Marine Insurance takes advantage of the benefits of Big data
Let’s look at the history of Marine Insurance.
Marine Insurance is one of the oldest forms of Insurance and still existing and catering wide varieties of by protecting the insured and indemnifies them in case of any unworthiness act upon the consignments shipped.
Some of the Popular Marine insurance products:
Specific Voyage Policy:
- A Specific policy is issued to cover a particular consignment under transit, proposed by an Insured.
- Insurance is arranged with specific reference to an individual proposal.
- This policy can be issued to cover inland transit, export, and import consignments.
- A specific policy must show complete details of the cargo and contain particulars of conveyance/vessel name, Bill of lading, or RR or LR or AWB No., Sum Insured, terms and conditions of cover, voyage, description of cargo, premium, etc.
- This policy can be issued subject to applicable clauses A/B/C.
- This policy can be extended to cover SRCC in the case of Inland and war and SRCC in the case of ocean transits.
- Open Policy is issued to provide automatic insurance protection for a specific period of time (usually one year) for Inland transits until canceled by either party to the contract or exhaustion of Sum Insured by way of declarations whichever is earlier.
- Insured has the option of enhancement of Sum Insured during the currency of the policy before the exhaustion of the balance sum insured.
- If the sum insured is exhausted, only a fresh open policy has to be issued.
- Premium is by way of Deposit (based on an estimate) and adjustable on the declaration of actual values of shipments/dispatches.
- All the terms and conditions, premium rating, basis of valuation, and limit per dispatch is agreed upon and decided at the inception of the policy.
- By chance, a particular dispatch is more than “limit per dispatch”, the insured must approach the office in advance and pay the appropriate additional premium if any and get the concurrence of the insurer for such sending.
- Open Cover is issued to provide automatic insurance protection for a specific period of time (usually one year) for Export and/or Import transits until canceled by either party to the contract.
- Insured has the option of increasing the deposit premium during the currency of the cover.
- Premium is by way of Deposit (based on an estimate)
- All the terms and conditions, premium rating, the basis of valuation, and the limit per conveyance and per bottom/per location are agreed upon and decided at the inception of the policy.
- The open cover is an unstamped agreement between the Insurer and Insured and stamped certificates are issued for each declaration giving details of shipments.
- This policy is normally taken out by an importer having a valid import license to cover the payment of actual duty payable to the Government on the goods which are imported from abroad.
- Duty Insurance policy is a pure indemnity policy.
- The rate of premium for duty coverage is 75% of the rate charged for covering the CIF value of cargo.
- Duty insurance policy can be granted only when there exists insurance on the CIF value of the cargo itself from any insurer
- This policy can be granted only before the arrival of the carrying vessel at the destination port.
- The duty insurance policy can be taken by the importer even if the CIF policy is taken by the seller.
- For issuance of this policy completed proposal form is required from the Insured.
- This policy is not assignable
Increased Value Insurance:
The policy is normally taken by an importer having valid import license for the increased value of the goods by reason of the market price of the goods at destination on the date of landing being higher than the value of the cargo derived by adding procurement cost + insurance cost + freight paid (CIF) + duty payable.
- This policy can be granted only if there exists insurance on CIF cargo
- This policy is not assignable.
- This policy has a compulsory excess of 25% of the claim amount.
- The insurance is generally not granted for an amount of more than 100% of the CIF value of cargo.
- The rate of premium for this policy is 100% of the normal rate applicable to the CIF insurance.
Seller’s Contingency Insurance:
- This policy can be issued only to exporters.
- This cover can be granted only for the contracts on FOB and C&F terms.
- Under certain situations, the realization of the price of goods may become doubtful when the buyer neither retire the documents nor take delivery of goods, and exporters to face problems if the consignments get damaged.
- Under these circumstances to protect the interest of the sellers against physical loss or damage to the goods, this policy is issued.
- This policy is not assignable and can be given only to the known and reputed clients.
This policy can be issued only in respect of goods belonging to the assured or held in trust by him not under any sale purchase while in transit by rail or road from specified depots, processing center to other depots, processing center owned or hired by the Insured.
