Transcript Document

Spoken English for International Business
Lesson 8 Insurance
Foreign Languages College
Lesson 8 Insurance
Learning Point
In this lesson, we will learn how to
negotiate insurance terms and deal with
problems relating to insurance in
international business transactions.
Lesson 8 Insurance
Background Knowledge
The international trade is subject to many risks. Ships may sink or
consignment be damaged in transit, exchange rates may alter, buyers
default or governments suddenly impose an embargo. Therefore,
exporters and importers have to insure themselves against many of
these risks.
In the insurance business, loss is referred to in most cases as the
special term “average”, so average in marine insurance simply means
loss. General Average is a voluntary and deliberate loss and refers to
sea hazards that affect all the cargo on a ship, though only one shipper,
perhaps, actually suffers, while Particular Average is an involuntary and
accidental loss, a partial loss which is suffered by the one whose goods
are partly loss or damaged, but not voluntarily incurred, such as by
jettisoning, which are covered by General Average. The most serious
loss in marine insurance is a total loss of the entire shipmen, resulting
from the perils on the sea such as beaching, grounding, stranding,
collision, natural calamities, fire, etc.
Lesson 8 Insurance
Total Loss falls into two kind: “actual total loss” where the
thing insured is completely lost or is so badly damaged that
it is not worth repairing, and “constructive total loss” where
a ship or her cargo is so badly damaged that the cost of
repair would be greater than the market value, they are
treated as totally lost, and the insurers are bound to pay the
total sum for which the damaged ship or cargo was insured.
Exporters or importers arrange insurance cover for
their shipment according to the type of goods and
circumstances. There is a wide range of standard types of
coverage, the three basic ones being as follows: Free of
Particular Average (F.P.A), With Particular Average (W.P.A)
or With Average (W.A), All Risks.
Lesson 8 Insurance
Whether the additional risks which All Risks policy
does not cover are necessary depends on a number of
factors. General additional risks usually are: theft,
pilferage and non-delivery (TPND), fresh water or rain
water damage, short weight, intermixture and
contamination, leakage, breakage, hook damage, rust,
sweating and heating, etc. It must be noted that, in China
all these general additional risks are included in “All Risks”.
Special additional risks that are not included in All Risks
and have to be taken separately are mainly: Failure to
Delivery Risk, War Risk, and Strikes, Riots and Civil
Commotions (S.R.&C.C.)
The most commonly used document in marine
insurance is the insurance policy. Other similar documents
include open cover, floating policy and so on.
Lesson 8 Insurance
It is important that exporters have a
basic understanding of some the
underpinning principles of insurance
generally, and particularly their practical
implications to cargo insurance. And these
principles include: insurable interest,
indemnity, utmost good faith, subrogation,
contingency (seller’s interest) insurance,
proximate cause and so on.
Lesson 8 Insurance
Case Study
Lesson 8 Insurance
The coverage of FPA, WPA and All Risks (part 1)
 F: What risks are covered in your offer according
to the GIF clause?
 C: We generally only issue FPA, WPA and All
Risks, but we could add special coverage if a
customer requires.
 F: We would also like to have War Risk coverage.
Can you get this for us?
 C: We certainly can. But you must bear the
premium for this sort of special coverage.
Lesson 8 Insurance
110% of the GIF invoice value (part 2)
 F: Do you mind telling me what kind of insurance we've got for this
order of goods?
 C: Sure. We've got it covered under WPA, considering our deal is
based on GIF clause. Is there anything you'd like to know or …?
 F: No, not really. I was just wondering if the damage of goods is
included in this WPA or not.
 C: Actually, the damage of the goods belongs to the Risk of Breakage.
We could add this item if you wish.
 F: But that's an additional risk item, isn't it?
 C: Yes. And the buyer is usually required to bear the cost for the
additional risk coverage.
Lesson 8 Insurance
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F: I see. How about this? What if we change to “All Risks”?
Do we still have to pay extra for the Risk of Breakage?
C: No, you don't have to. The insurance of All Risks has
that item under coverage already. However, all you need to
do is to pay a little higher premium rate.
F: That really doesn't matter. The safety of the goods is all
that counts.
C: Oh, yes, absolutely. I'll have your insurance changed
from WPA to All Risks for 110% of GIF invoice value as per
the ocean marine cargo clauses of the PICC.
F: Sounds good. Thanks.
Lesson 8 Insurance
Class Activity
Lesson 8 Insurance
Compose a dialogue on the following situation.
You sell Longchuan celadon porcelain ware (龙泉青瓷)
on behalf of China National Arts & Crafts Imp & Exp Corp.,
Zhejiang Branch. Longchuan celadon porcelain ware has a
history of more than 1 000 years, and its smoothness is
exceptional among Chinese porcelain wares. Now a
businessman from U.S. has ordered a total of $ 7 000 worth
of your products, FOB, New York. You're now discussing
with him the following issues: payment, shipment, packing
and insurance, concerning which you suggest a coverage
of WA.
Lesson 8 Insurance
Exercises
Lesson 8 Insurance
I. Answer the following questions.
1. What is General Average?
2. What is Particular Average?
3. What is Total Loss?
4. What are the three basic standard types of
coverage in marine insurance?
5. What is the most commonly used document
in marine insurance?
6. What are the underpinning principles of
insurance?
Lesson 8 Insurance
II. Interpret the following sentences.
1．在离岸价的条件下，货物的保险由买方投保，
或由卖方代保险。
2．在到岸价的条件下，货物的保险由卖方负责。
3．保险的目的是为了保障货物的安全和投保人
的利益。
4．保险责任的期限是被保险货物在最后卸货港
卸货60天为止。
5．保险索赔必须于货物在最后装卸港卸货后9个
月内提出。
Lesson 8 Insurance
Thank you very much!