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Unit 12 Insurance

Unit 12 Insurance. Teaching Objectives:  Knowledge Requirements: 1 To make students be familiar with some terms of insurance 2 To enable students to understand the business letters about insurance  Competence Requirements:

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Unit 12 Insurance

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  1. Unit 12 Insurance Teaching Objectives:  Knowledge Requirements: 1 To make students be familiar with some terms of insurance 2 To enable students to understand the business letters about insurance  Competence Requirements: 1. To have students skillfully write business letters about insurance according to the useful words, expressions and sentences 2. To cultivate students ability to handle different cases about risks and insurance in business transactions

  2. Part One Introduction • Insurance is very closely related to foreign trade. In international trade, the transportation of goods from the seller to the buyer is generally over a long distance by air, by land or by sea and has to go through the procedures of loading, unloading and storing. During this process it is quite possible that the goods will encounter various kinds of perils and sometimes suffer losses. In order to protect the goods against possible loss in case of such perils, the buyer or the seller before the transportation of the goods usually applied to an insurance company for insurance covering the goods in transit. • As a high percentage of our trade in and out in a country goes by ship, what mainly concerns us is the Marine Insurance. In this unit we are going to discuss the different kinds of risks of insurance that are commonly dealt with in customary practices. • Maritime Losses are generally divided into two kinks as follows:

  3. 1. Total loss • Total loss means all the insured goods have been lost totally. • (1) Actual Total Loss, also Absolute Total Loss, i.e. All the goods insured have been lost. Nothing is left. • (2) Constructive Total Loss • The insured goods may not be lost totally, but, according to the stipulations concerned, they can be regarded as totally lost. • 2. Partial loss also “Average” • Partial loss means parts of the insured goods are lost or damaged. • There are two kinds of Average in the practice of insurance. • (1) General Average • It is a loss resulting from a voluntary sacrifice or expenditure in time of peril, for the safety of the hull, cargo and freight/ (transportation). • (2) Particular Average • It means partial loss or damage accidentally caused to the ship or to a particular lot of goods. Particular loss is not a total loss. It must be borne by the owner of the property suffering the loss, and is distinct from General Average, which is shared by all who have a financial interest in the voyage, in proportion to the value of their interests. • As to the coverage of Marine Insurance, the Institute of London Underwriters has a set of universally accepted stipulations—The Institute Cargo Clauses (ICC). But we have our own clauses, known as China Insurance Clauses (CIC) made by the People’s Insurance Company of China (PICC).

  4. These Clauses are different from the ICC. The principal perils the basic Marine Policy of the People’s Insurance Company of China (PICC) insures against under its Marine Cargo Clauses are as follows: • Free From Particular Average (FPA) • A) With Average (WA) or With Particular Average (WPA) • B) All Risks (AR) • Besides the principal perils, there are also a number of additional risks. However they cannot be covered independently and should be added to the covering of any one of the three basic risks mentioned above. • Additional Risks are usually classified into two categories: • 1 General additional risks which include: • 1) Theft, Pilferage ＆ Non-delivery (TPND) • 2) Fresh Water/Rain Damage (FWRD) • 3) Risk of Shortage • 4) Risk of intermixture ＆ Contamination • 5) Risk of Leakage • 6) Risk of Clash ＆ Breakage • 7) Risk of Odour • 8) Damage Caused by Heating ＆ Sweating • 9) Hook Damage • 10) Loss for Damage by Breakage of packing • 11) Risk of Rust • 2 Special Additional Risks which include: • 1) War Risk • 2) Strike Risk • 3) On Deck Risk • 4) Failure to Deliver Risk • 5) Reject Risk

  5. Part Two Insurance and Sample Letters • 2.1 Structural Parts of Insurance Letter • Analysis of Letter of Insurance: Asking Seller to Arrange Insurance on behalf of Buyer

  6. Upon the above analysis, we may come to the impression and conclusion that: • Structural parts of letters of insurance generally consist of the following sections: • Section 1: Identify the reference letter & arouse its counterpart’s attention of payment terms; • Section 2:Asking its counterpart to arrange desired insurance; • Section 3: Promise to refund the premium to its counterpart; • Section 4:Ask for approval & expect a favorable reply from its counterpart.

