An insurer’s perspective of

safety

A SARKAR
Chief Manager,
New India Assurance Co. Ltd.
HO,Mumbai
Contents

 Risks covered by general insurers

 Why is safety important to an insurer?

– Safety for risk reduction
– Lack of adherence to safety–root cause of most
accidents

 Adherence to safety – A ‘win-win’ for both

insurer and insured
General Insurers mainly cover the following risks

 Construction of infrastructure such as roads, bridges, ports, airports,

buildings

 Storage cum erection for factories, refineries, power plants

 Marine cum storage cum erection (I.e. storage cum erection including
transit both overseas and domestic)

 Advance loss of profit (followed by losses in above policies)

 Operational cover after testing and commissioning such as fire, flood,

earthquake, machinery breakdown and Terrorism.

 Third party liability.

Activities in any project involve

 Design of layouts, machines, and processes

 Procurement of goods/equipments

 Installation of all necessary equipment at site

 Testing of the completed installation

 Post takeover operation/maintenance

Project insurance – Erection All Risk

Fabricator Local
Supplier
Intermediate
Storage

Civil const.
Site Storage
Erection
Foreign Testing
supplier Port Commn.

 OPERATION
 CONSTRUCTION
 TRANSPORT  FIRE
 INTERMEDIATE  MCE
 MARINE  FLOP
 OFFSITE  EAR (SCE)
(IMPORTS)  MB
 STORAGE  CAR
 MARINE  BOILER
 ADDITIONAL  TPL
(LOCAL)  MLOP
 TRANSIT  CPM
 MARINE LOP  EEI
 ALOP
 IAR MEGA
 Operational insurance - Industrial All Risk Policy

•A single simplified, convenient, cost effective policy

Fire Machinery
Fire MLOP
Loss of Insurance
Insurance
Profit

Boiler Electronic Burglary

insurance equipment insurance
insurance

• Most Comprehensive coverage • depreciation not deducted in Machinery

–Not a named perils policy Breakdown total loss or partial loss claim
•Underinsurance to the extent of 15% waived
Contents

 Risks covered by general insurers

 Why is safety important to an insurer?

– Safety for risk reduction
– Lack of adherence to safety–root cause of most
accidents

 Adherence to safety – A ‘win-win’ for both

insurer and insured
Why is safety important for an insurer?

 Safety is a part of risk management for reduction in risk before transferring

to insurance company
Risk Management

Risk Identification
Risk Evaluation

Risk Reduction Safety

Risk Transfer Insurer
 Even though insurers come into the picture after the risk has been
transferred, still adherence to safety norms is essential from the point of
view of the insurer as well, because most accidents are a result of not
abiding by safety norms
 Of course, insurance companies offer discount on premium if during pre-
acceptance it is established that safety norms are being followed
Contents

 Risks covered by general insurers

 Why is safety important to an insurer?

– Safety for risk reduction
– Lack of adherence to safety–root cause of most
accidents

 Adherence to safety – A ‘win-win’ for both

insurer and insured
Insurance company expects claims from

Losses arising due to

Fire, Lightning, Explosion, Riot & Strike and Malicious
Damage, Damage by Terrorist activities, Impact Damage.

Storm, Tempest, Cyclone, Flood, Inundation Rockslide,

Landslide, Subsidence, Earthquake and Similar Natural
Hazards.

Electrical/Mechanical Breakdown, Failure of Control Systems

Human Error, Negligence, Lack of Skill, Faults in Erection and

Error in Handling
Insurance company expects claims from

Losses arising due to

Burglary, Theft, Pilferage.

Design Defect, Consequences of Faulty Material,

Workmanship other than faulty erection

Loss of revenue / Payment of Penalties - due to delay in

commissioning.

