Insurance & survey

INSURANCE & SURVEY
“ ONE CANNOT TEACH OTHER
PERSON ANYTHING; ONE CAN ONLY
HELP PERSONS FIND WISDOM
WITHIN THEMSELVES.”
- GALELIO
Presented by T.S.Shrinivaasan, Mar-Tech
Insurance Surveyors & Loss Assessors Pvt.
Ltd.,

What is Insurance ?
• Insurance is defined as a co-operative
device to spread the
loss caused by a particular risk
over a number of persons who
are exposed to it and who
agree to insure themselves
against that risk.
• Mow bray and Blanchard
define as a social device for
eliminating or reducing the
cost to society of certain types
of risk.
• In other words, Insurance is a
co-operation form of
distributing a certain risk over
a group of persons who are
exposed to it.
Ltd.,

What is Insurance ?
• Insurance may defined as a
contract between two
parties whereby one party
(Insurer) agrees to protect
the other party (the
Insured) against a loss,
when it takes place through
the risk insured or pay a
fixed amount on the
happening of a certain
event, in exchange of a
fixed sum (premium).
• What is risk ? Risk is a
chance or possibility of
danger, loss, injury etc.
Ltd.,

Types of Risks
• The Chartered Insurance Institute, states the
following categories of risk.
• Financial risks which means that the risk
must have financial measurement.
• Pure risks which means that the risk must be
real and not related to gambling or wagering.
• Particular risks which means that these risks
are not widespread in their effect, for
example such as earthquake risk for the
region prone to it. Presented by T.S.Shrinivaasan, Mar-Tech
Ltd.,

Types of Insurance
INSURANCE
LIFE NON-LIFE
MARINE FIRE MOTOR ENGINEERING MISCELLANEOUS
Ltd.,

What is Marine Insurance ?
• Marine Insurance is a contract, whereby the Insurer
undertakes to indemnify the Insured, in manner and to the
extent thereby agreed against Marine Losses , that is to say,
Losses incident to Marine Adventure.
-- Marine Insurance Act 1906 (UK)- Sec.1
Presented by T.S.SHRINIVAASAN of MAR-TECH
Insurance Surveyors & Loss Assessors
Ltd.,
Pvt. Ltd.,

Principles of Insurance
– PRIMARY PRINCIPLES
• PRINCIPLE OF CO-OPERATION
• PRINCIPLE OF PROBABILITY
– LEGAL PRINCIPLES
• INSURABLE INTEREST
• UTMOST GOOD FAITH
• INDEMNITY
• SUBROGATION
• CONTRIBUTION
• CAUSA PROXIMA
• WARRANTIES
Ltd.,

PRINCIPLE OF CO-OPERATION
• We have already seen Insurance is based on co-operative
endeavor. The risk of an individual is to be
shared by many so as to reduce the share of an
individual.
• To illustrate the point, suppose 10000 persons have
insurance policy and they all pay a small amount called
premium, which is to be collected in a pool by the
Insurance Company. In the event of damage or loss,
claims are settled by Insurance Company.
• Thus Insurance is basically based on the principle of co-operation.
Ltd.,

PRINCIPLE OF PROBABILITY
• To illustrate this principle, suppose a coin is
thrown into air. What are the chances of getting
head. It is 50% and similarly getting tail is 50%.
James Bernally called this “Theory of Large
Numbers”
• Insurance companies collect the data of previous
happenings or loss statistics and form an idea for
the future likely events. They prepare the
mortality tables (for life) and loss tables (for other
property insurances) and fix premium.
Presented by T.S.Shrinivaasan of MAR-TECH
Ltd.,

PRINCIPLE OF INSURABLE INTEREST
• M.I.A SEC 5 says “ every person has an
insurable interest who is interested in a
marine adventure. It further states that i)
there must be a physical object exposed to
marine perils and ii) the assured must have
some legal relationship to that object in
consequence of which he benefits by its
preservation and is prejudice by its loss or
damage thereto or incurs liability in respect
thereof.
Ltd.,

INSURABLE INTEREST
• In Life Insurance : It
must exist at the time
of taking insurance.
• In Marine Insurance:
It must exist at the
time of loss.
• In Fire Insurance: It
must exist both at the
time of effecting as
well as at the time of
loss.
Ltd.,