  7. 2.2 Sample Letters of Insurance • Sample 1 Buyer’s Asking for Excessive Insurance Coverage • Dear Sirs, • We refer to the 4,000 cases of Iron Nails under Sales Contract No214 and are pleased to inform you that we have established with the Bank of China, New York Branch the confirmed, irrevocable L/C No231 in the amount of US$6,813, valid up to May 15th. • Please see to it that the above mentioned goods are to be shipped before May 15th and the insurance is covered for 130% of the invoice value against All Risks. As we understand that as per your customary practice you only insure the shipments for 10% above the invoice value, the extra premium for additional coverage shall be for our account. • Please arrange insurance according to our request and meanwhile we are expecting your shipping advice. • Yours faithfully, • …… • Notes: •  All Risks 一切险，根据中国人民保险公司制订，中国人民银行及中国保险监督委员会审批颁布的中国保险条款（CIC）规定，海洋保险基本先别有三种：即（1）Free from Particular Average（FPA）平安险（2）With Particular Average（WPA）水渍险（基本险）（3）All Risks 一切险（综合险）。 • cover 投保，保险 • premium 保险费 • coverage 保险范围，承保险别

  8. Sample 2 Reply to Buyer’s Request for Information about Insurance Coverage • Dear Sirs, • We have received your letter of May 15th and would like to inform you of the following: • Breakage • Breakage is classified under extraneous risks. Usually the rate is 4%. If you are willing to have the goods insured against breakage, we will arrange for that. • All Risks • All Risks coverage will admit all losses occurring at any time throughout the whole currency of the coverage, irrespective of whether they are caused by accidents at sea or on land. Generally we cover insurance WPA and War Risk in the absence of definite instructions from our clients. • Insurance amount • Our rate for a $500 000 A.R. Open policy on your color TV, Model TX-26 by S.S. Prince from Dalian to Bangkok is 120% of declared value. • We trust that this information will be of help to you and hope to hear from you soon. • Yours faithfully, • …… • Notes: •  Extraneous Risks：附加险 • 指除了保险条款所规定的主要险别外，投保人根据自己的需要所加保一些险别。 • breakage 破损

  9. Sample 3 Risk of Breakage Not Covered • Dear Sirs, • We refer to your L/C No.157 covering Glazed Wall Tiles, which we have just received. • Please note for this article, we do not cover Breakage. You have to, therefore, delete the word “Breakage” from the insurance clause in the credit.      • Furthermore, we wish to point out that for such articles as window glass, porcelains, etc., even if additional Risk of Breakage has been insured, the cover is subject to a franchise of 5%. In other words, if the breakage is surveyed to be less than 5%, no claims for damage will be entertained. • We trust that the position is now clear. Please fax the amendment at once. • Yours faithfully, • …… • Notes: •  delete 删去  franchise 免赔率

  10. Sample 4 Buyer’s Insurance Letter to Insurance Industry • Dear Sirs, • We are a Shanghai-based Import ＆ Export company and going to ship 10 containers of household electrical appliances to Rome next week. We want to insure the goods with you, who we know has a prestigious position in the insurance industry, if the rate is within our expectation. • Would you please quote us your most favorable premium rate of the goods for the insured value of US$100, 000 against All Risks plus War Risk? The insurance is from our warehouse to the port of Rome. • We are awaiting your information. • Yours faithfully, • …… • Notes: •  Shanghai-based 总部设在上海的 • prestigious 有声望的 • premium rate 保险费率

  11. Sample 5 Insurance Industry’s Reply to Buyer’s Insurance Letter • Dear Sirs, • We acknowledge the receipt of your letter inquiring about the rate of your household electrical appliances exported to Rome. • The premium for the above-mentioned goods is at the rate of 0.8% of the insured value declared against All Risks plus 0.4% against War Risk. You will find it most favorable among the market-leading insurers. • If the rate is acceptable to you, please let us know at your earliest convenience so that we could prepare and send the policy to you in due course. • Yours faithfully, • …… • Notes: •  The premium for the above-mentioned goods is at the rate of 0.8% of the insured value declared against All Risks plus 0.4% against War Risk.译为：上述商品按保险金额的0.8%都保一切险，加上按保险金额的0.4%投保战争险，并据此计算保费。 •  market-leading 在市场上占主导地位的

  12. Summary • Goods are always insured in transit through an insurance company or insurance brokers. Claims for damage or loss may be made if the goods have been damaged, lost or interfered within transit. However, damage and errors are often noticed later when the container or the package is unpacked and rechecked. It is customary to employ brokers not only for the conclusion of a contract of insurance but also for the settlement of claims. If the consignee is informed that the goods have arrived damaged, he should immediately notify the insurer’s agent at the port of discharge who will survey the goods and issue a survey report. Then he could claim indemnity from the insurer by producing the insurance policy, survey report and other necessary documents. • As a high percentage of our trade in and out in a country goes by ship, what mainly concerns us is the Marine Insurance. In this unit we mainly discussed the different kinds of risks of insurance that are commonly dealt with in customary practices and relative letters between related parties.

