Advantages of Marine Open Cover Policy - Essay Example

Maritime Insurance Table of Contents Introduction 3 3 Company and Maritime Insurance Overview 4 What Is the Marine Cargo Open Cover? 6 Benefits of Maritime Insurance for a Domestic Manufacturer of Electrical Appliances 7 8 Conclusion 9 9 References 10 Bibliography 12 12 Introduction Insurance signifies an assurance of reimbursement for any probable future losses. In other words, it can be classified as the process of minimising the risk of financial failure at the time of facing problems such as theft, health problems, death and property damages among others. Insurance is also termed as ‘risk management’. There are various types of insurance policy for different problems namely ‘life insurance’ which is related to one’s life and ‘property and casualty insurance’, a type of insurance that considers problems related to property and business, are few of the notables. Furthermore, there are also few other insurance policies categorised as credit or debt insurances and buying insurance (Financial Consumer Agency of Canada, 2011). The primary objective of the paper is to present a view on the maritime insurance served by Lloyd’s Insurance Broker. This insurance will be served to a manufacturer of domestic electrical appliances and the pertinent aspects of the insurance will be described by a presentation report which includes the overview of the Lloyd’s company and maritime or marine insurance along with including merits for the manufacturing company. Company and Maritime Insurance Overview Lloyd’s is a United Kingdom based company which serves the customers in insurance and banking sectors. Lloyd’s had planned to start an insurance business after being influenced by the growing population and problems faced by the people. Since then, the idea was formulated and a corporate body was formed in 1688 from its own coffee house. Lloyd’s insurance corporate body was formulated underneath ‘Lloyd’s Act 1871 of the British Parliament’. The business processes of Lloyd’s are run by the members, managing agents, brokers and other members who support the governing body in operating the business. Lloyd’s generally deals with or serves its customer with a financial backup at the time of facing problems. The policies those are issued by Lloyd’s for their customers are related to casualty, energy, reinsurance, property, marine, motor and aviation. The history of Lloyd’s states the fact that they were the first insurance company to insure the commercial flight. However, it is also observed that Lloyd’s serves their customers with new and innovative insurance policies from its past till recent times. Lloyd’s fundamentally serves certain polices to protect the customers from certain risks which are unique and complicated. It serves in over 200 countries worldwide. Lloyd’s is one of the best and largest insurance corporate bodies in the world among the other insurance bodies. In recent times, Lloyd’s has been recognised as a specialist insurance body escorting the global insurance market (Lloyd’s, 2012). Among the various insurance policies, maritime or marine insurance is considered in the paper to discuss the objectives of the paper. Maritime is an insurance policy introduced or provided by the world leading insurance company Lloyd’s. The primary motive of issuing the policy is to provide backup to problems related to shipping process. This refers that losses and damages occurred in the process of transporting goods through shipping can be considered under this insurance coverage. These damages as well as losses are insured by Lloyd’s with the help of maritime insurance policy. Marine insurance policy is the agreement made between a company and a person for minimising the risks involved in voyage. The customers of this insurance are those who have ship or whose goods are to be transported through shipping. The policies comprising within the maritime insurance are time, voyage, mixed and floating policy. Time policy is that agreement which is made between the customer and the insurance body for certain precise period of time (Lloyd’s, 2012). Voyage is related to the particular mode of transportation through shipment and the policy only includes cargo. Mixed policy is described as the contract made between the company and the people for a specific time and place. For example, a ship bound for Chicago from Boston for 6 months is insured under mixed policy. Furthermore, the other policy under maritime insurance is identified as floating policy which is classified as the contract made between the company and the person by assuming an estimated value before the transit. After the transportation of the cargo, the actual value is calculated; subsequently the estimated value is deducted from the actual value. This calculation is done under floating policy (Giaschi, 2002). Under the Marine Insurance Policy of 1906 section 29 floating policy states that the loss will only be cleared by the insurance company if the details of the shipment is submitted or declared to the insurance body before the shipment or transportation (Marine Insurance Part III, 2002). What Is the Marine Cargo Open Cover? A marine cargo open cover is a policy which comes under the maritime insurance policy. With the help of the policy, Lloyd’s insures the cargos which are to be transported through shipment. These agreements are made by following the four levels of agreement i.e. time, voyage, mixed and floating policies. Once an agreement is made between the owner of the goods and the cargos and the insurance company such as Lloyd’s, insurance coverage can be carried out in future transportation through voyage, without making an agreement for every voyage. When there will be shipment of goods and cargos, owner will get separate certificates (Edward, 2007). Advantages of Marine Open Cover Policy Marine Open Cover Policy assures its customer for giving back the amount which is lost in form of damaged and misplaced machinery at the time of transportation. Lloyd’s has different types of policies related to maritime insurance and the company serves its customers with the apposite policies which suit them properly. The insurance of the insured goods starts as the product or the machinery leaves the merchandise. Losses related to damages are fundable even if the accident occurs before the details of the cargo are submitted to the insurance body. Once the policy is made, the agreement cannot be cancelled before the expiry date until and unless the party makes the company to do so. And, the cancellation is to be done before one month earlier than the expiry