Marine cargo insurance for exporters and importers: policies, declarations and claims from SAP

Who has to insure the goods?

No Indian law makes marine cargo insurance compulsory for every shipment. The sales contract decides, usually through its Incoterm:

So an exporter selling CIF or CIP must insure every shipment, and an importer buying FOB, CFR or CPT must insure its own imports. Under CIF and CIP, Incoterms 2020 also sets the minimum sum insured at 110% of the contract price.

Banks follow the same rule. Under UCP 600, when a letter of credit asks for an insurance document without stating the amount, cover must be at least 110% of the CIF or CIP value, and the insurance must be effective no later than the shipment date.

Which kind of policy fits a regular trader?

Most policies use the Institute Cargo Clauses: (A) is all risks with listed exclusions, (B) and (C) cover named perils only. War and strikes cover is added through separate Institute clauses.

What is a declaration, and why do they go wrong?

Under an open policy, the insured tells the insurer about each shipment, usually before it starts or within the time the policy sets. A declaration typically contains:

• the invoice number and value, and the currency;
• the goods, packing and quantity;
• the voyage: origin, destination, ports and transhipment;
• the conveyance: vessel or flight, bill of lading or air waybill number;
• the sum insured, usually invoice value plus 10%;
• for exports under CIF or CIP, a request for a certificate of insurance.

Declarations go wrong when they are typed from emails and spreadsheets after the fact: shipments are missed, values are wrong, or they are declared late. An undeclared or wrongly declared shipment may not be covered when a loss happens, and an under-declared value means a reduced claim. Since every field already exists in the sales order, delivery, invoice and shipping documents, the reliable approach is to declare from SAP.

How does a cargo claim work?

1. Notify the insurer, or its claims agent at the destination, as soon as loss or damage is found.
2. Protect the claim against the carrier: note damage on the delivery receipt and give written notice to the carrier or port within the time its contract allows.
3. Survey: the insurer appoints a surveyor to inspect the goods and report the cause and extent of the loss.
4. Submit documents: typically the policy or certificate, commercial invoice, packing list, bill of lading or air waybill, survey report, the notice to the carrier and the claim bill.
5. Settle: the insurer pays the claim, and the amount is posted in finance against the shipment.

Claims slow down when documents sit in different mailboxes. Linking each claim to its SAP delivery and invoice keeps the evidence in one place.

What SAP data do insurance declarations use?

The same shipping data also drives the shipping bill, the e-BRC and the EDPMS entry. See the SAP EXIM compliance overview.

How does Opti-Insurance handle it?

Opti-Insurance manages all of a company's insurance in SAP: property, marine cargo, liability, project, employee, motor vehicle and special contingency cover. For marine cargo, stock-in-transit and warehouse cover:

• Declarations: transit insurance declarations are generated automatically from SAP shipment data for each shipment, including high-volume distribution networks.
• Policies and premiums: policies, terms and documents are stored centrally, premiums are scheduled and the prepaid expense is accounted for in SAP FI, and renewal alerts go out before any policy lapses.
• Brokers: insurance requirements go to brokers as RFQs, and quotes are compared in one place.
• Claims: from first notice of loss and surveyor coordination to settlement, posted to SAP FI with a full audit trail.

For EXIM documents and schemes on the same shipments, see OptiEXIM and OptiEXIMc.

Frequently asked questions

Is marine insurance mandatory for exports from India?

Not by law. It depends on the contract: under CIF and CIP the exporter must insure, and a letter of credit may require an insurance document. Under FOB, CFR and CPT the buyer insures.

How much should the sum insured be?

Usually the invoice value plus 10%. Incoterms 2020 sets 110% of the contract price as the minimum under CIF and CIP, and UCP 600 sets at least 110% of the CIF or CIP value when a letter of credit does not state an amount.

What is the difference between ICC (A) and ICC (C)?

Institute Cargo Clauses (A) cover all risks except listed exclusions. Clauses (C) cover only named major perils, such as fire, stranding or sinking. CIF requires at least (C); CIP requires (A).

What is an open marine policy?

A policy that covers all of a trader's shipments in a period up to agreed limits. Each shipment is declared to the insurer instead of buying a new policy every time.

What happens if a shipment is not declared under an open policy?

It may not be covered if a loss occurs, depending on the policy wording. Declaring every shipment from SAP data avoids missed or late declarations.

Who insures imports bought FOB?

The Indian importer. Under FOB, CFR and CPT the risk passes to the buyer at shipment, so the importer needs its own cover, often under an open import policy.

Which documents are needed for a cargo claim?

Usually the policy or certificate of insurance, commercial invoice, packing list, bill of lading or air waybill, survey report, the notice given to the carrier and the claim bill.

Sources

• ICC: Incoterms 2020
• ICC: Uniform Customs and Practice for Documentary Credits (UCP 600), article 28
• Lloyd's Market Association: Institute Cargo Clauses (A), (B) and (C), 2009
• Insurance Regulatory and Development Authority of India (IRDAI)