Insurance and Risk Management General Insurance Marine insurance -- Oldest form of insurance It covers -- cargo insurance -- hull insurance It has its origin to London where Lloyds Underwriters evolved “Ship and Goods Policy”. Even though it originally started to cover the risk of loss due to voyage in ocean, now marine insurance covers the following: Export and import of goods by ocean going vessels Coastal shipments by steamers, sailing vessels, mechanised boats Shipments by inland vessels or country crafts or barges Consignments by rail, road, airways and post incidental to the above.

Insurance and Risk Management General Insurance Marine insurance Marine Insurance is governed by Marine Insurance Act 1963. It is governed by the basic principles of insurance namely Utmost good faith Insurable interest Indemnity Subrogation Contribution and Proximity Let us briefly discuss the above.

Insurance and Risk Management General Insurance Marine insurance Utmost good faith The insured is supposed to disclose in the proposal all material facts relevant to the contract which he knows and he ought to know. 2. Insurable interest The insured must have a legal relationship to the subject matter of insurance and stand benefited by its safety. 3. Indemnity Indemnity means security or protection against loss or damage. The insurer provides compensation for loss only to the extent of loss or damage suffered.

Insurance and Risk Management General Insurance Marine insurance 4. Subrogation It means “ the transfer of rights and remedies of the insured to the insurer who has indemnified the insured in respect of the loss” 5. Contribution It is a right of an insurer who has paid a claim under a policy to recover a proportionate amount from other insurers who are also liable for the loss 6. Proximity or proximate cause The insurance contract is to provide cover against loss caused by a particular peril or event. If the loss is caused by two events, one the insured and the other not insured, then it has to be seen which event has contributed most to the loss, whether the insured or not insured? This process of verifying the cause of loss is called as proximity cause.

Insurance and Risk Management General Insurance Marine insurance Who can take marine insurance? Hull insurance on the vessel can be taken by the owner of the vessel. It can not be transferred or assigned without the concurrence of the insurer. Freight insurance can be taken by the owner/ operator or charterer of the vessel. It also can not to be transferred. Cargo insurance can be taken by the buyer of the cargo or the seller. Insurable interest need NOT be established at the time of insurance. But the insured must have the insurable interest at the time of loss. This is the major difference between marine insurance and other Insurances.

Insurance and Risk Management General Insurance Marine insurance Marine Risk– Institute cargo clause Marine insurance contract is evidenced by the policy and the clauses attached to it. In respect of export / import policies, the Institute Cargo Clauses drafted by the Institute of London Underwriters are adopted by insurance companies. For policies covering inland trade, the clauses drafted by Tariff Advisory Committee are followed. Duration of the cover The cover will be for the period from the time the goods are loaded at the place named in the policy till the time they are discharged at the place named therein or on the expiry of 60 days after completion of discharge at the port of destination, whichever is earlier. Open cover

Insurance and Risk Management General Insurance Fire Insurance Even though the cover is named as fire risk, conventionally fire risk covers he following: Fire Lightning Explosion Riot, strikes, civil commotion Malicious damage Terrorists attack Cyclone, storm, hurricane etc. The normal principles under which other insurance policies are issued are applicable for fire insurance also. One important clause is the “Average clause”

Insurance and Risk Management General Insurance Fire Insurance Average Clause Fire risk is generally for property or the goods. The insured is expected to take insurance cover for the full value of property or goods. In the event of a loss, if it is found that he has not insured for the full value of the goods or property, he will be paid only proportionately. The proportion will be between the value of the goods and the extent of cover taken. Assuming the goods stored in a godown are for a value of Rs200,000. The insured has taken a policy for only Rs100,000. A fire takes place and the loss comes to Rs100,000. How much will be the compensation? Since the insured has taken cover only for 50% of the actual value, he will be compensated only to the extent of 50% of the loss.

