International Transportation Insurance-Insurance Procedures

Usually insurance is arranged by the exporter (under CIF terms,etc.) or the importer (under FOB,CFR terms,etc.)approaching an insurance company which has a department specializing in cargo insurance.They may start by inquiring and choosing the right coverage and then negotiate insurance premium rates.Sometimes,brokers may be utilized whose assistance can be of enormous benefit as they are highly sklled specialists and can obtain sound and reliable coverage,together with competitive premium rates.In export trade,who will effect insurance depends on the particular trade term adopted.Under CIF terms,it is the seller who arrange insurance with an insurance company.Under the terms as FOB,CRF,etc., the buyer effects insurance,but he may ask the seller to arrange insurance on behalf of the buyer.An insurance policy is issued when goods are insured,but it is also usual for a certificate of insurance to be issued for documentary purpose.An insurance policy is actually a contract,sering as evidence of the agreement between the insurer and the insured (the people who take out insurance.It forms part of the shipping documents.
The amount insured must be at least the invoiced value of the goods.Under a CIF contract,it is common practice for exporter to insure the goods for 10% above the invoice value.In return for payment of a premium paid by the insured,the insurer agrees to pay the insured a sum should the event insured occur.In the sales contract,insurance clause should be expressly stipulated,including insurer,insured,the criterion for the insurance clause,insured value, and so on.

*Fundamental Principles of Cargo Insurance
The three fundamental principles of insurance are insurable interest,good faith and indemnity.

1.Insurable Interest
It means the person insuring must have the absolute ownership of the goods insured and must be the one who suffers some financial loss if the risk materializes.If he does not have the ownership or does not suffer any financial loss,he will have no insurable interest and will not be given the coverage.
2.Good Faith
In the formation of a contract of cargo insurance,the utmost good faith must be observed by both the assured and insurer.If either party fails to observe good faith,the other may avoid the contract.Breach of good faith may consist of either material misrepresentation,or of non- disclosure of a material fact.Hence,It is the duty ot the assured to disclose to the insurer all material circumstances that are known to the assured before the contract is concluded.The material circumstance will influence the decision of the insurer as to whether or not to accept the risk and under what terms.
3.Indemnity
A cargo insurance policy is basically a contract of indemnity,an agreement to compensate teh assured in the event of loss. According to this principle,the assured cannot recover more than his actual loss because the objective of insurance to provide compensation for the loss suffered by the assured but not to profit from insurance.

*Factors Determining Premium Rates
1.The Carrying Vessel
The age,classification,flag,ownership and management of the ship are imprtant consideration.
2.Nature of the packing used
This has to be related to the mode of the transportation and its adequacy as a form of protection to the cargo.Air freight and maritime container shipment tend to require less packing.
3.Type of Merchandise involved
Some commodities are more vulnerable to damage than others.Additionally,one must relate this to the cover provided and the experience of conveying such cargo.
4.Nature of Transit and Related Warehouse Accommodition
Generally,the shorter the transit time,the less vulnerable the cargo to damge/pilferage.Again the mode(s) of transport invloved influence(s) premium determination.
5.Previous Experience
If the cargo involved have been subject to significant damage/pilferage,the premium are likely to be high.
6.The Extent of Cover Needed
Obviously the more extensive cover is required,the higher the premium rate is.For example,glassware may be at a high rate against all risks including breakage,or at a much lower rate excluding breakage,cracking or chipping.
7.The Volume of Cargo Involved
A substantial quantity shipment of cargo may obtain a more favorable premium, but much consideration depends on other circumstances,particularly transport mode and type of packing,if any.
*Cargo Insurance Claims
Most insurance company policies require that immediate notice be given to nearest branch or agency in the event of damage giving rise to a claim under a policy on goods.When notified of damage,the company's agent appoints a suitable surveyor to inspect the goods and to report on the nature and extent of damage.A common practice is for a report or certificate of loss incorporate the surveyor's findings to be issured to the consignees,the latter paying fee.This certificate of loss is included with the claim papers and,if the loss is recoverable under the insurance cover,the fee is refunded to the claimants.
In some circumstances,the claim papers are returned to the place where the insurance was effected and subsequently presented to the underwriter.However especially where goods are sold on CIF terms,and the policy is assigned to the consignees,arrangement are made for any claims to be paid at destination. In such cases,the consignees approach the agents named in the policy for payment of their claims. Of course,the claims procedure will vay by circumstances,but undountedly a quicker settlement should be secured in the event of loss or damage.
The following documents are required when making an insurance claim and should be produced by the buyer:
7.1 The commercial invoice issued to the buyer
7.2 The original bill of lading
7.3The original policy or certificate of insurance
7.4The survey report or other documentary evident detailing the loss or dame incurred
7.5Extended protest for salvage loss,particular average in goods or the total loss of goods
7.6Any exchange of correspondence with carrier or other parties regading their liability for the loss or damage
7.7Any landing account af final destination