Businesses involved in the export of goods by way of ships should invest in suitable marine insurance. An adequate marine insurance cover can protect businesses from incurring possible financial losses that may arise due to an unexpected event or marine perils. So what are the factors that decide the premium of Marine Insurance policies?
When buying a marine insurance policy, it is important to consider the factors that determine the premium. Besides the benefits, businesses should consider the cost of insurance. Let’s take a look at the factors that increase or decrease the premium of a marine insurance policy.
The following parameters determine the cost of premium of a marine insurance policy:
- The nature of the goods
- The value of the goods
- The inherent risks that your products may possess
- The route, construction, and type of vessel
- The destination to which your goods will travel
- Any political risk, strike, riots, or civil commotion that could hamper the delivery of goods
- Historical Data of incidents with the insured and overall
Parameters influencing premium rates
Some of these parameters are as follows:
- Natural forces: While some natural disasters are permanent, some are seasonal. Some ports suffer from problems like insufficient depth, absence of good anchorage, and lack of protection against tides.
- Construction and type of the vessel: The quality and fitness of the vessel play an important role. The underwriter would be keen to know about the vessel with respect to its owner, the material used in construction, the structural strength, and its adaptability to carry different types of cargo, its age, etc.
- Nationality of the vessel: It is essential for the insurer to know this because it discloses the dependency that certain countries have on ocean trade. The nationality of the vessel also can show the skillfulness of the master and crew. Also, the marine insurance premium rates depend on the age of the vessel, risks covered, and transit.
- Policy conditions: Various clauses may be added to limit or increase the insurer’s liability. Some policies may cover total loss, others may cover the partial loss. The premium of the policy is decided on the basis of the coverage chosen.
Case on Marine Insurance Premium
Established in 2011, M.S Electronics Ltd. is a Pune-based electronics company supplying and exporting quality electronics products both in India & to other countries abroad. The company manufactures LED TVs, home theatre systems, and LCD and LED monitors. Last year, the company got a large contract for exporting electronic items, including home theatres and LED TVs to Malaysia.
As it was a consignment worth $200 million to be shipped by sea, the company decided to buy marine insurance. The insurer emphasized getting a comprehensive insurance policy. He considered various factors like the nature and value of the goods, the distance to cover, and the inherent risks, for computing the premium rates. The insurer also asked M.S Electronics Ltd. to furnish details regarding the nationality and type of the vessel. As the company was using two vessels, the underwriter checked both the vessels to get to know their qualities and features.
The underwriter discovered one vessel as slightly damaged as compared to the new one. The insurer also considered the structural strength of vessels to compute the final marine insurance premium rates.
Buy Marine insurance from SecureNow
Premiums vary from one insurance company to another depending on the added benefits offered and their process of underwriting. On Securenow digital platform, employers can compare the benefits offered by various insurance companies and also calculate the marine insurance rates using the premium calculator online. Online comparison helps you make a rational choice.