1. Spoken English for International Business Lesson 8 Insurance Foreign Languages College

2. Learning Point In this lesson, we will learn how to negotiate insurance terms and deal with problems relating to insurance in international business transactions. Lesson 8 Insurance

3. Background Knowledge The international trade is subject to many risks. Ships may sink or consignment be damaged in transit, exchange rates may alter, buyers default or governments suddenly impose an embargo. Therefore, exporters and importers have to insure themselves against many of these risks. In the insurance business, loss is referred to in most cases as the special term “average”, so average in marine insurance simply means loss. General Average is a voluntary and deliberate loss and refers to sea hazards that affect all the cargo on a ship, though only one shipper, perhaps, actually suffers, while Particular Average is an involuntary and accidental loss, a partial loss which is suffered by the one whose goods are partly loss or damaged, but not voluntarily incurred, such as by jettisoning, which are covered by General Average. The most serious loss in marine insurance is a total loss of the entire shipmen, resulting from the perils on the sea such as beaching, grounding, stranding, collision, natural calamities, fire, etc. Lesson 8 Insurance

4. Total Loss falls into two kind: “actual total loss” where the thing insured is completely lost or is so badly damaged that it is not worth repairing, and “constructive total loss” where a ship or her cargo is so badly damaged that the cost of repair would be greater than the market value, they are treated as totally lost, and the insurers are bound to pay the total sum for which the damaged ship or cargo was insured. Exporters or importers arrange insurance cover for their shipment according to the type of goods and circumstances. There is a wide range of standard types of coverage, the three basic ones being as follows: Free of Particular Average (F.P.A), With Particular Average (W.P.A) or With Average (W.A), All Risks. Lesson 8 Insurance

5. Whether the additional risks which All Risks policy does not cover are necessary depends on a number of factors. General additional risks usually are: theft, pilferage and non-delivery (TPND), fresh water or rain water damage, short weight, intermixture and contamination, leakage, breakage, hook damage, rust, sweating and heating, etc. It must be noted that, in China all these general additional risks are included in “All Risks”. Special additional risks that are not included in All Risks and have to be taken separately are mainly: Failure to Delivery Risk, War Risk, and Strikes, Riots and Civil Commotions (S.R.&C.C.) The most commonly used document in marine insurance is the insurance policy. Other similar documents include open cover, floating policy and so on. Lesson 8 Insurance

6. It is important that exporters have a basic understanding of some the underpinning principles of insurance generally, and particularly their practical implications to cargo insurance. And these principles include: insurable interest, indemnity, utmost good faith, subrogation, contingency (seller’s interest) insurance, proximate cause and so on. Lesson 8 Insurance

7. Case Study

8. The coverage of FPA, WPA and All Risks (part 1)  F: What risks are covered in your offer according to the GIF clause?  C: We generally only issue FPA, WPA and All Risks, but we could add special coverage if a customer requires.  F: We would also like to have War Risk coverage. Can you get this for us?  C: We certainly can. But you must bear the premium for this sort of special coverage. Lesson 8 Insurance

9. 110% of the GIF invoice value (part 2)  F: Do you mind telling me what kind of insurance we've got for this order of goods?  C: Sure. We've got it covered under WPA, considering our deal is based on GIF clause. Is there anything you'd like to know or …?  F: No, not really. I was just wondering if the damage of goods is included in this WPA or not.  C: Actually, the damage of the goods belongs to the Risk of Break­age. We could add this item if you wish.  F: But that's an additional risk item, isn't it?  C: Yes. And the buyer is usually required to bear the cost for the additional risk coverage. Lesson 8 Insurance

10.  F: I see. How about this? What if we change to “All Risks”? Do we still have to pay extra for the Risk of Breakage?  C: No, you don't have to. The insurance of All Risks has that item under coverage already. However, all you need to do is to pay a little higher premium rate.  F: That really doesn't matter. The safety of the goods is all that counts.  C: Oh, yes, absolutely. I'll have your insurance changed from WPA to All Risks for 110% of GIF invoice value as per the ocean marine cargo clauses of the PICC.  F: Sounds good. Thanks. Lesson 8 Insurance

11. Class Activity

12. Compose a dialogue on the following situation. You sell Longchuan celadon porcelain ware ( 龙泉青瓷 ) on behalf of China National Arts & Crafts Imp & Exp Corp., Zhejiang Branch. Longchuan celadon porcelain ware has a history of more than 1 000 years, and its smoothness is exceptional among Chi­nese porcelain wares. Now a businessman from U.S. has or­dered a total of $ 7 000 worth of your products, FOB, New York. You're now discussing with him the following issues: payment, shipment, packing and insurance, concerning which you suggest a coverage of WA. Lesson 8 Insurance

13. Exercises

14. I. Answer the following questions. 1. What is General Average? 2. What is Particular Average? 3. What is Total Loss? 4. What are the three basic standard types of coverage in marine insurance? 5. What is the most commonly used document in marine insurance? 6. What are the underpinning principles of insurance? Lesson 8 Insurance

15. II. Interpret the following sentences. 1 ．在离岸价的条件下，货物的保险由买方投保， 或由卖方代保险。 2 ．在到岸价的条件下，货物的保险由卖方负责。 3 ．保险的目的是为了保障货物的安全和投保人 的利益。 4 ．保险责任的期限是被保险货物在最后卸货港 卸货 60 天为止。 5 ．保险索赔必须于货物在最后装卸港卸货后 9 个 月内提出。 Lesson 8 Insurance

16. Thank you very much!