Accident / Sinking of Vessel, non Delivery, Shortage, Damage

during Transit, Loading, Unloading Or any other accidental
causes
Fire losses – key reasons

 Fire mostly occurred in storage areas

 Fire mostly occurred in unattended areas or

during unattended periods Lack of
awareness
 Not much importance is paid to fire protection of safety
in storage areas and
following
 Inadequate training for fire emergencies safety
norms
 No attempt to learn from past mistakes
Fire losses – key causes & safety measures

23%
18%
Key
10%
causes 8% 7% 7%
of fire 4%
Electrical

Friction
Smoking

Hot surface

Burner
flames

Spontaneous
Overheated
materials

ignition
Must be No Proper Away from Purged or Proper
Safety as per ISI smoking lubrication combustible inert stacking
measure condition
Loss prevention measures for ‘safety’ - Fire

Conduction Convection

Radiation
Loss prevention measures for ‘safety’ - Fire

Concept of passive fire protection

Compartmentation Segregation
Loss prevention measures for ‘safety’ - Fire

Concept of passive fire protection

Perfect Party walls Fire proof doors
Loss prevention measures for ‘safety’ - Fire

Concept of passive fire protection

Encasing Separating distances
Loss prevention measures for ‘safety’ - Transit

Case study
 Collapse of bridge during crossing of
128 wheeler trailer carrying generator
turbine
 River in spate, turbine lying in the
middle of the river bed
Cause of loss
 Classic case of Bridge Structural
capacity imbalance
 One bridge span larger than the total
length of 128-wheeler trailer
 Complete Loaded Trailer Weight came
onto one bridge span
Loss prevention – safety measures
 Route survey – roads/ bridges
 Loss prevention measures for ‘safety’ - Erection

Case study
 Shifting of heavy silos in progress at a
project site
 Crawler crane in operation collapses
 Heavy impact damage to silos, crane &
equipment stored underneath

Cause of loss
 Uneven ground conditions
 Crane encountered a quickly filled soft
ground spot

Loss prevention – safety measures

 Check ground under base of crane
 Loss prevention measures for ‘safety’ - Process

Case study
 Un-confined vapor cloud
explosion from leakage of
hydrocarbons

Cause of loss
 Pipeline (250mm dia. and 35 bar
press.) failed at sleeper-type
pipe support.
 Small release continued from
bottom of pipe for 1 hour after
detection.
 Refinery was put into crash shutdown & water curtains set up.
 Full bore rupture following pressure surge when pipeline valve closed by
staff, without stopping supply pumps.
 External corrosion and internal pitting evident
 Normal pipe wall thickness = 7mm. Corroded section = < 1mm thick.
Loss prevention measures for ‘safety’ - Process
Loss prevention measures for ‘safety’ – Other perils

Losses Some examples of prevention measures for

arising out of safety
Earthquake &  Design and construction of building to withstand the
similar natural shock of earthquake
hazards  Ensure that boxes in warehouse are stacked wide
rather than high and secured in groups with ropes or
strapping
 Place materials especially large components far
enough apart to avoid their damaging one another
when toppling over
Storm, tempest,  Design building to withstand highest wind speeds
cyclone, flood recorded in 25 year period
 Pay attention to weather forecast regularly and alert
emergency team/ fire brigade in case of sever
weather forecast
Loss prevention measures for ‘safety’ – Other perils

Losses Examples of prevention measures for safety

arising out of
Water damage  Level of storage yard to be 0.5m above highest level
of river for the last 25 years
 Constructing rain water drainage system for highest
rainfall in the last 25 years

Theft, pilferage  Factory should be surrounded by compound wall

with entry possible only with identity proof through
guarded gate
Contents

 Risks covered by general insurers

 Why is safety important to an insurer?

– Safety for risk reduction
– Lack of adherence to safety–root cause of most
accidents

 Adherence to safety – A ‘win-win’ for both

insurer and insured
A ‘win-win’ for both insurer and insured

Awareness of safety among all

Implementation of safety processes

Reduction of claims to insurance companies

Increase in surplus of the insurance companies

Building up of good reserves and increased capacity

of insurance companies

Insurance companies can provide wider cover at a

lower premium without re-insurer support
Thank you