date. The insurance policies that are served by the company to its customers are usually affordable by all income level personnel. Lloyd’s marine open cover insurance also helps its customers by facilitating with single insurance policy which can be used time and again and the customers do not need to make an agreement for every time when their goods are transported through shipment. The insurance policy is offered by Lloyd’s to its customers with the price of the goods at which they had bought from the merchandise. Lloyd’s allows its customers to pay the premium according to their benefits such as quarterly, annually or monthly (Insurance Council of New Zealand, 2006). In reviewing the terms and the policies of insurance companies, it can be assumed that insurance policy has less limitation as compared to its advantages. This condition is revealed because the policies are insured for the advantages of people. The disadvantages that the policies have may be related with time and money among others (International Association of Insurance Law, 2009). Benefits of Maritime Insurance for a Domestic Manufacturer of Electrical Appliances A company is a body that runs its business nationally or within a nation. Especially, a company generally attempts to bring its machineries from abroad to produce effective outcome. All the manufacturing related machineries are generally brought through shipment. In the process of transporting the machines and the products, they can be damaged or misplaced. In relation to this condition, a maritime or marine insurance company can help the firm or the company by giving the certain amount of fund for the damages or misplaced products in transportation. The fund will be allocated only after an agreement is made between the insurance company and domestic manufacturing before transporting the machinery or the product from one place to another. To run a business nationally or domestically, every company’s management deems to utilise modern technologies or machineries in order to make their operational processes and products effective. Thus, a domestic electrical appliances manufacturing company can get augmented facilities from the maritime insurance body largely at the time of bringing modern technologies and machineries for its production unit. Being a domestic company, the management can be hampered sternly as the company can face a situation of huge loss, if the machineries are damaged or misplaced while transporting through shipment. In order to reduce the shock and loss, maritime insurance body acts as a risk management entity for that company. The primary function of the domestic manufacturer before the machinery is transported through shipment is to insure the machineries under marine insurance corporate body. After which if there are any losses or damages in transportation then the maritime corporate body will allocate the fund to the respective company according to its terms and policies (Edward, 2007). Conclusion Insurance is one of the fundamental requirements for the people in the present time. With the increase in the population, the chances of accident are rapidly rising because of the overcrowdness in every aspect. This scenario influenced Lloyd’s to introduce the insurance for a number of sectors such as life and health insurance, property insurance and maritime insurance among others. Maritime insurance generally deals with all concerns related to the transportation system through voyage. Under maritime insurance there are several dimensions among which open cover is recognised in the discussion. The Lloyd’s Insurance Broker has to introduce this plan to a domestic manufacturer of electrical appliance. The primary motive of the broker is to make an agreement with the domestic manufacturer. In certain cases, company and customer can create problems for each other. It is in this context, every company is different in serving its customers. Although the customers’ needs are same in the market and the needs are satisfied by the company by their separate characteristic. In this situation as well, Lloyd’s can face problems if they do not get clients for insurance. This is because their financial statement will be effected negatively and will have less financial turnover. However, customers can make an agreement with other insurance bodies to protect their goods and cargos. Customers can also suffer losses by not agreeing to deal with Lloyd’s because it has certain advantages which no other insurance company provides. References Edward, T., 2007. Marine Insurance - Are We Really Covered? Trade Finance Association of Bankers. [Online] Available at: http://www.tfab.org/files/Marine%20Insurance_02.pdf [Accessed July 03, 2012]. Financial Consumer Agency of Canada, 2011. Understanding Insurance Basics. Government of Canada. [Online] Available at: http://publications.gc.ca/collections/collection_2011/acfc-fcac/FC5-24-2011-eng.pdf [Accessed July 03, 2012]. Giaschi, C. J., 2002. Marine Insurance. Admiralty Law. [Online] Available at: http://www.admiraltylaw.com/UBC%20Law332/marine_insurance-outline.pdf [Accessed July 03, 2012]. Insurance Council of New Zealand, 2006. Marine Cargo Open Policy Handbook. Marine Cargo Handbook. [Online] Available at: http://www.icnz.org.nz/downloads/marine-cargo-handbook.pdf [Accessed July 03, 2012]. International Association of Insurance Law, 2009. Introduction. Warranties Marine Ins. [Online] Available at: http://www.aida.org.uk/docs/warrantiesmarineins.pdf [Accessed July 03, 2012]. Lloyd’s, 2012. Insurance and Lloyds. What We Do. [Online] Available at: http://www.lloyds.com/Lloyds/About-us/What-we-do/Insurance-and-Lloyds [Accessed July 03, 2012]. Lloyd’s, 2012. Exploring Our Current Business Activities. About Us. [Online] Available at: http://www.lloyds.com/Lloyds/About-us/What-we-do/What-lloyds-insures [Accessed July 03, 2012]. Marine Insurance Part III, 2002. General Principles of Marine Insurance Law. International Trade Law. [Online] Available at: http://www.nadr.co.uk/articles/published/shipping/008CHAPTEREIGHTTRADE3.pdf [Accessed July 03, 2012]. Bibliography James, J., 2012. Lloyds and the London Insurance Market: An Overview. Insurance Market. [Online] Available at: http://www.mellatinsurance.com/insurance-market/19.pdf [Accessed July 03, 2012]. Maritime Insurance Group, 2012. About Maritime. Corporate. [Online] Available at: http://www.maritime-ins.com/corporate/ [Accessed July 03, 2012]. Soyer, B., 2005. Warranties in Marine Insurance. Routledge. Zevnik, R. W. & Zevnik, R., 2004. The Complete Book of Insurance: Understand the Coverage You Really Need. Sphinx Publisher. Read More