Chapter 11 Insurance

Contents1. Revision 2. New Lecture 3. Useful Expressions 4. Exercises

By learning this unit, you are supposed to be able to: Understand the importance of insurance. Know the basic knowledge and types of insurance.3. Write letters to talk about insurance.

Revision I. Translate the following phrases from English to Chinese or vice versa.1. non-negotiable B/L2. voyage charter3. ETD4. dispatch money 5. shipping space6. 7. 8. 9. 10.

II. Sentence Translation. 1. Theres still another possibility to ensure a prompt delivery of the goods.

2. If shipment were effected from Hong Kong, we could receive the goods much earlier.

3. They hold a discussion on the time of shipment for fireworks.

4. Im sorry to tell you that we are unable to give you a definite date of shipment for the time being.

5. After shipment, it will be altogether four to five weeks before the goods can reach our retailers.

New Lecture

Background KnowledgeWhat is insurance?

Importance of InsuranceInsurance is closely related to international trade. In international business, the transportation of the goods from the seller to the buyer is usually over a long distance and has to go through the procedures of loading, unloading and storing. This process involves varies risks which may result in the damage or loss of the goods, and thus the inconveniences or even financial losses to both the seller and the buyer. To protect the goods against possible losses, before shipment, the buyer or the seller usually applies to an insurance company for insurance covering the goods to be transported.

The international trade is subject to many risks. Ships may sink or goods be damaged in transit, exchange rates may alter, buyers default or government suddenly impose an embargo. Therefore, exporters and importers have to insure themselves against many of these risks.

As far as international trade is concerned, what mainly concerns to us is still the marine insurance, for a large percentage trade goes by ship.

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Three basic types of insurance:

1. Free of Particular Average (F.P.A)

2. With Particular Average (W.P.A) or With Average (W.A)

3. All Risks

General additional risks usually are:Theft, pilferage and non-delivery (T.P.N.D)Fresh Water and/or Rain Water DamageRisks of ShortageRisks of Hook DamageRisk of Breakage of Packing

It must be noted that, in China, all these general additional risks are included in All Risks.

Special additional risks usually are:Failure to Delivery RisksWar RisksStrike, Riots and Civil Commotions (S.R.C.C).

Special additional risks are not included in All Risks and have to be taken separately.

Writing StrategyAn insurance letter is composed of three main parts as follows:1. The opening sentence: express thanks for the previous letter of insuring the goods and confirm the insured goods.2. The middle part can be divided into several paragraphs if necessary, and it states the details of insurance completely.3. The closing sentence: hope to make a response promptly.

While writing a letter on an opening policy by the clients, one should make the aims clear, ask for the policy politely, and pay more attention to politeness, conciseness and completeness.

TextbookSection 1Section 2Section 3Section 4Asking for Insurance Arrangement Open Cover Policy Reply to an Insurance ApplicationRequest for Excessive Insurance

Section 1 Asking for Insurance Arrangement Letter 1Dear Sirs,We have pleasure in informing you that weve booked S/S, East Wind, which is leaving Guangzhou for New York on July 5th 1991, to carry 1,000 cartons of Litchi with a total invoice value of HK$20,000. Eagle & Puma Ltd., the consignee, entrusts us with insuring the consignment against ALL Risks. The amount to be covered is the total invoice value plus 10%. Please quote us the lowest rate for the cover.Yours faithfully,

Language Points1. entrust v. e.g. We will entrust your company as the only business agent of our company in China.

2. ALL Risks: ARFPAWA

3. FPAWAAR

Section 1 Asking for Insurance ArrangementLetter 2Dear Sirs, Referring to our contract, you will see the transaction is concluded on CFR basis.As discussed in our e-mail, we now desire to have the order insured at your side. We shall very much appreciate it if you could have the goods covered for our account against FPA and Aflatoxin Risk for 110% of the invoice value, totally GBP 55.000. We will refund the premium to you upon receipt of your draft at sight on us or a debit note.We sincerely hope our request will meet your approval.Looking forward to your early reply.Yours truly,