INSURABLE INTEREST
Some examples:
• Owner of a Ship.
• Owner of the cargo.
• A creditor who has advanced money on the security of
Ship or cargo.
• The mortgagor and the mortgagee.
• The Master and Crew have insurable interest for their
wages.
• In case of Advanced Freight, the person advancing the
freight has Insurable Interest, if such Freight is not
repayable in case of loss.
Ltd.,

PRINCIPLE OF UTMOST GOOD FAITH
• Utmost Good Faith or ‘Uberrima Fide’
whereby parties to the contract must disclose
every material fact known to them.
• Unlike ‘Caveat Emptor’ (let buyer beware) in
any other commercial contract, this is very
peculiar for Insurance Contracts.
• Disclosing of material facts apply to both the
parties.
Ltd.,

Examples of Material Facts
• The shipment on deck cargo, which normally
carried under deck.
• The shipment is Second hand and not new.
Ltd.,

PRINCIPLE OF INDEMNITY
• Strictly speaking, all Insurance Policies,
except Life Insurance and personal accident
are contract of indemnity.
• The object of this principle is to place the
insured as far as possible in the same
financial position occupied by him before
the happening of the event.
• The insured is not allowed to make any
profit while compensating the loss by
Insurer.
Ltd.,

PRINCIPLE OF SUBROGATION
• This principle refers to the rights of
the Insurer to stand in place of
insured, after the settlement of the
claim, having all the rights and
remedies against the third party.
• For example, due to negligence of
ship’s crew sea water got entry into
ship’s holds and bags of sugar got
damaged. Insurance company settled
the claim to cargo interest, but with
the subrogation right, suing the ship
owner for recovery. During recovery, if
Insurance company gets more than
the claim paid, he has right to receive
only to the extent of claim settled and
excess amount will have to be passed
on to the cargo interest.
Ltd.,

PRINCIPLE OF CONTRIBUTION
• This principle is applied when a subject matter is
insured with several insurers and in the even of loss,
all insurers have to proportionately bear the loss.
• For example, X insured same property with 3 insurers
A. B and C respectively for a sum of 3 Lacs, 2 lacs
and 1 lac. During a fire, there was a loss of
Rs.15000/- which will be proportionately shared by
all three insurance companies as under:-
• A will bear = Rs.15000*3lacs/6lacs = Rs.7500/-
• B will bear = Rs.15000*2lacs/6 lacs = Rs.5000/- and
• C will bear = Rs.15000*1 lac/6 lacs = Rs.2500/-
Ltd.,

PRINCIPLE OF CAUSA PROXIMA
• Under Marine Insurance, Insurers are liable
for a loss caused by a peril insured against, but
there may be several causes may have
operated and as per this Principle it is the
proximate cause that must be looked into and
not the remote cause. ‘Causa proxima non
remota spectatur’ ( the proximate cause and
the remote cause must be regarded.)
Ltd.,

EXAMPLES OF CAUSA PROXIMA
• Thames and Mersey Marine Insurance Company
v. Hamilton, 1887, a vessel and her machinery
were insured against “perils of the sea” and other
named “perils”. Owing to an engineer’s
negligence a pump on board was damaged.
• It was held that the insurer was not liable for the
loss because it was not caused by a peril of the
sea or by a peril named in the policy document.
Ltd.,

• In Leyland Shipping v. Norwich Union,. 1918, the insured
vessel was torpedoed by a German submarine during the
First Word War. The vessel was taken to a port for repairs
and berthed in the inner harbour. During the shifting the
vessel grounded and eventually sank. The question arose as
to what was the proximate cause of the loss. If the loss was
a “marine loss” (grounding is a “peril of the sea”) the
assured would have been covered. If the reason for the loss
was the war risk, this was excluded in the contract and the
assured would not be covered.
• It was decided by the court that the dominant reason or
cause of the loss was the torpedoing because the vessel
was never out of imminent danger from this cause until she
sank. Accordingly, the assured’s claim failed.
Ltd.,

• In Pink v. Fleming, 1890, a cargo of oranges and
lemons was insured. The vessel did suffer a
collision and had to be repaired in a port. During
repairs, the cargo had to be discharged and
reloaded after repairs. When the cargo arrived at
the destination it was damaged because of the
handling at the repair port and the delay.
• The direct loss was not the collision but the
perishable character of the cargo. The assured
failed in his claim.
Ltd.,

