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How to Calculate Marine Insurance Premium

Posted on 24 Dec 2021

Understanding Marine Insurance Premium

Marine transit insurance, which is the oldest form of insurance is a special type of insurance which provides coverage against the losses or damages caused to goods during their transportation from one location to another. A comprehensive marine insurance (with named exclusions) covers not only the sea voyages but air and surface transportations as well.
As in case of any insurance, the premium amount for a marine cargo insurance policy, is determined by the insurer on the basis of risk estimates provided by the insured. Below are some major parameters that are taken into consideration while calculating marine insurance premium:

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  • Natural Risks associated with the transit locations

    Natural forces or natural disasters such as earthquake, tsunami, flood, cyclone etc. can occur anytime and cause huge damage to the transporting goods. Though these perils can never be predicted, they have a high chance of occurring during some seasons and at some places as per the historical trends.

    In fact, some ports are more prone to these disasters due to factors like insufficient depth and lack of protection from tides. These things can have a huge impact on marine insurance premium.

  • Type and construction of vessel

    The construction, type, quality and fitness of a shipping vessel, plays a major role in determining the marine insurance premium for goods that are to be transported in it. The insurance provider usually asks for the vessel details before providing a marine insurance quote.

    The details which can be asked include ownership of the vessel, its structural strength, material used for its construction, and its adaptability for carrying different types of cargo.

  • Nationality of the vessel

    The nationality of the vessel is also taken into consideration by the insurers while calculating marine insurance premium. It’s because the nationality of a vessel reflects the skills of the crew and its masters. For example, countries who are too much dependent of ocean trades usually have highly skilled vessel crews and captains.

  • Value and nature of the goods

    It’s an obvious fact. The value and nature of the goods for which the marine insurance is sought for play an important role in the evaluation of premium amount. If the value of the goods is high or if there are high chance of goods getting damaged, such as glass, food items etc., the marine insurance premium is most likely to go up, and vice versa.

  • Terms and conditions of the policy

    Last but not the least, the terms and conditions of a marine insurance policy, including its exclusions and inclusions, also impacts its premium. For example, some policies cover entire losses whereas some policies cover only partial losses. The premium of a particular policy is decided on the basis of the coverage it is providing.

In Conclusion

Marine insurance providers put in a lot of thought and customized calculations for determining premium rates based on the risk perception. The aforementioned factors are the ones which are considered by most marine insurance companies to achieve a common ground as far as premium calculation is concerned.

  • Marine Transit Insurance (Inland) Policy
  • Product Code: 2005
  • Product UIN: IRDAN115CP0007201920

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This contains only an indication of the cover offered. For complete details on risk factors, terms, conditions, coverages and exclusions, please read the sales brochure carefully before concluding a sale.ICICI trade logo displayed above belongs to ICICI Bank and is used by ICICI Lombard GIC Ltd. under license and Lombard logo belongs to ICICI Lombard GIC Ltd. ICICI Lombard General Insurance Company Limited, ICICI Lombard House, 414, Veer Savarkar Marg, Prabhadevi, Mumbai – 400025. . IRDA Reg.No.115. Toll Free 1800 2666. Fax No – 022 61961323. CIN (L67200MH2000PLC129408). customersupport@iciclombard.com. www.icicilombard.com. (Marine Single Transit Insurance, 2005, IRDAN115CP0007201920)