- This policy is accepted on the basis of a duly filled prescribed proposal form.
- Additional perils like theft, pilferage, Non-delivery, Rain and freshwater damage, breakage, leakage, SRCC may also be covered singly or jointly by charging additional premiums.
- The maximum value of goods in transit at any one time has to be declared.
- This policy is subject to Annual policy — conditions/clauses.
Annual Turnover Policy:
- It is a designer product for the discerning customer, an open policy in the real sense of the term.
- The premium for the policy is charged on the sales turnover of the client.
- The annual turnover policy provides transit insurance coverage on Imports + custom duty (actual or deemed/ contingent)+ domestic purchase of raw materials, consumables, and stores + any number of inter factory / inter depot / to and fro job worker movements + exports (FOB/CIF) + domestic sales of finished goods, temporary storage cover at intermediate storage like job workers/C& F premises, etc.
- The declaration either monthly or quarterly based on the actual turnover of the client has to be obtained.
How the Insurer can take advantage of Big data
From the above specified marine insurance products, it is very clear that the underwriting process for the policies under these categories is quite cumbersome, and prudent risk acceptance techniques should follow to cater to the qualified subject matter for insurance. Human intervention in these process might be not effective as this may lead to obvious human errors, in turn, accepting such erroneous or poor quality risk may lead to settling claims which are inappropriate or even cause disputes –for those companies should pay a hefty amount for the legal process
Insurance companies can leverage Big data technology to redefine the legacy insurance process to an automated data-driven optimized process, some of the quick adoptions where the companies can implement with less turn around are as follows
- Companies should follow the compliances process for accepting the risks, such compliances should be formulated as rules/scrutinization process
- As the Marine insurance deals with cross border /territory, insurance companies should refer to a variety of international standards /practices, for this insurance company can build an instant search /hook in methods to get the practices /standards /major disputes aligned with the products to be underwritten
- Rating process can be adopted to rate the risk with the standards defined and with reference to the huge volume of data underwritten in the past by the companies
- Segment analysis with précised target can be done with the wide variety of data available and this helps to targeted marketing
- Specifically by nature of this line of Business — this involves multiple parties and it does not strictly adhere to the law of indemnity as the matter of fact insurable interest changes from time to time as per the international commercial terms. Not only the multiple parties as also several maritime frauds reported in line with this. Hence the big data analytics helps to a larger extent to process the claim with clear filtration of maritime frauds
- By the past history and future trends analysis with less tolerance percentage, insurance companies /providers can offer a better competitive price to attract more inured /prospects
- To take prospective steps to improve claim incurred ratio
What exactly is Big data?
As the name implies, big data is the process of systematically analyzing very vast data sources that involve both structured and unstructured data. this can describe in detail by the characteristics of data sources like Volume, wide variety, velocity, Veracity, Exhaustive, Fine-grained and uniquely lexical, Relational, Extensional, Scalability, Value, and Variability.
This technology can be used for analysis on data as per the characteristics mentioned above to take a smart and effective decision for the sectors like Health care, Education, For govt sectors especially for Sensex, etc, and pertinently it is important for Insurance and that too Marine Insurance due to its technological advancement and growth achieved so far and the variety of historical data in terms of maritime hazards and perils
How will Big data affect the Maritime industry?
Marine insurance started its practices early in the 17th century by the Merchants through respondentia and bottomry bonds executed by financiers, since then to now practice of insuring based on the past experience and other innovative prediction on the maritime. By the advantage of new technology, thanks to Bigdata- the advent of big data brings closer the Marine insurance underwriters to understand the nature and type of the risk involved and also to understand the possible maritime frauds, etc..,
Following are some of the pivotal changes what big data brings to the Marine insurance sector
1) Smart Pricing
2) Claims Handling
3) Loss preventions
Thus, Big data is a realistic tool for analyzing the data set and play a pivotal part in insurance risk analyzing, and Big data along with a variety of advanced technologies like AI, Process Automation, and Blockchain will bring real efficiency to smart insurance, even a step ahead integrating with IoT services will yield more value and paves ways to build the apt product applicable for the maritime insurance buyers.
Author: Shiju V