INSURANCE DOCUMENTATION :
1. Proposals
As has been mentioned earlier , insurance is the subject matter of solicitation, i.e the offer or proposal for insurance has to come from the insured. The proposal forms for most products have been designed , over the years, to conveniently and comprehensively, obtain information from the insured which would be material to underwriting the policy.
The basic principle of utmost good faith comes into operation here. The insured should at the start of the contract divulge all material information about the subject matter; this would enable the insurer to decide the terms of cover and the rating and help avoid any disputes in the future in the event of a claim.
The owner’s pecuniary interest in the subject matter of insurance establishes that the loss if any would adversely affect him financially; this serves to prove the insurable interest that the proposer has in the property to be insured.
The policy of insurance is a personal contract, and thus if the insured wants to transfer the interest in the policy, he can only do so with the consent of the insurer. The transfer of rights can be made through assignment of the policy. Assignment means transfer of the rights to another person usually made through a written document.
When the property on which insurance has been obtained, is sold the existing policy might be transferred to the buyer of the policy, with the permission of the insurer. However, marine cargo policies are freely assignable as together with the invoice and contract of affreightment i.e – B/L, AWB. GCN or RRthey form negotiable instruments that can be discounted at banks.
The proposal form is therefore the foundation of the insurance contract. It contains all the relevant information about-
(i) Generic details about the insured/proposer – name, address etc. Important not only for incorporating on the policy form but also checking KYC diligences under the anti money laundering laws and for checking moral hazards etc.
(ii) Specific details about the subject matter to be insured-this may be a line or two, if a single machinery, or a single shipment of goods by road; it may run into pages in case it contains details about projects which are to be insured-eg.hydro electric project, oil rigging platform etc
(iii) Details regarding the value to be sum insured; duration of insurance covered required.
Almost all general insurance policies are for 1 year; specific voyage policies can be shorter for the transit duration only. Project polices can be longer than 1 year – till the project is commissioned and operative.
2. Policy Schedule:
The policy schedule is the document which together with various clauses, warranties and conditions forms the contract.
Naturally, this would include such details as name address, nature of business, policy number etc. Other more particular information detailed in the policy schedule would be
1. Full details and description of the subject matter to be insured.
2. Sum insured based on value of the sum insured. The basis of valuation and the adequacy of the sum insured is to be measured and specified clearly to avoid dispute in future in the event of a claim.
3. Period of insurance
4. Premium
5. The terms and conditions which details the actual cover eg. in marine cargo pilciies whether the cover is under ICC (A) or ICC (B) etc.
6. The various clauses which attach to the policy schedule and which are applicable to the contract would be listed on the policy schedule as well to clearly specify the nature and extent of the cover which is being issued.
It is advisable to discuss with the insured, especially in case of insurance of high value risks , the exact words and clauses which attach to the policy and that define the cover. Eg , in case of project policies etc- it may be necessary to clarify what is testing period. It may be necessary to advise that when the plan becomes operational, post testing period, project insurance cover should be replaced by operational cover like fire policy.
3. Certificates of insurance:
These are usually given in marine transit insurance under open policies and also for motor insurance. In motor insurance they are mandatory as it confirms that there is insurance cover extant for the vehicle plying on public roads. They are less detailed than a policy and not stamped, but essentially give the same information regarding insurance
4. Cover note
These are documents that are issued immediately to prove that insurance cover is existing and valid for 60 days from the date of issue. Mostly used in motor insurance and transit insurance, particularly for import covers by sea. The cover note in marine insurance would be valid for duration of transit.
5. Endorsements
There may be instances, when during the currency of te policy, certain changes may be advised by the customer. Eg. Change in location, correction of name or other details of subject matter insured. There may be instances of increase in the value to be insured, inclusion of extra covers or deletion of covers etc.
In such cases, the insurer would, on being so solicited by the insured customer, issue an endorsement which would reflect the changes or amendments and would thereafter form part of the policy document. This is particularly relevant, in the event of a claim, as the damaged property may have been the subject matter of the endorsement- which details would not be available in the original policy.
Generally endorsements are issued for such alterations as
1. Change in insurable interest
2. Cancellation of insurance
3. Change in the value at risk
4. Change in the location or situation of risk
5. Reduction or addition to the risk
6. Change of the insured as when a transfer of interest or assignment of interest is made.
Sometimes an endorsement is also issued to correct a typographical error in the policy already issued.
6. Renewal Notice
While it is not obligatory to issue renewal notices reminding insured that the policy ois due for renewal, it is recommendatory as an excellent customer servce initiative.
It is well known that getting a new customer is much more difficult an dtime consuming that retaining an old one. With much less effort one can cash in on their loyalty and ensure that policies are renewed year after year.