Language Points1. 2. FPA: free of particular average 3. Aflatoxin Risk

Section 1 Asking for Insurance ArrangementLetter 3Dear Sirs, We would like to insure the following consignment against All Risks and SRCC for the sum of U.S.$ 50, 000:10,000 yards of watered silk.These goods are to be loaded on to the S.S Chang Feng which sail from Dalian on May 15 and is due in London on June 2.As the matter is urgent, we would appreciate an early reply. Thank you.Yours faithfully,

Language Points1. SRCC: strike, riots and civel commotion

Section 1 Asking for Insurance ArrangementLetter 4Dear Sirs, We wish to refer you to our Order No. 123 for 1000 cases Toys, from which you will see that this order was placed on CFR basis.As we now desire to have the shipment insured at your end, we shall appreciate it if you will kindly arrange to cover the same on our behalf against All Risks at Invoice value plus 20%, i.e. US$ 100,000.We shall of course refund the premium to you upon receipt of your debit note or, if you like, you may draw on us at sight for the same.We sincerely hope that our request will meet with your approval.Yours faithfully,

Language Points1. CFR cost and freight e.g. Order No. 123 for 1000 cases Toys is order was placed on CFR basis. 1000123 2.on ones behalf / on behalf of sb. e.g. Will you cover the same on our behalf against All Risks at Invoice value plus 20%? 20%3. draw on sb. at sight for / against e.g. We shall of course refund the premium to you upon receipt of your debit note or, if you like, you may draw on us at sight for the same.

Section 2 Open Cover PolicyLetter 1Dear Sirs, We are in receipt of your letter of July 20 asking us to cover insurance on the captioned goods for you.In compliance with your request, we have contracted the insurance company here and covered the goods with them against All Risks and Clash &Breakage Risks for 130% of the invoice value, totaling US$ 18200. The policy is being prepared accordingly and will be forwarded to you by airmail within one week. Please pay the premium by check into our account with the Bank of China, Beijing.For your information, we are arranging shipment of the above goods by S.S. Yours faithfully,

Language Points1. cover insurance for: e.g. We shall cover the glassware against breakage risk.

2. Clash & Breakage Risks

Section 2 Open Cover PolicyLetter 2Dear Sirs,We are glad to learn from our connections that, as an insurance company in the world, you have so far provided satisfactory service to all your customers. Now we avail ourselves of this opportunity to approach you for insurance on the goods we are going to purchase from Japan.We have concluded business with the Japan suppliers for large quantities of household electric appliances and the goods are to be shipped from Osaka to us in ten installments within fifteen months. To save time and cost, we should find someone who can issue open polices for our imports at the most favorable rates. If you are interested, please fax us immediately so that we can send you details of the goods that are to be imported and negotiated further with you.We are waiting for your good news.Yours faithfully,

Language Points1. connection n. e.g. We have good connections with all the leading importers and wholesales in our country.

2. installment e.g. We didnt buy the goods on installment basis. We want them to be shipped in one lot. How many installments did it take to pay off the loan?

3. Osaka

Section 2 Open Cover PolicyLetter 3Dear Sirs, We acknowledge with thanks the receipt of your letter of August 1st. We are pleased that you would like to insure with us the goods of 20 cases of Mens Shirts by International Shipping Line from New York to Shanghai.We will cover insurance WPA and War Risks according to usual practice in the absence of definite instructions from you. The premium is at the rate of 1.5% of the value declared. We enclose here the relevant file of our company for your reference. We are sure that you will find our rate is most favorable.If our rate is acceptable for you, please let us know it so that our insurance policy can reach your timely.We look forward to hearing from you promptly.Yours faithfully,

Language Points1. International Shipping Line

2. WPA With Particular Average, W.P.A

3. at the rate of .