  13. Exercises • 1. Translate the following terms into Chinese. • （1）the insurer • （2）the insured • （3）the premium • （4）insurance policy • （5）All Risk (AR) • （6）Free from Particular Average (FPA) • （7）With Particular Average (WA/WPA) • （8）Theft, Pilferage and Non-Delivery (TPND) • （9）Particular Average (P.A) • （10）General Average (G.A)

  14. Answer: • (1)保险人 • (2)被保险人 • (3)保险费 • (4)保险单 • (5) 一切险 • (6)平安险 • (7)水渍险 • (8) 盗窃提货不着险 • (9) 单独海损 • (10)共同海损

  15. 2. Translate the following sentences into Chinese. • （1）Since the cause of the damage is covered by the insurance policy, you should claim compensation from the insurance company concerned. • （2）We usually cover shipments against WPA and War Risks, if you wish to add any extraneous risks, please let us know in advance. • （3）Our customer requests that the wooded cases must be reinforced by steel strapping and meanwhile the shipment be insured against pilferage. • （4）we generally insure our export shipments with the People’s Insurance Company of China. • （5）Breakage is a special risk，for which an extra premium will have to be charged. • （6）Since the goods have been covered by insurance, we would recommend you to apply to the insurance company concerned for compensation. • （7）We usually effect insurance against All Risks and War Risk for Full invoice value plus 10% for the goods sold on CIF basis. • （8）The premium varies with the extent of insurance. Should additional risk be covered, the extra premium is for buyer’s account.

  16. (1) 由于损坏的原因属于保险单的保险范围之内，你们应该向有关的保险公司要求赔偿。 • (2) 我们通常将货物投保水渍险和战争险。如果你方想投保附加险，请事先告诉 我们。 • (3) 我们客户要求木箱用钢条捆紧，同时，货物必须投保盗窃险。 • (4) 我们通常为我方出口船货向中国人民保险公司投保。 • （5）破碎险上一种特殊先别，须额外收费。 • （6）既然货物已投保，我们建议你方向有关的保险公司要求赔偿。 • （7）对于按CIF出售的货物，我们通常按发票金额的100%加10%投保一切险和战争险。 • （8）保险费随保险的范围变化。如果要投附加险，额外保险费由买方负担。

  17. 3. Translate the following short passages into English. • (1) 请你方立即告诉我们对你方该货物要投保的详细险别。在我们没有收到客户明确通知的情况下，我们一般保水渍险和战争险。 • (2) 既然你们已经从一个有声誉的鉴定人那里获得检验报告，我们建议你们与中国人民保险公司联系，并直接与他们商定解决方法。 • (3) 并不是所有破碎险都是属于单独海损。只是由于自然灾害或意外事故所造成的破碎，如货船搁浅与沉没，或归因于着火、爆炸、或碰撞所引起的破碎才算是属于单独海损。如果没有发生上述事故，破碎便常被认为是一种普通损失，也就是我们所说的，由于“货物内在缺陷或特性”所引起的损失, 不属于承保范围之内。 • (4) 按照通常惯例要在保险单或保险凭证上特别注明破碎险包括在内。包括这种特别险就必须附加保险费。这种保险费一般要比通常的海洋运输货物险的基本险高。这类险别的保险费率将根据货物种类，比如陶瓷器，根据货物的易脆性而有所不同。 • (5)“水渍险”与“平安险”是有些不同。“平安险”条款 不包括单独海损性质的部分损失，而“水渍险”条款当超过事先商定的百分比时，则包括此类损失。这是“水渍险”与“平安险”唯一不同之处。除此之外，“平安险”条款所承保的责任与 “水渍险”条款所承保的责任差不多相同。因为万一在运输途中遭遇海上意外事故，诸如搁浅、着火、爆炸或碰撞，这两种条款都全部赔偿单独海损的损失。

  18. 3. Translate the following short passages into English. • （1）Please let us know immediately the detailed risks you wish to insure against for your shipment in question. In the absence of definite instructions from our clients, we generally cover WPA and War Risks. • （2）Since you have obtained a survey report from a reputable surveyor, we would recommend you to contact the People’s Insurance Company of China and negotiate with them directly for a settlement. • (3) Not every breakage is a particular average. It is a particular average when the breakage results from natural calamities or maritime accidents, such as stranding and sinking of the carrying vessel, or is attributable to fire, explosion or collision. If none of these conditions occur, breakage is often considered as an ordinary loss and represents what we call “inherent vice or nature of the subject matter insured” which is outside the scope of the coverage. • (4) It is a usual practice to make specific mention in the insurance policy or certificate that the risk of breakage is included. The inclusion of this special risk will be subject to an additional premium that will normally be higher than the basic insurance for the ordinary marine risks. The rate for such risk will vary according to the kind of commodity, or, as in ceramics, according to the fragility of the goods. • (5) There is some difference between W.P.A. and F.P.A. The F.P.A. clause does not cover partial loss of the nature of particular average, whereas the W.P.A. clauses cover such losses when they exceed a prearranged percentage. This is the only difference between W.P.A. and F.P.A. Otherwise, the protection under the F.P.A. clause will be almost identical with that offered by the W.P.A. clause, because in the event of maritime accidents en countered in transit, such as stranding, fire, explosion or collision, both clauses will cover particular average losses in full.

