The insured's premium is received by the insurer into a found or pool for that type of risk, and the claims of those suffering losses are paid out of this pool. Because of the large number clients in any particular fund or pool the insurance .company can predict, with reasonable accuracy, the amount of claime likely to be in curred in the coming year. There will be some variation in claims costs from year to year and the premiums include a small margin to built up a reserve upon which the company can draw in bad years.

The main stimulus to enterprise is the release of found , now available for investment in the productive side of a business, which would otherwise need to he held in easily accessible ;reserves if the firm had not transferred the risk to an insurer. Medium and large firms would probably create reserve funds for emergencies which might put their whole future viability in jeopardy the premium payable to an insurer, however would only be a small proportion of the fund required because of the pooling arrangement , and so most of this money could be invested in new plants, building or stock Transportation Insurance

In overseas trade the geographical gaps are great, and the transport multi-modal-—-that is to say, we must combine road. rail, sea and air in almost all cargo movement to some extent, Similarly the time lag is great between production and consumption. In bridging both the geographical gap"' and the time gap serious risks have to be run. And it is in this framework that the insurance underwriters13 operate to carry the risks which otherwise would have to be borne'" by the producers.

Cargo insurance is one of the main branches of insurance. These are usually listed as fire, marine, lire and accident. The term "marine" used to refer to" the insurance of ships and their cargoes. Today the movement of cargoes is frequently effected partly by other modes of transport, in association with shipping. Where cargo is concerned, "transportation insurance” seems a better term to use today than marine insurance, Good do not go overseas solely by sea ——air transport takes an increasing share of cargo these days. Similarly export cargo moves to the dock by road rail and inland waterway, while import cargo moves to the hinterlard in the same way.

Cargo insurance therefore is an activity aimed at moving the burden of risk from the shoulders of the exporters and importers. and placing it upon the shoulders of specialist risk-bearing under writers. T he important point to realize about Transportation insurance is that it ;s "the handmaiden'8 of commerce". Trade would not cease if there was no method of insurance available , but the losses would 'fie suffered by those who were unfortunate, and not shared out equally among all traders. By paying a premium into an insurance pool, the assured earns the right to claim compensation from the pool should he suffer loss. He does not want to scoop the pool —— he would prefer his cargoes to reach their destination

safely ------but being insured he feels easier about trading;his risks are covered to some extent at least.

 

( liyy )09 Oct,2010

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