Insurance and Risk Management General Insurance Fire Insurance Tariff The cost of insurance, premium is generally called as tariff in fire insurance. Earlier it was fixed by Tariff Advisory Committee. Sine 1.1.2007, it is fixed by individual insurance companies. Duration of fire policies Issued for 12 month period and can be renewed for another 12 month period. Longer duration policies can be issued only for covering residential houses.

Insurance and Risk Management General Insurance Motor Insurance Governed by Motor Vehicles Act 1988. Insurance is compulsory to cover third party risk. Other risks also can be covered. Basic principles of insurance will apply to motor insurance also. For deciding the cost of insurance namely premium, vehicles are divided as under: Private cars/ two wheelers Goods carrying vehicles Passenger carrying vehicles Miscellaneous and special types of vehicles There are many other insurances as health, transit, theft, and other miscellaneous schemes

Insurance and Risk Management Customer Service- Complaint Redressal Ombudsman -- a quasi judicial authority -- set up under Redressal of Public Grievances Rules, 1998 -- appointed by the governing Body of the Insurance Council Powers of Ombudsman To receive and consider any total or partial repudiation of claims by the insurer any dispute regarding premium paid or payable in terms of the policy any dispute with regard to legal construction of policies in so far as they relate to claims delay in settlement of claims non issuance of any insurance document to customer after receipt of premium The Ombudsman acts as a counsel and mediator. His decision whether a complaint is fit to be heard is final.

Insurance and Risk Management Customer Service- Complaint Redressal Ombudsman Conditions to be satisfied for complaining to Ombudsman: 1. When the insurance company has not replied the complainant within one month. 2. The company has rejected the complaint 3. The reply given is not satisfactory 4. The complainant has NOT gone to civil court or consumer forum 5. The complaint to Ombudsman is made within 1 year from rejection of representation by the insurance company or sent its final reply.

Insurance and Risk Management Customer Service- Complaint Redressal Ombudsman Ombudsman settles through mediation and mutual consent. Makes a recommendation within one month from receipt of complaint If the complainant accepts it, he sends his acceptance with in 15 days Ombudsman forwards the recommendation and acceptance to insurer Insurer has to comply within 15 days and inform compliance What happens if not settled through mutual agreement?

Insurance and Risk Management Customer Service- Complaint Redressal Ombudsman Where the complain is not settled through mutual consent, Ombudsman will pass an “award” within 3 months from the receipt of Complaint. The complainant has to convey his acceptance or not within 1 month. When the award is accepted, the insurer has to execute the award within 15 days and confirm compliance to Ombudsman. If the complainant is not agreeing with the award, he can choose other means of redressal like court. Whether recommendation or award, the insurer has to comply with, if the complainant accepts it. Ombudsman can also award ex-gratia payment if he deems it fit.

Insurance and Risk Management Consumer Protection Act 1986 (COPRA) 15th March each year is observed as “ world consumers day”. It was on this day in 1962, John F kennedy, the then US President declared the rights of consumers as Right to safety Right to be informed Right to choose Right to be heard These rights also find a place in the socio economic agenda of India. In order to serve the cause of consumers at large, the above Act came in to force on 15.4.1987. The aim is to provide simple, speedy and inexpensive redressal of grievance of consumers.

Insurance and Risk Management Consumer Protection Act 1986 (COPRA) The following are the Forums with quasi judicial power District Consumer Redressal Forum headed by a District Judge with financial jurisdiction of Rs 20.00 lacs 2. State Commission headed by Judge of High Court with financial limit of Rs 1.00 crore 3. National Commission headed by a judge of Supreme Court to hear disputes above Rs 1.00 crore. State and National Commissions have appellate powers also. Supreme Court is the ultimate judicial authority. The Act defines a consumer as a person who buys goods or services for a consideration for his use.

Insurance and Risk Management Consumer Protection Act 1986 (COPRA) Life Insurance is a service rendered to the Public. There is a consumer relationship between the insurer and the insured. Therefore insurance company comes under the purview of the Act. If an insured finds defect or deficiency in services he can seek redressal in any of these Forums. Now a days, these Forums proceed against insurance Agents also, as they are also responsible for the insurance decision taken by the insured.