverage during transit: Insurance remains valid if goods are temporarily unloaded, reshipped or moved due to a covered risk.
- Presumed total loss: If a ship disappears and no news is received after a reasonable time, it’s treated as a total loss.
Exclusions and limitations of marine insurance
The following are not generally covered:
- Losses caused deliberately by the insured.
- Losses caused by delays.
- Damage from regular use, ageing or minor leak.
- Losses caused by rats, insects or other vermin.
- Damage to machinery not caused by a listed risk in the policy.
Note: The above list is not exhaustive; please refer to the policy documents for more information.
Implications for the maritime industry
The Marine Insurance Act has enormous implications for the maritime industry. It provides a legal foundation for the operation of marine insurance, enabling trade by providing a safety net against the many risks of the ocean. Compliance with the act ensures the validity and enforceability of marine insurance contracts, which are vital for the economic stability of maritime operations.
Challenges and criticisms
The Marine Insurance Act has its share of challenges and critics. This foundational requirement of utmost good faith sometimes creates disagreement over what constitutes a material fact. The requirements for insurable interest and compliance with warranties and conditions can also make the application and claim processes difficult.
The future of the Marine Insurance Act
The maritime business also continues to grow with technological developments and shifts in global trade dynamics. Consequently, it is debated whether the Marine Insurance Act should be updated or reformed to reflect the evolving requirements of maritime commerce.
Conclusion
The Marine Insurance Act of 1963 continues to be the backbone of secure maritime trade in India. By setting clear rules and protections, it empowers businesses to navigate the uncertainties of sea transport with confidence. Its principles not only safeguard investments but also strengthen trust between insurers and policyholders.
FAQs
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What are the different types of marine insurance?
Marine insurance policies in India include marine open insurance, marine transit insurance, marine inland insurance and marine import and export insurance. You can tailor them to cover specific risks like natural disasters, theft, fire, or accidents, as well as different types of cargo, modes of transport and more.
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How is the premium for a marine insurance policy calculated?
The premium is determined by factors such as the type and value of goods, mode of transport, route and duration of transit. Policies with higher risks, expensive cargo or longer shipping routes generally attract higher premiums.
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Are delays in delivery covered under a marine insurance policy?
Delays in delivery are generally not compensated under marine insurance. The policy primarily covers direct physical loss or damage to the insured cargo. Financial losses due to late delivery or missed deadlines are usually excluded unless specifically added as a separate coverage option.
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What are the obligations of the insurer under the Marine Insurance Act?
Insurers must honour claims arising from covered risks, act in good faith and pay compensation as per the policy. They are responsible for investigating claims fairly and settling losses according to the contract’s terms, conditions and applicable legal provisions.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure / policy wordings carefully for detailed information about on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.