Introduction
Insurance means protection from financial losses in which, in exchange for damaged goods, loss of product, and injury to a person, a compensation amount is provided by another party upon agreed terms and regulations. It is a form of risk management, primarily used to hedge against the risk of uncertain losses. A person or an entity buying the insurance is known as the policyholder, while the person who is covered under the policy is known as the insured.
Insurance is a form of guarantee against the loss of any object, property, or living being. Insurance was first introduced by the Chinese, Indians, and Babylonians while trading in the 3rd and 2nd millennia BC, respectively. Later on, the insurance policy became more sophisticated in Enlightenment-era Europe, where more specialisation was created. And slowly, with time, insurance in various sectors and fields took place to grow the economy, provide service in all sectors, and maintain insurance for everything that can be bought and sold.
Next, the types of insurance formed in the modern world are as listed: vehicle insurance, gap insurance, health insurance, income protection insurance, casualty insurance, life insurance, burial insurance, property insurance, crop insurance, earthquake insurance, landlord insurance, marine insurance, aviation insurance, boiler insurance, and the list goes on.
But today, we will exclusively discuss Marine and Aviation Insurance. We will learn how and when they were established, how they used to function then and now, and compare each other in functionality, packages, offers, and the diverse fields they cover under their policies.
Marine Insurance Vs. Aviation Insurance
Marine insurance is the oldest form of insurance and began during the 12th and 13th centuries in Italy. The UK then adopted marine insurance, which was provided from December 1901 to January 1902. In which the archaeologist found the diorite stele in pieces inscribed with numerous cuneiform laws in which code 100 indicated the repayment of the debtor of a loan to a creditor on the scheduled maturity date specified in the laws, Codes 101 and 102 were stipulated as the insurance we know today. The code stated that the shipping agent was only required to repay the principal of the loan to their creditor in the event of any net loss or total loss due to an act of God. Also, code 103 was stipulated as marine insurance, which covered the liability of the entire loan if the cargo or a crew member became a victim of theft. Correspondingly, codes 104, 105, 126, 235, 236; 237, 238; and 240 were stipulated, which covered discrete factors required to fulfil the marine insurance completely.
Aviation insurance, like marine insurance, was first introduced in the twentieth century in 1911. That is, Lloyd's of London created the aviation insurance policy in 1911. Lloyd's is a London-based insurance and reinsurance market that was founded in 1871 in England. Even though the first aviation insurance policy was written in 1911, the first specialist aviation insurer appeared in 1924. Upon releasing that there should be a separate airline industry, the International Union of Marine Insurance (IUMI) first set up an aviation committee and, in 1934, formed the International Union of Aviation Insurers (IUAI). The catastrophic nature of aviation insurance is measured by the number of losses that have cost insurers hundreds of millions of dollars.
To state the obvious, as previously stated, the Marine Insurance Committee was formed first, and later, with the assistance of the Marine Committee, the Aviation Insurance Committee was formed. And we'll see the differences in their policies, insurances, packages, performances, and required documentation below.
Difference Between Marine Insurance and Aviation Insurance in Tabular Form
| Parameters | Marine Insurance | Aviation Insurance |
| Meaning | Marine insurance is a type of indemnity that protects against losses on ships and other ocean vessels. | Aviation insurance is a type of indemnity that covers losses in aircraft as well as risks associated with the operations of other aircraft. |
| Application | Marine insurance is a guarantee for the products in the ship, cargo, the ship itself, and any damaged parts of the ship. that even after the damage, there would be financial compensation for any damaged goods or injuries. | Aviation insurance is a guarantee of the products against any risk related to an aircraft's technical failure, accidents, or terrorist hijacking. Because financial compensation is provided for any injury or damaged goods. |
| Industry served by them | Marine industry, community and committee. | Aviation industry, community and committee. |
| Establishment | Marine Insurance is the oldest and first in the list of insurance. It was established in the 12th and 13th centuries. | Aviation insurance came into being in the United Kingdom in the 20th century. |
| International Union | The International Union of Marine Insurance was formed in the 19th century. | The International Union of Aviation Insurance was formed right after the establishment of aviation insurance in the 20th century. |
| Limitations | The losses incurred due to purposeful acts of misconduct and negligence will not be covered. And any damage to goods during shipping as a result of improper packing. | The losses were caused by the mechanical failure of the spare parts aircraft and engine. wear and tear of tyres and brakes Improper maintenance and so on are the factors for which the insurance can't be covered. |
| Significance | Marine insurance protects from unforeseen disasters like turbulent weather, piracy, shipwrecks, and collisions. | Aviation Insurance provides the guarantee of the products under situations like terrorist attacks, technical failures, and so on. |
| Acknowledgement | The products falling under the insurance policy are acknowledged by either one of the following parties before being imported or exported through the ship: the forwarding agent, importer, or exporter. | The products falling under an insurance policy are acknowledged by the forwarding agent and importer. |
What is a Marine Insurance?
Marine insurance, like any other type of insurance, is mentioned in the indemnity contract. This insurance will cover any loss or damage to ships, cargo, terminals, or goods. Along with that, the property is likely to fall under insurance from the time it is acquired, transferred, and held until its final destination. Onshore and offshore exposed property, container terminals, ports, oil platforms, pipelines, hulls, marine casualties, and many more things are covered in marine insurance.
