The tale of a sinking ferry — Are we ready?
Recent news about a sinking ferry with about 500 persons and a number of motor vehicles on board on the Volta Lake was one that kept some Ghanaians sitting on the edges of their seats praying against the imminent!
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The period between when some of the distressed passengers made phone calls to the media seeking help and the period they were eventually evacuated kept our hearts in our mouths. But for the timely intervention of the Ghana Navy, swift and professional as they had always been, it could have been a tragic incident.
While thanking God for the rescue, thoughts of whether this huge vessel and its passengers were insured were definitely a question on the minds of many people.
Quite often we hear of goods being lost at sea and other water bodies, shipping vessels sinking with the goods and the crew and sometimes passengers getting lost.
Given the value of losses in such cases, I often wonder how the vessel owners feel about these accidents. This may not necessarily be the same for other large water bodies but the risks are similar.
In view of the growing hazards on our seas and the Volta Lake in particular, the need for a specialised insurance to address our peculiar needs has become imperative. The catastrophic effects of happenings in these water bodies may be similar or more heart-rending than those in the air. This is validated by the age-old argument that there is virtually nothing more to discover in space, as there is under the water!
Insurance for the Ferry
The use of the ferry in recent years has become popular as many a commuter in certain parts of the country have no other means of transporting themselves from one location to the other using water ways.
Until recently many commuters who used the Senchi area to and from Ho in the Volta Region were compelled to do so as the Adomi Bridge underwent over a two-year renovation.
While some of us had the leisurely experience of using it quite frequently, for others it was for their livelihoods. But are these ferries having the appropriate and adequate insurance protection for vessel, passengers and / or goods? Knowing the capacity of the Volta Lake Transport Company Ltd, I am not too sure if adequate insurance arrangements have been put in place to take care of such situations.
Generally, the type of policy that comes to mind is Marine Insurance.
Marine insurance
Marine Insurance (MI) is designed to cover loss or damage to ships, vessels, cargo, terminals, and any other form of sea transport for which property is transferred, acquired, or held between the points of origin and final destination.
It also protects importers/exporters against loss, theft or damage to goods or property conveyed by sea including other waterways and rivers. Ship-owners are also protected against loss or damage to hull, machinery of the vessel and legal liability of the ship-owners, while on the high seas.
Historically, it was the earliest well-developed kind of insurance, with origins in the Greek and Roman maritime era. Separate Marine Insurance contracts were developed in Genoa and other Italian cities in the 14th century and spread to northern Europe.
Under MI contracts, the following persons are deemed to have insurable interest when loss or damage occurs: Vessel/ship owner; Cargo owners; for advance freight, the person or institution advancing the freight in case of a loss.
There is also the creditor who has loaned money on the security of the vessel/ship or cargo; the crew of the vessel/ship (in respect of their wages); mortgagor and mortgagee, if the subject matter of insurance is mortgaged; a manager holding any property in trust., and the insured in respect of the charges of any insurance policy which s/he may take.
Types of MI
Giving its specialised nature, MI is structured into several types for the ease of underwriting and prompt claims payments as follows:
Hull insurance: Covers the vessel and its equipment (i.e. furniture and fittings, machinery, tools, fuel, etc), with the responsibility being the ship owner’s. Here is where the ferry can be appropriately covered.
Cargo insurance: this includes the cargo or goods contained in the ship and the personal belongings of the crew and passengers.
Freight insurance: This covers freight loss. Mostly, owners of goods are bound to pay freight, under the terms of the contract, only when the goods are safely delivered at the destination port. If the ship is lost on the way or the cargo is damaged or stolen, the shipping company loses the freight. This is taken to guard against such risks.
Liability insurance: Covers third-part liabilities; largely arising from collision, drowning and any personal accident.
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Voyage policy: Covers a particular voyage irrespective of the time involved in it. In this case the cover is in force only when the ship starts on the voyage.
Time policy: It covers the subject matter against perils of the sea for a definite period of time, mostly not exceeding 12 months though the contract may however contain a 'continuation clause' for an extended period to complete the voyage.
Mixed policy: This is a combination of voyage and time policies and covers the risk during particular voyage for a specified period of time.
Valued policy: Both insured and insurer agree on the value of the subject matter to be covered.
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Open or un-valued policy: Policy does not specify value of subject matter, but limited to the sum assured.
Floating policy: Policy only specifies the amount for which the insurance is taken, without stating the name of the ship(s). Such policies are very useful to merchants who regularly dispatch goods through ships.
Wagering or honour policy: Here the insured has no insurable interest and the insurer is prepared to dispense with the insurable interest.
Premium rating
Premium rates often depend on factors such as nature of the cargo, scope of cover, packing of the goods, mode of conveyance, distance and past claims experience. This is when an agreed value is placed on the cargo.
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The way forward
Given its complexities, ferry, vessel owners and managers of businesses that require the use of transportation via water bodies, must enlighten themselves about the nuances of MI. Even though associated with high premiums, it must be noted that the losses arising from marine accidents are often daunting; hence the need for MI.
I wish to recommend that insurers should take advantage of the recent incident to offer one-off insurance policies to passengers using the Volta Lake. The premiums could be factored into the fares such that in the event of a disaster, affected passengers will be adequately compensated.
Until next week, “This is Insurance from the eyes of my mind.”