Meaning & Principles of Marine Insurance.
Marine insurance is concerned with overseas trade. International trade involves transportation of goods from one country to another country by ships. There are many dangers during the transshipment. 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 insures the coverage of all types of risks which occur during the transit.
Marine insurance may be called a contract whereby the insurer undertakes to indemnify the insured in a manner and to the extent thereby agreed upon against marine losses.
Marine insurance has two branches:
- Ocean Marine Insurance.
- Inland Marine Insurance.
Ocean marine insurance covers the perils of the sea whereas inland marine insurance is related to the inland risks on the land.
Marine insurance is one of the oldest forms of insurance. It has developed with the expansion of trade. It was started during the middle ages in Italy and then in England. The sending of goods by the sea involves many perils; so it was necessary to get the goods insured. In modern times marine insurance business is well organized and is carried on scientific lines.
Principles of Marine Insurance
The principles of all types of insurance are generally the same and they have been discussed earlier, in detail. Some of the principles related to marine insurance are given as under:
I. Utmost good faith:
The marine contract is based on utmost good faith on the part of the parties. The burden of this principle is more on the insured than on the underwriter. The insured should give full information about the subject to the insured. He should not withhold any information. If a party does act in good faith, the other party is at liberty to cancel the contract.
II. Insurable Interest:
Insurable interest means that the insured should have interest in the subject when it is to be insured. He should be benefited by the safe arrival of commodities and he should be prejudiced by loss or damage of goods. The insured may not have an insurable interest at the time of acquiring a marine insurance policy, but he should have a reasonable, expectation of acquiring such interest. The insured must have insurable interest at the time of loss or damage, otherwise he will not be able to claim compensation.
This principle 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. The underwriter provides to compensate the insured in cash and not to replace the cargo or the ship. The money value of the subject-matter is decided at the time of taking up the policy. Sometimes the value is calculated at the time of loss also.
IV. Cause Proxima:
This is a Latin word which means the nearest or proximate cause. It helps is deciding the actual cause of loss when a number of causes have contributed to the loss. The immediate cause of loss should be determined to fix the responsibility of the insurer. The remote cause for a loss is not important in determining the liability. If the proximate cause is insured against, the insurer will indemnify the loss.