EXAMPLE OF CAUSA PROXIMA
• In Etherington & The Lancashire & Yorkshire
Accident Insurance Co. 1909 – an Insured held
a Policy covering accident but not sickness. He
was thrown from his horse while hunting and
died after developing pneumonia consequent
upon the shock and wetting that he received.
• It was held by the court that the death was
due to accident.
Ltd.,

WARRANTIES
• A Warranty is a promise by the Insured to the
underwriter that something shall or shall not
be done or certain of affairs does or does not
arise.
• A warranty must be literally complied with. As
otherwise Insurer may avoid all liability from
the date of breach.
• A warranty is in effect a safety valve of Insurer.
Ltd.,

TYPES OF WARRANTIES
WARRANTIES
EXPRESS
WARRANTIES
IMPLIED
WARRANTIES
Ltd.,

EXPRESSED WARRANTIES
• These are clearly expressed or stated in the
Policy, which must be complied with. For
example:
• Warranted packed in new gunny bags.
• Warranted in new drums.
• Warranted professionally packed.
• Warranted sailing within seven days.
• Warranted shipped under deck.
• Warranted surveyed before shipment.
Ltd.,

IMPLIED WARRANTIES
• These are not expressed but implied and
taken for granted. For example.
• Sea worthiness of the vessel at the
commencement of voyage.
• Legality of the adventure.
• In the Voyage Policy on Goods, there is no
Implied Warranty that the goods insured are
seaworthy.
Ltd.,

Practice of Marine Insurance
• COVERS THREE MAIN INTERESTS in a marine
venture
 Hull – it represents the ship;
 Cargo – it is the goods being transported
by the vessel; and
 Freight – is the profit or earnings of the
ship at the end of a marine venture.
• Marine insurance policy covers not only sea
voyage but also purely inland transits through
any mode like rail, road, multimodal, air or
even by post
Ltd.,

Marine Insurance Coverage
• FORTUITOUS - sea accidents or casualties caused without willful
intervention of human (an element of chance or ill luck)
• INSURED PERILS
 Fire, Pirates and Thieves, Stranding
 Barratry - act willfully committed by master and crew against owner or
charterer of ship. It is an act of gross misconduct committed by a master
or crew of a vessel which damages the vessel or its cargo.
 Jettison –throwing of cargo overboard due to either a deliberate act or at
the wake of grave danger
 Taking at sea –when vessel is captured by enemy or others
 Foundering at Sea –ship has been reported lost after a stipulated time
 Collision –ship collides with another ship or with other objects, causing
damage
 UNINSURED PERILS
 Wear and Tear, Leakage, Breakage of goods, Inherent Vice, Loss by Rats
and Vermin
PRESENTED BY T.S.SHRINIVAASAN OF MAR-TECH
INSURANCE SURVEYORS & LOSS
ASSESSORS PVT. LTD.,

Types of Losses
• TYPES OF LOSSES
– TOTAL LOSS
• ACTUAL TOTAL LOSS
• CONSTRUCTIVE TOTAL LOSS
– PARTIAL LOSS
• PARTCULAR CHARGES
• SUE & LABOUR CHARGES
• EXTRA CHARGES
• SALVAGE CHARGES
– GENERAL AVERAGE LOSS
Ltd.,

MARINE CLAIMS
• Insurance Product as you all know is intangible in
nature.
• What is intangible ?
• Product Marketing Vs Service Marketing
• Say for eg. When you sell a computer, you can
give a demonstration.
• Unfortunately this is lacking in Service Marketing.
• How difficult is Service Marketing ??
PRESENTED BY T.S.SHRINIVAASAN MAR-TECH
SUREYORS PVT. LTD.
Ltd.,

MARINE CLAIMS
• Quality of an Insurance Product can be
evaluated only during claims management.
• As against , Product Marketing Tangible nature
to some extent can be felt only during claims
handling by an Insurer.
• Hence an efficient management Claims
Management is over emphasized.
SUREYORS PVT. LTD.
Ltd.,

Marine Claims – Major Areas
• Chronology
• Nature of packing
• Nature of Damage/Loss
• Cause of Damage/Loss
• Claim against parties responsible for damage/loss
• Exclusions
• ICC Clauses ‘A’, ‘B’, AND ‘C’
• Documents
SUREYORS PVT. LTD.
Ltd.,