Section 3 Reply to an Insurance ApplicationLetter 1Dear Sirs,Thank you for your letter of 23 April.As requested, we enclose herewithour Insurance Certificate No. 57568, in duplicate, covering the above shipment against All Risks subject to PICC clauses which was shipped on board the vessel DONGFENGsailing on or about 5 May, 2009 from Zhanjiang to Hamburg for a sum of US $ 68800.Kindly acknowledge receipt thereof. Yours faithfully,

Language Points1.. herewith e.g. Please fill in the form enclosed herewith. 2. covering the above shipment against All Risks subject to PICC clauses cover sth. or sb. against sth. or for sth. e.g. We shall cover the goods against All Risks. 3. kindly acknowledge receipt thereof

Section 3 Reply to an Insurance ApplicationLetter 2Dear Sirs,In reply to your enquiry, we are pleased to give you the following information:ALL Risks, according to PICCs Ocean Marine Cargo Clauses, covers All Risks of loss or of damage to the insured goods whether partial or total, arising from external clauses in the course of transitaside from the risks covered under the FPA and WA conditions. But this insurance does not cover: 1. Loss or damage caused by the intentional act or fault of the insured. 2. Loss or damage falling under the liability of the consignor. 3. Loss or damage arising from the inferior quality or shortage of the insured goods prior to the attachment of this insurance.

4. Loss or damage arising from normal loss, inherent vice or nature of the insured goods, loss of market and/or delay in transit and any expenses arising therefrom. 5. Risks and liabilities covered and excluded by the Ocean Marine (Cargo) War Risks Clauses and Strike, Riot and Civil Commotion Clauses of this company.Although the rate of All Risks is higher than that of other risks, in view of your consignment, All Risks is your best choice. Enclosed is the information about various coverages and their relevant premium rate for your reference.We look forward to the pleasure of serving you well. Yours sincerely,

Language Points1. PICCs Ocean Marine Cargo Clauses

2. relevant premium rate

Section 3 Reply to an Insurance ApplicationLetter 3Dear Sirs, With reference to your letter of August 1 inquiring about the insurance on your order, we wish to inform you that for goods sold on CIF basis, our company will cover against All Risks and War Risks for 110% of the invoice value. If you want to insure broader coverage, the extra premium will be borne by you. The insurance shall terminate when the goods are delivered to the consignees warehouse at the destination named in the policy. Our underwriterthe Peoples Insurance Company of China enjoy high reputation for settling claims promptly and equitable. Should any damage to the goods occur a claim may by lodged with the insurance agent at your end, who will undertake to compensate you for the loss sustained. For further particulars, pleases contact the Peoples Insurance Company of China or its agent at your end.Yours faithfully,

Language Points1.cover 110% of the invoice value 110%

2.be borne by sb. e.g. According to the contract, the insurance premium is borne by you.

Section 4 Request for Excessive Insurance Letter 1Dear Sirs,As regards to your fax dated 14th, Oct. 2008 covering fore commodities for A.R. under Contract 2133, we hereby want to keep you informed that the AJC of 3FCL shipping to Iraq will need to add the War Risk at the proportion of 0.3% of the total invoice value, and goods packed in plastic bags of 4FCL to Baltimore will additionally cover the F.P.A. Of course, please note that the remaining goods are still covered against the original insurance terms stipulated in the contract.Yours faithfully,

Language Points1. request for = ask sb. for sth. in speaking or writing make a request for instruction 2. Excessive Insurance = Additional Insurance (General Excessive Insurance)(Special Excessive Insurance)3. covering commodities for AR under Contract 2133 2133

4. keep you informed that e.g. Keep me informed about what happens.

5. AJC. apple juice concentrate

6. FCLFULL CONTAINER LOAD

Section 4 Request for Excessive InsuranceLetter 2Dear Sirs,Thank you for your letter of July 7, 2009 informing us that the lathes we booked with you are now ready for shipment.As contracted, insurance on the goods should be effected for 10% above the invoice value. But as you know the recent situation in the countries along the way from Beijing to our port is very serious, we wonder if you could insure against War Risk in addition to the previously agreed FPA for 150% of the invoice value. If so, the extra premium will be for our account.Your early information of the above will be much appreciated.Yours faithfully,

Language Points1. effect insurance You must effect payment of Order No.3476 plus the interest immediately. 34762. for 10% above the invoice value 3. for ones account Any additional cost arising from transshipment shall be for the buyers account.