  19. 4. Put the proper forms of the following words in the blanks to complete the dialogue. • consignment breakage liability coverage attributable • subject appointment deal with calamity mediator • A: Good afternoon, Mr. Brown. Mywas at 4 o’clock, wasn’t it? • B: Yes, Mrs. Wang. We have been expecting you. Mrs. Wang, this is Mr. Jordan of the People’s Insurance Company of China. He has come to explain the unfortunate affair about the insurance. • A: Thank you for coming. Mr. Brown, as you may recall, the February arrived at Manila seriously damaged. The loss through was over30% of the consignment. We’ve presented a claim to the underwriters through your firm, but the insurance company refused to admit , as there was no insurance on breakage. We naturally were not satisfied with such a reply. • B: I should like to hear what Mr. Jordan has to say about it. You know of course that we, the sellers, are merely acting as in this matter. The Insurance Company is responsible for the claim, as far as it is within the scope of coverage. • J: That’s just the point. The loss in question was beyond the coverage granted by us. According to your instructions, we made out an insurance certificate covering W.P.A. and the risk of breakage wasn’t mentioned in it. We rang up the Ceramics Section of Light Industrial Products Import & Export Corporation, but were told that their customer had not asked for coverage in case of breakage.

  20. B: In the letter of credit only ________ for all marine risks. I should like to point out that our prices were calculated without insurance for any special risk. So we applied for the usual W.P.A. coverage and let our customers _________ the matter of breakage. Since the validity of the letter of credit was going to expire in two days, there was no time to write for more detailed instructions. If the L/C had been valid for a longer period, we should have had time to make the matter thoroughly clear. • A: Mr. Brown, our import license only ran up to the middle of February, consequently we were not able to extend the validity of the letter of credit. But we presume that the wording of our L/C implies covering the risk of breakage. Besides, when I take W.P.A. insurance, that is, with particular average, I should think the risk of breakage is a particular average, isn’t it? • J: Not every breakage is a particular average. It is a particular average when the breakage results from natural ________ or maritime accidents, such as stranding and sinking of the carrying vessel, or is _________ to fire, explosion or collision. If none of these conditions occur, breakage is often considered as an ordinary loss and represents what we call inherent vice or nature of the subject matter insured which is outside the scope of the coverage. • A: But the risk of breakage is covered by marine insurance, isn’t it? • J: Certainly, but it is a usual practice to make specific mention in the insurance policy or certificate that the risk of breakage is included. The inclusion of this special risk will be _________ to an additional premium that will normally be higher than the basic insurance for the ordinary marine risks. The rate for such risk will vary according to the kind of commodity, or, as in ceramics, according to the fragility of the goods. I think you must know all about that. • A: Well, I have heard something about it but I can’t say that it is very clear to me. I must admit I’m a layman as far as insurance is concerned. • J: Then let me explain this insurance. • B: Mrs. Wang, would you care for a cup of tea? Or some coffee? • A: Thank you. A cup of tea would be nice. And now, let me hear more about the problem of insurance.

  21. Answer: • appointment • consignment • breakage • liability • mediators • coverage • deal with • calamities • attributable • subject

  22. 5. Letter Composing • Write a letter to tell the exporter that eight typewriters under order No.4567 were damaged. Request the exporter to file claim against insurance company and deliver eight replacement typewriters.

  23. Dear Sirs, • When the S.S. “Prince” arrived at Singapore on 16 June, it was noticed that one side of case No.7 containing the “Fish” Typewriters was split. We therefore had the case opened and the contents examined by a local insurance surveyor in the presence of the shipping company’s agents. The case was invoiced as containing ten typewriters, eight of which were badly damaged. • We enclose the surveyor's report and the shipping agents’ statement. As you hold the insurance policy we should be grateful if you would take the matter up for us with the insurers. • Eight replacement typewriters will be required. Please arrange to supply these and charge to our account. • We hope no difficulty will arise in connection with the insurance claim and thank you in advance for your trouble on our behalf. • Yours faithfully • ……

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