Marine Insurance is one of the oldest forms of insurance. It is the insurance against loss by damage or destruction of cargo, freight and merchandise. It is the means or instruments of transportation and communication whether on land, sea, or air.
Marine insurance may be defined as a contract of indemnity whereby the insurer undertakes to indemnify the insured against financial loss caused by sea perils to the ship or its cargo in a specified voyage or time. It is concerned with overseas trade. The persons who are importing the goods will like to ensure the safe arrival of their goods. The shipping company wants the safety of the ship. So marine insurance ensures the coverage of all types of risks which occur during the transit. Marine insurance is a safe haven for shipping corporations and transporters because it helps to reduce the aspect of financial loss due to loss of important cargo. It also helps to bring together the transporting companies and the receiving parties, the duty, dedication and the straightforwardness of the insurance companies.
According to M. N. Mishra, "Marine insurance is the contract between the insurer and insured whereby the insurer undertakes the insured in a manner and to the interest thereby agreed, against marine losses incident to marine adventure."
In conclusion, marine insurance may be defined as a contract under which the insurer takes the responsibility of indemnifying the insured against specific loss due to sea perils in exchange for the premium.
Marine insurance is the contracts of insurance upon vessels of any description, including cargoes, freights & other interests which may be legally insured. Whatever be the transit by land, water or both and whether or not including warehouse risk or similar risk included among the risks insured against in marine insurance policies. It has two branches:
a) Ocean Marine Insurance
Ocean marine insurance covers the perils of the sea. Travelers continue to monitor the ever-changing landscape of the ocean marine industry to stay in step with the needs. Ocean Marine Insurance is one of the strongest companies in the marketplace today.
b) Inland Marine Insurance
Inland marine insurance is related to the inland risks on the land. It has developed with the expansion of trade. In modern times marine insurance business is well organized and is carried on scientific lines. Inland marine insurance is available standalone or can be packaged with other coverages.
The various types of risk covered by marine insurance are as follows:
a) Cargo Insurance
The goods to be insured are called ‘cargo’. It is insured by the owner and insurance of goods shipped through waterways is known as cargo insurance. Any loss of goods during the journey is indemnified by the insurance company. The goods or cargoes shipped to a foreign country are exposed to the perils of the seas. The goods are generally insured according to their value and some percentage of profit can also be included in the value. The policies of cargo may be special, reporting and floating. The special policy is only for one shipment.
b) Hull Insurance
The word Hull refers to the body of the ship or vessel. The ship exposes a number of risks like a cyclone, collision, and arrest by foreign naval power. The insurance which protects the ship owner against the loss of the ship is known as hull insurance. In Hull Insurance, the ship is insured against any type of danger. If the ship is damaged, the owner of the ship gets indemnity from the insurance company. The ship may be insured for a particular trip or for a particular period.
c) Freight Insurance
Freight insurance is one of the subject matter of marine insurance. The freight may be paid in advance or on the arrival of goods. If the goods are lost during transit, the shipping company will not get freight. The shipping company may insure the freight to be received which is known as freight insurance. When the cargo pays freight at the time of shipment of goods, the ship owner losses the freight. They do not reach the port of destination. The ship owner guards against possible loss of freight by freight insurance.
Some of the principles related to marine insurance are as follows:
1. Utmost Good Faith
The marine contract is based on utmost good faith on the part of both the parties. It is one of the important principles of marine insurance. The insured should give full information about the subject matter to the insurer. He should not withhold any information.This principle is based on the insured than on the underwriter. A party should act in good faith otherwise, the other party may cancel the contract.
2. Insurable Interest
The insured should have an interest in the subject matter when it is to be insured which means insurable interest. At the time of acquiring a marine insurable policy, the insured may not have an insurable interest. He should have a reasonable expectation of acquiring such interest. He should be benefited by the safe arrival of commodities. He should get the compensation amount of the loss or damage of goods.
The principle of indemnity means that the insured will be compensated only to the extent of loss suffered. He will not be allowed to earn profit from marine insurance. At the time of taking up the policy, the money value of subject matter is decided. Sometimes the value is calculated at the time of loss also.
4. Cause Proxima
The word Proxima is derived from Latin word which means the nearest or proximate cause. This principle helps to decide the actual cause of loss when a number of causes have contributed to the loss. To fix the responsibility of the insurer the immediate cause of loss should be determined.