Section 4 Request for Excessive InsuranceLetter 3Dear sirs,We have received your letter of January 23, asking us to insure the captioned order for an amount of 30% above the invoice value.Although it is our usual practice to insure shipments for the invoice value plus 10%, we are prepared to comply with your request for getting cover for 130% of the invoice value. But the extra premium will be for your account.Please take note of the above.Yours faithfully,

Language Points1. comply with e.g. The Company strives to be a good corporate citizen in every country and community where it conducts business and will comply with all applicable laws and regulations.

Glossary 11. insurance proceed 2. insurance arrangement 3. an insurance company 4. insurance agents 5. insurance certificate 6. insurance coverage 7. insurance premium () 8. insurance applicant 9. premium 10. insurance document

(1)Theft, Pilferage and Nondelivery, 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 Odor(8)Damage Caused by Heating & Sweating(9)Hook Damage(10)Loss for Damage by Breakage of Packing(11)Risk of Rust

Glossary 2insurance policy insurance certificate open policy by airmail by check at the most favorable rates usual practice in the absence of definite instructions value declared

Glossary 31. ship on board 2. consignee 3. underwriter 4. settle claims 5. ocean marine cargo insurance clause 6. insurance coverage; risks covered 7. average Particular Average(P.A) General Average(G.A) 8.Failure to Delivery Risk 9.risk of normal loss 10. insurance against additional risks

Glossary 41. be ready for shipment 2. in addition to 3. be for our account 4. effect effect payment effect shipment 5.insurance instruction 6.insurance conditions 7. insurance expense 8.premium rate 9. insurance broker 10. insurance compensation ( indemnity )

Useful ExpressionsWe can serve you with a broad range of coverage against all kinds of risks for sea transport, such as Free of Particular Average (F.P.A), With Particular Average (W.P.A), All Risks and Extraneous Risks.

Please note that our insurance coverage is for 110% of the invoice value only.

In the insurance business, the term average simply means loss in most cases.

W.P.A coverage is too narrow for a shipment of this nature, please extend the coverage to include TPND.

For transaction concluded on CIF basis, we usually cover the insurance against All Risks for 110% of the invoice value. If you wish to cover insurance for 130% instead, the extra premium should be for your account.

In the absence of your definite instructions, we usually cover the insurance against WPA and War Risks. If you want to cover FPA, please let us know in advance.

The cover is to be from warehouse to warehouse and come to effect from May 20th.

Breakage is a special risk, for which an extra premium will have to be charged.

We are willing to take out FPA and WPA covers for the shipment. Would you please give us the policy rates for FPA coverage and for WPA coverage?

Please quote us your lowest FPA rate for US $10,000 on TV sets from HONGKONG to SHANGHAI.

Buyers request for insurance to be covered up to the inland city can be accepted on condition that such extra premium is for buyers account.

ExercisesChoose the best to complete each of the following sentences.

1. We are sorry we cannot ________ your counter-offer. A.entertain B. agree C. consider D. Think

2. You may ________ us the expenses of clearness.A. spend B. charge C. cost D. ask

3. We should never omit a word ________ the expense of clearness. A. with B. at C. by D. for 4. Insurance is to be _________ by the buyer if a transaction is concluded on FOB or CIF. A. taken B. covered C. done D. made5.The consignment is covered _______ our open policy NO.1234. A. at B. by C. on D. for6. As we can wait no longer for the delivery of your order, we have to _____ it. A. postpone B. refuse C. delay D. cancel

7. All you have to do is to knock 10% _______ the price. A. down B. off C. at D. on 8. After a _______, we found the amount deficient. A. check-up B. check-in C. check-out D. check 9.We will draw______ you by our documentary draft at sight on collection basis.A. at B. up C. on D.for10.Payments should be made ______ sight draft.A. at B. upon C. by D.after

Translate the following letter into Chinese.Dear Sirs, We shall have a consignment of 100 sets of Apple computer, valued at US$60,000 CIF Shanghai, to be shipped from New York by the vessel FENGQING, and due to sail on or about August 1st.We wish to cover the shipment against All Risks, including Breaking Risks. According to the usual practice we insure our goods for the invoice value plus 20%.We are looking forward to receiving the insurance policy and one certified copy.Yours faithfully,