Insurance, Force Major
Insurance – a practice of sharing among many persons , risks to life or property that would otherwise be suffered by only a few.
Risks in international trade
The export trade is subject to many risks. Ships may sink or collide; consignment may be lost or damaged. While the goods are in a warehouse, there are risks of fire & burglary. While the goods are in transit they may be stolen, totally destroyed or damaged through a lot of reasons, for example vibration, an accident, poor handling, change of temperature, etc.
To protect themselves against such risks, exporters always ensure their consignments. Without an insurance cover, a company could even be put out of business by the loss of a large consignment. With an insurance policy, the insurance company will pay compensation for the loss and the exporting company will be able to stay in business. So, the general idea of insurance is to gain indemnity in the case of any happening that may cause loss of money. The insurance has become more & more significant as commerce developed.
Kinds of insurance
There are many kinds of insurance contracts but all of them fall within one or other of the 4 main classes:
Accident insurance includes a wild variety of policies, dealing with a loss of property.
- theft/burglary insurance – this covers loss or damage due to the activities of thieves;
- bad debts insurance – this protects the company against the risks that its customers will not pay;
- goods/cash in transit insurance – this cover goods or cash being transported from one place to another.
- employees liability insurance – if an employee has an accident at work, he may claim compensation from the company where he injuries. It provides cover against this possibility.
- public liability insurance – if a member of the public has an accident on the companies premises, he may claim compensation from a company on his injuries.
- fidelity bond insurance – this protects the company against acts of dishonesty.
- motor/vehicle insurance – this must cover all risks associated with the case of vehicle.
Fire insurance includes a number of risks connected with fire, explosion, flood, flaming & etc. Life Insurance or Life Assurance includes all insurance connected with life threat. Marine insurance is the oldest one. It deals with a variety of policies giving cover to owners of ships their cargo against loss caused by pilferage, leakage, damage by water etc. Marine losses fall into two main classes:
1. Total Loss:
- actual total loss – mean that vessel or cargo are totally lost;
- constructive total loss – in case where the ship or the goods have been abandoned, because the cost of salvage (saving) or recovery would have been out of proportion to the value.
2. Partial Loss:
- particular average – if a particular cargo is damaged in any cause & the loss must borned by the owner of this individual consignment;
- general average – it applies to a loss internationally in curds in the interest of the ship owners & the owners of the various cargoes. This loss is borned by all concerned in proportion.
Insurance industry in the UK & Russia
The insurance industry in the UK is made up of three groups – insurance brokers, insurance companies, Lloyd’s of London .
Brokers or intermediaries look for the best cover for their clients & offer advice on insurance. They place their business with the insurance companies. Brokers handle about 70% of the general UK insurance business.
There are about 850 insurance companies authorized in the UK. One half of them handle more than 90% of company market business. They provide the full range of insurance contracts including life, pensions, health insurance, marine, fire, accident, motor, travel & household insurance.
Lloyd’s is a unique international insurance market. It is a society of underwriters. It’s made up of more than 26 000 members or “names”. They are private individuals who accept insurance risks & are liable for claims to the full extent of their personal wealth. To become a “name” at Lloyd’s you have to have 250 000 pounds of free assets. The members are grouped in 350 syndicates, which operate as small insurance companies. Each syndicate has its own specialization & a reputation in that particular market.
All business comes to Lloyd’s direct from Lloyd’s brokers. They look for the best quotation on behalf at their clients. Lloyd’s is recognized as the authority on marine insurance, but it now covers almost any risk, from oil refineries, aircraft, road vehicles even to satellites.
Lloyd’s has some advantages over the insurance companies. Its historical reputation is very good. It has never failed to pay a claim in the whole of its history. It has low operating expenses. It has a system of agents that operate throughout the world. Besides, Lloyd’s are the leaders in the field of marine insurance.
In Russia foreign trade organization takes out insurance with Ingosstrach. Goods may be insured as well with some other insurance companies, which have recently appeared in Russia.
All sensible businessmen now insure goods for the full value against all risks. This type of insurance involves a W.A. clause (with average). It denotes that insurers pay claim for partial losses. The F.P.A. (free of particular average) type of insurance means that partial losses are not covered. In the insurance business the word average means loss. The goods may be also covered against general & particular average.
An insurance premium is the name given to the sum of money paid by the firm insuring its goods & is quoted as a percentage.
Normally goods are insured for the CIF value of the consignment plus 10% of that figure. Using the CIF value means that in addition to the price of the goods, the freight charges & insurance premium are also covered. The 10% means that, in the case of the total loss, the insured party receives some compensation for the expense of processing the claim & for any commercial loss.
As an example of calculating of an insurance premium let’s take a consignment with the value of 00, a freight charge of 0 & an insurance rate of 0.75%. First we should calculate the CIF value of the goods, which in this case is 00 (value of goods + freight). Then we calculate10 % to this value, & the sum will be 0. This amount is added to the original 00, so the goods will be insured for 10. To define the insurance premium now means to calculate 0.75% of 10, which is .08.
Thus the premium payable is .08 to which may be added a small administration charge which will not amount to more than a few pounds. There are other ways of calculating insurance premium, but they involve more complicated formulas & so this method is widely used.
Documents used in insurance
The principal document used in insurance is an insurance policy, which act as a contract. When insurance is taken out, a proposal form is completed. It gives details of what are insured, for how long and the nature of the risk. Underwriters, who work for the insurance company, then assess the risk and calculate the premium – the price of insurance. The client receives the policy, which is the contract between the insured and the insurer, giving full details of cover and compensation.
The policy may be known as a floating policy, when it covers a large quantity of goods for a long period, usually a year, or it covers goods up to a large sum of money. For each shipment of goods another document is issued, which is called the insurance certificate.
A cover note is a small document issued by the insurance agents to their customers, to tell them that their goods are insured, & to give proof of this until the policy is ready.
Force Majeure
Force Majeure is a force against which you cannot act or fight. Every contract has a force majeure clause. It usually includes natural disasters such as an earthquake, flood, fire, etc. It can also list such contingencies as war, embargo, blockade & strikes, production may be suspended if there is a shortage of energy supply. When negotiating a contract a list of contingencies must be agreed and put into the Contract.
In case of a contingency, the Seller must notify the Buyer of a force majeure right away. The Article of the Contract to this effect may run: “Should the Seller to notify the Buyer of a contingency the Seller is denied a right to refer to these circumstances”. If it’s done in due time the Buyer may take immediate action to protect his interest.
A force majeure must be a proven fact. The Seller is to submit to the Buyer a written confirmation issued by the Chamber of Commerce. It certifies the fact of a contingency. This certificate serves as evidence that non-execution of a contract or its partial fulfillment is a direct result of a contingency. The duration of a force majeure is 4 or 6 month. After that the Buyer has a right to cancel the contract. The Seller in this case has no right to claim any compensation for his losses.
Insurance Company Q&A
A coupé insurance company that will thieve me beside lots tickets?
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A motor insurance company sent me two check?
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A relative have a lifetime annuity from an insurance company. Is the annuity past the worst?
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A relative received a cheque from an insurance company mistakenly and he bank it. Is he liable to be sued?
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A request for information to deduce in the region of: Why can’t you, or anyone else, start an insurance company and a short time ago product billions?
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A vehicle tattered by and Insurance company for me get scratched, The rental company desires me to foot the deductible
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A very well prearranged insurance company use pretend detector sofware at their appointment meeting point in need recitation the customer.?
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Addresses of Indian Insurance companies?
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