Marine Claims -Chronology
• Commencement of journey
• Date arrived at place of destination
• Date of Delivery
• Date of notification of loss
• Date survey held
PRESENTED BY T.S.SHRINIVAASAN 34
Ltd.,

Marine Claims- Nature of Packing
• Packing plays vital role in Claims Handling.
• Whether the packing is customary or
adequate in nature to withstand transit
hazards.
• Inadequacy or insufficiency in packing will
place an Insurer to repudiate the claim, vide
General Exclusion Clause, which we will see
later.
Ltd.,

Marine Claims – Nature of
damage/loss
• Here again detailed descriptive of nature of
damage or loss has to be insisted
• Damage is only a general term.
• Specific damage has to be described, like
drum dented/holed and part contents
spilt/leaked out.
• Similarly, machinery part dented/bent or
broken etc.
Ltd.,

Marine Claims – Cause of Loss/damage
• This forms only opinion of concerned Surveyor.
• There should be logic in arriving at such opinion
about cause of loss or damage.
• As surveyor is appointed only after occurrence of
loss or damage, Surveyor has to perform like a
post mortem.
• Cause of damage and policy exclusions taken in to
account to decide about admissibility of claim.
Ltd.,

Marine Claims – Claim against the
parties responsible for loss/damage
• Insured must prefer claim against third parties
responsible for loss/damage like Transporter
or warehouse or port.
• Very many Insured asks, when they insure
with Insurance Company, why should they
claim against third parties ?
• This monetary claim against third parties will
facilitate Insurer to go for recovery.
Ltd.,

Marine Claims - Exclusions
• Willful misconduct.
• Ordinary leakage, loss in weight and volume.
• Insufficiency or unsuitability of packing.
• Ordinary wear and tear
• Inherent vice or nature of subject matter
• Delay, even if caused by an insured peril.
• Weapon of war using atomic or nuclear
fission/fusion radio active force or matter
Ltd.,

Marine Claims - Exclusions
• Deliberate damage to or deliberate
destruction of subject matter (in B & C
clauses)
• Un-seaworthiness or un-fitness of vessel,
conveyance, container
• War risks
• Strikes, Lock outs, Civil Commotions
Ltd.,

MARINE CLAIMS- ICC CLAUSES A, B & C
SR.
RISKS A B C
NO.
01 FIRE/EXPLOSION   
02 STRANDING/SINKING   
03 BARRATRY/JETTISON   
04 COLLISION   
05 THEFT/PILFERAGE/ND  x x
06 SHORTAGE  x x
07 CONTAMINATION  x x
08 HEAVY WEATHER  x x
Ltd.,

MARINE CLAIMS-ICC CLAUSES (Contd.)
Ltd.,
•
09 SPONTANEOUS
COMBUSTION
x x x
10 WAR/STRIKES/INSTABILI
TY
 x x
11 TERRORISM/PIRACY x x x
12 G.A. SACRIFICE   
13 EARTHQUAKE/VOLCAN
O/LIGHTNING
  x
14 LOB/WASHING OVER
BOARD
  x

MARINE CLAIMS-ICC
CLAUSES (Contd.)
ICC CLAUSES (Contd.)
Ltd.,
SR.
NO.
RISKS COVERED A B C
15 DISCHARGE IN PORT OF
REFUGE/DISTRESS
  
16 ROUGH
HANDLING(BURSTING OF
BAGS, BREAKAGE,
LEAKAGE,SWEAT,
CONDENSATION, RAIN
WATER, IMPROPER
STOWAGE ETC
 x x

Marine Claims - Documents
Insurance Policy
Invoice Copy
Damage certificate from carrier
LR/AWB/RR copy with endorsement
Monetary claim on carrier
Carrier’s reply or AD slip
Packing List
Claim Bill
Ltd.,

Surveyor
• Following Surveyors are in the field:
• Marine Surveyor
• Government Surveyor
• Classification Surveyor
• Insurance Surveyor
Ltd.,

Surveyors License & Authorization
• In India, Licenses are given by Govt. only for
Insurance Surveyors and issued by IRDA
(Insurance Regulatory and Development
Authority).
• IRDA prescribed Eligibility Criteria for issuance
of license, which are three fold:
• Qualifications
• Training
• Examination.
PRESENTED BY: T.S.SHRINIVAASAN, MAR-TECH
INSURANCE Ltd.,
SURVEYORS & LOSS
ASSESSORS PVT. LTD.,

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