Marine Insurance Act 1963: A Complete Guide for Indian Businesses

Most people think marine insurance is only for ships. But the Marine Insurance Act 1963 also covers inland transport, including rivers, trucks, and railways when it’s part of the shipment. So, what is the Marine Insurance Act 1963? What all is covered under the act? If you have questions about the coverage of the act or are unable to understand its provisions, you are at the right place.

We have simplified the Marine Insurance Act 1963 to help businesses and MSMEs. Bajaj General Insurance provides marine insurance policies that protect you from losses when transporting goods internationally or domestically.

The History of Marine Insurance in India

Marine insurance has a long history. It started in Europe in the Middle Ages, where sea routes were used to exchange goods, and traders had to face a number of risks when transporting goods.

During British rule, marine insurance in India followed British laws. The main law was the Marine Insurance Act of 1906 from the UK. After independence, India recognised the need for its own legislation, and this led to the enactment of the Marine Insurance Act 1963.

Though the basic idea of marine insurance has not changed, protecting goods and ships from risks, trade today is more complicated. Now we have things like container shipping, goods moving by different transport modes (ship, rail, road, air), and risks like piracy and extreme weather due to climate change. Because of this, insurance policies today combine coverage for both inland and sea journeys. This way, goods are protected right from the starting point to the final destination.

Objectives of the Marine Insurance Act 1963

The Marine Insurance Act 1963 was created with some clear purposes as follows:

1. Uniform Legal Framework

Before this law, marine insurance rules were not the same everywhere, which created confusion. The act made one set of clear rules for everyone in India. So all those involved in international trade like exporters, importers, ship owners, and insurers, need to follow the same standards. The act also ensured Indian practices are aligned with international standards.

2. Protection for Both Parties

Both parties to the contract, the business owner (insured) and insurance company (insurer) need to be protected; this act ensures that there is fairness on both sides. For example, the insured must share all important details honestly, and the insurer must pay claims as per the contract.

3. Facilitation of Trade

When traders and ship owners know that their goods are protected under the law, they are willing to undertake risks and send goods and their vessels across the ocean. This security encourages trade within our country and with other countries. So, the fear of loss is reduced and businesses can carry on international trade smoothly.

4. Dispute Resolution Mechanism

Sometimes, disputes arise when a claim is made. For example, the insurer may question whether the damage is covered. The Act gives clear guidelines on how such disputes should be solved, either through negotiation, arbitration, or legal steps.

Scope of the Act

The Marine Insurance Act 1963 applies to different kinds of insurance in shipping and cargo movement.

1. Cargo Insurance

When the goods are being transported by sea, river, or even through land, there is a risk that the goods may be damaged. For example, if you are sending textiles from India to Europe and the shipment is damaged in a storm, cargo insurance will cover the loss.

 2. Hull Insurance

This covers the ship or vessel itself. Ships are very costly assets, and they face risks like collisions, fire, or sinking. If during such an incident, a ship is damaged, the owner will face a very heavy loss. Hull insurance provides the owner with the cost of repairs or replacement, so that unbearable loss on the part of owner is avoided.

 3. Freight Insurance

Freight is the money paid to transport goods. Sometimes, before reaching the buyer, goods may be lost or damaged in transit due to the perils of the sea. Freight insurance ensures that carriers or shipping companies do not lose their earnings and provides a payout to cover the loss.

 4. Liability Insurance

When goods are transported across oceans or seas, it may happen that they cause damage to others. A ship carrying hazardous chemicals may damage nearby vessels and the owner may face legal claims. Liability insurance covers third-party claims, and helps to reduce the financial burden on the business.

Key Provisions of the Marine Insurance Act 1963

The provisions of the act are:

1. Insurable Interest

When you purchase a marine insurance policy, it is essential that you have some financial interest in the goods or ship being insured. So, if a loss occurs, you must stand to lose money. This rule prevents people from taking insurance on something they don’t actually own or benefit from.

2. Utmost Good Faith (Uberrimae Fidei)

Both the insured (the business) and the insurer must be completely honest when entering into the insurance contract. You must share all important details about your goods, packaging, and journey. For example, if the cargo is fragile or the ship is passing through a piracy-prone area, it must be disclosed. Do not hide such key details, else the insurance company can cancel the policy or reject a claim.

3. Warranties

These are specific conditions or promises that must be followed. If these conditions are not followed, the insurer has the right to deny the claim. For example:

●        The ship must be seaworthy before starting the journey.

●        Goods must be packed properly and safely.

4. Assignment of Policy

Marine insurance policies can be transferred from one person to another if the new person has an insurable interest. An exporter can transfer an insurance policy to the buyer when the goods are in transit.

5. Types of Loss

●        Total Loss: When the entire cargo or vessel is damaged and you are unable to recover anything, it is called a total loss.

●        Partial Loss: Partial loss is when only a part of the cargo or ship is damaged. For example, if 20 out of 100 boxes are spoilt.

●        Constructive Total Loss: When the cost of saving or repairing the goods/ship is higher than their actual value, it is termed as constructive total loss. For example, if your cargo is worth ₹10 lakh, but to recover the cargo the amount required is ₹12 lakh, it is treated as a total loss.

6. Measure of Indemnity

This refers to how much compensation (money) the insured will get after a loss. The Marine Insurance Act explains the method of calculation, which is usually based on the value agreed upon in the insurance policy. This ensures that businesses know in advance how claims will be settled.

Conclusion: Why the Act Matters for Businesses?

Businesses and MSMEs need to understand the Marine Insurance Act 1963 as it will help them manage risks. The law helps in reducing legal disputes, supports international trade, and builds trust among traders, financiers, shipping lines, etc.

As India grows as a global trade hub and digitalisation makes insurance faster and smarter, the Marine Insurance Act remains the backbone of marine risk management. To protect your business from the various risks while transporting goods, get a marine insurance policy from Bajaj General Insurance. We provide strong coverage, expert guidance, and quick claim support.

FAQs

What is the Marine Insurance Act 1963?

The Marine Insurance Act 1963 is a law that explains how marine insurance works.

Who needs marine insurance under this Act?

Exporters, importers, ship owners, freight forwarders, and businesses transporting goods using water or inland transport.

What types of losses does the Act cover?

It covers total, partial loss, and constructive total loss.

How can Bajaj General Insurance help under this Act?

Bajaj General Insurance offers marine insurance policies that provide strong coverage, smooth claim settlement, and risk protection.

What documents are required to file a claim?

Bill of lading, commercial invoice, insurance certificate, proof of loss, and a surveyor’s report.

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***Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.