Marine insurance is required for many imports and exports of products trading through the sea. Both parties are liable for the payment of any goods under insurance. Nevertheless, the subject of marine insurance goes beyond any contractual obligations, and some necessary legal documentations need to be carried out beforehand before dispatching the export cargo. The goods in the cargo that are insured under marine insurance need to be acknowledged by any one of the three parties: 1. The forwarding agent 2. The exporter 3. The importer
The amount covered by marine insurance depends on a variety of factors, such as the geographical location of the importer or exporter, the rules abided by the different governments, the goods and products exported or imported through ships, what causes the damage and loss of the product, and many more minor and major factors are taken into consideration. There may also be the rise of certain liabilities from things like a ship crashing into another ship or a collision with a fixed object in the sea, among other things.
There are two ways the proof of the product's level of loss is calculated. The first method is the actual total loss, which is calculated when the product is destroyed and can't be repaired. Hence, the cost of the overall product is to be covered under the insurance as per the terms and regulations agreed upon by both parties. A constructive total loss occurs when the product is not damaged enough and can be repaired and constructed as new again. The cost of repairs is calculated as per the terms and regulations agreed upon by both parties.
There are various types of sub-insurances included in marine insurance, such as shipping insurance, personal insurance, yacht insurance, war risk insurance, increased value, annual cover, open cargo, newbuilding risks, and so on.
What is an Aviation Insurance?
Aviation insurance, like marine insurance, covers losses and damage to goods and products at sea, as well as losses and damage to aircraft and other risks involved in aviation. Aviation insurance differs from all the other areas of insurance, which include transportation because aviation insurance refers to incorporating aviation terminology, limits, and clauses specific to aviation terminology.
It provides coverage for an entire aircraft, aircraft losses, property damage, loss of goods and products, cargo loss, personal injury or health problems, and so on. Aviation insurance is also known as aircraft insurance. It protects both the owner and aircraft operators from any foreseen or unforeseen losses. The aircraft insurance also provides for search-and-rescue operation costs, personal injuries sustained while operating the aircraft, as well as the costs incurred due to emergency landings and crashes.
The aviation insurance policy covers a great deal of damage and losses to the aircraft and everything that comes with it, as the aircraft is more prone to technical failures, terrorist hijackings, and accidents due to natural causes. In situations like this, it is better to have everything covered under insurance. Hence, aviation insurance can be extremely crucial. Below is the type of insurance provided in aviation insurance:
In-flight Coverage: The insurance covers damage to the product while the aircraft is in mid-air. Though this is an expensive package, it is worth it since a lot of product damage is caused when aircraft are in mid-air.
Hull All Risk: The insurance is most likely liable to a wealthy person who owns private jets, small planes, agricultural praying planes, etc. The insurance covers any partial or complete damage to the insured plane. And it also covers the plane against complete loss and disappearance.
The various other insurance types covered under aviation insurance are as follows: hull/spare war risk, loss of licences, spare all risk insurance policy, and aviation personal accident insurance for crew members and pilots.
Following that, the documents needed for the aircraft insurance claim process include aircraft detailed documents, flight detailed documents, crew member details, documented proof of the accident, information on the aircraft's maintenance and engineering, operational manual passenger documents, and so on. This documentation for the claim process is based on the Indian region only. The same and other documents may be required in the different states as per their rules and terms.
Main Difference Between Marine Insurance and Aviation Insurance in Points
- The key factor that differentiates marine insurance from aviation insurance is that the former protects the owners of ships and vessels from unforeseen disasters that are related to the marine and oceans, while the latter protects the aviation industry, air clubs, and even the aircraft that are rented from the risks involved in aviation.
- As the name implies, both of them serve in different sectors of the transportation industry. Marine insurance covers the risk involved in the operations of water transport. And aviation insurance covers the risk contained in the operations of air transport.
- The establishment of marine insurance is much older than aviation insurance. That is, marine insurance was established in the 12th and 13th centuries, and aviation insurance was set up in the 20th century in the years 1911 and 1912.
- Marine insurance is necessary to deal with the damage caused to ships, vessels, cargo, goods, and products in the ships by weather turbulence, shipwrecks, accidents such as collisions, and so on. Aviation insurance is required to cover damage to aircraft, spare parts, cargo, and vessels caused by technical failure, weather hazards, hijackings, and other events.
- The international union of marine insurance was formed in the 19th century and was named the International Union of Marine Insurance (IUMI). The International Union of Aviation Insurance (IUAI) was formed immediately after the establishment of aviation insurance in the twentieth century.
- There are certain limitations to what can be covered in the respective insurance; for example, in marine insurance, deliberate acts of misconduct, negligence, delays, and improper packing are all factors that make it impossible for the insurer to claim insurance. Likewise, in aviation insurance, the lack of maintenance, electrical or mechanical breakdowns, and wear and tear of brakes, tires, and engines are the points that make any insurance claim invalid.
- In the case of marine insurance, the acknowledgement from either one of the parties (the importer, exporter, or forwarding agent) is necessary to complete the documentation process. The same is not implied in aviation insurance; that is, the forwarding agent and importer both need to acknowledge the aircraft and vessels that go with them.
- The various other insurances that are covered under marine insurance are marine cargo insurance, hull insurance, liability insurance, freight insurance, and so on. Likewise, in aviation insurance, other types of insurance that get covered are passenger liability insurance, ground risk hull insurance in motion, ground risk hull insurance not in motion, in-flight insurance, and so on.
Conclusion
The main point is that both insurance companies provide for the different sectors a guarantee of compensation against any damage or injury during transport, whether by sea, ocean, or air. The difference in insurance is the difference in the sector, which is explained by all the factors that could have been explained.
Risk in any type of transportation is inevitable, and to have protection against such unforeseen damage, insurance is provided. The latter part depends on the people who are deemed to use such insurance for their transportation requirements.
References
- Aviation insurance - Wikipedia
- Marine insurance - Wikipedia
- What is Marine Insurance? (marineinsight.com)
- What is Aviation insurance? - Definition from Insuranceopedia
