Marine policy without exclusions

Was talking to one of the Marine practitioners the other day…. just about anything from the weather to cricket, when all of a sudden, he bowled this big in-swinger to me – ” What are your thoughts on an Inland Transit policy with no exclusions at all?” Taken aback for a moment, I retorted back – ‘ Why would you do such a daft thing, when premiums are abysmal and loss ratios are mounting?’. His argument was that any which ways rates and deductibles were not improving & also in all Inland transit policies, there were self-survey limits of up to INR 50,000 ( US$ 700). Even if not and in case of larger claims, there were hardly any defenses available to the insurers and none of the exclusions actually came into play. So his thought process was to position this product ( the one without any exclusions) as an Elite product made available at a much higher deductible. The idea, it appeared was that the higher deductible would eliminate the losses which were getting paid now and the customer will be happy that any losses beyond the deductible, howsoever caused would be payable.

Customers are much sharper, I said. While they will take the policy without exclusions, they will beat you down on the deductible and ultimately, the loss ratios would only burgeon further. Further, to fix the level of deductible, one would need to know the average payout per claim both at the book level and the industry level before even toying with this idea. Our talk ended there, but left me wondering what an Inland transit policy ( ITC-A) shorn of its exclusions would look like and whether at all can all the exclusions be eliminated.

1. Wilful misconduct of the insured: We believe that a very large percentage of our clients are honest and will not create/abet creation of a fictitious loss or even try to aggravate a genuine loss. Having said that, a free hand cannot be given to anyone saying that whatever you do, even if you intentionally damage the cargo, we will pay for the same under the policy, no questions asked. No brainer that this exclusion cannot be excluded or done away with.What will fall under the Wilful misconduct clause will be a separate discussion.
2. Ordinary leakage, ordinary loss in weight/volume or normal wear & tear: This exclusion is long since forgotten. It is perceived that any losses of these nature over and above the deductible are payable right away. So can this exclusion be eliminated? Again No. Some underwriters do add a manuscript condition that ‘unexplained shortages’ are not payable, in a bid to regain lost ground over the ordinary or normal losses in weight/volume or leakages. With this exclusion gone, the floodgates could well open. Imagine transportation of coal in open railway wagons. Weigh the wagon with coal at the start point and at the destination & claim the difference under insurance. Again, used machinery  claims could rise as normal wear and tear and transit-related losses will require no distinction. RODC exclusion – Why?. RODC losses could be claimed as normal wear & tear or if taken as an inherent vice, deletion of that exclusion will pave the way for such claims.
3. Insufficiency or unsuitability of packing: This is one exclusion which I opine will always be difficult to establish, though insurers/loss assessors use it often to decline claims or pave the way for lower negotiated settlements. Insufficiency of packing- 4.3 of ICC. So why give this up? Again, packing includes stowage too and in the absence of this exclusion, the insured/transporter, even if not with malicious intent could become a bit complacent.
4.  Loss damage or expense proximately caused by Delay: While the full intent of this exclusion can be and has been discussed in Can exclusion 4.5 under ICC be bought back? ( relating to Institute Cargo clauses, broadly on which ITC is based), fact remains that all delays can never ever be compensated under insurance. In the absence of this exclusion, even delays from the transporters’ side leading to an expense in the form of penalties on the insured by their clients could be presented as claims. Not to speak of increased losses from transportation of perishables, which will certainly rise.
5. Loss damage or expense caused by inherent vice of the subject-matter: With specific vices like spontaneous combustion of coal, getting invariably covered today, do not see insurers getting an opportunity to use this exclusion. Deletion of this exclusion, in my opinion save for RODC ( plz see Point 2) will not create much impact.
6. Unfitness of conveyance is an exclusion which was desired on the grounds of improper conveyances being used to save on freight thereby giving rise to losses. With this exclusion out of the way, insureds might decide to use cheaper options, not with the intention of lodging claims but playing on the Theory of Probability of how many such inferior conveyances can give losses, and comparing it with the savings on freight by using inferior forms of conveyance. Imagine carrying an ODC in a normal truck, when it had to be carried in low-bed trailer.
7. The war, strikes and nuclear group of perils present challenges of a different kind. Not that we have seen losses falling under these heads ( save for riots & strikes) but the fact that war risks on land can not be covered under normal marine treaties and nuclear group of perils are excluded under every treaty. So should there be a loss, a very remote possibility, the reinsurers will obviously not pay for the loss and in the absence of this exclusion, the insurer may have to bear the brunt. Also, in the absence of this exclusion & addition of the SRCC clause, it will be presumed that Terrorism losses, if any will get paid under ITC-A. They will not,as per Treaty terms unless SRCC clauses are added to negate the Strikes exclusion under which Terrorism falls.

To summarise, an inland policy with no exclusions at all does not seem a good idea.Over and above the arguments laid out, the biggest problem with an ‘exclusion-less’ policy will be that the prime responsibility of safe carriage from one point to another, which is that of the transporter shifts and they would tend to become even more complacent than they are today.