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
Local
Supplier
Fabricator
Intermediate
Storage
Site
Foreign
supplier
Port
 TRANSPORT
 MARINE
(IMPORTS)
 MARINE
(LOCAL)
 MARINE LOP





INTERMEDIATE
OFFSITE
STORAGE
ADDITIONAL
TRANSIT







CONSTRUCTION
MCE
EAR (SCE)
CAR
TPL
CPM
ALOP








OPERATION
FIRE
FLOP
MB
BOILER
MLOP
EEI
IAR
MEGA
Civil const.
Storage
Erection
Testing
Commn.
Operational insurance - Industrial All Risk Policy
•A single simplified, convenient, cost effective policy
Fire
Insurance
Boiler
insurance
• Most Comprehensive coverage
–Not a named perils policy
Fire
Loss of
Profit
Electronic
equipment
insurance
Machinery
Insurance
MLOP
Burglary
insurance
• depreciation not deducted in Machinery
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
Risk Transfer


Safety
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 preacceptance 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

Not much importance is paid to fire protection
in storage areas

Inadequate training for fire emergencies

No attempt to learn from past mistakes
Lack of
awareness
of safety
and
following
safety
norms
Fire losses – key causes & safety measures
23%
18%
Key
causes
of fire
10%
7%
7%
Must be
No
as per ISI smoking
Proper
lubrication
Away from
combustible
Spontaneous
ignition
Burner
flames
Hot surface
Overheated
materials
Friction
Smoking
4%
Electrical
Safety
measure
8%
Purged or Proper
inert
stacking
condition
Loss prevention measures for ‘safety’ - Fire
Conduction
Radiation
Convection
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 &
similar natural
hazards



Storm, tempest,
cyclone, flood


Design and construction of building to withstand the
shock of earthquake
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
Design building to withstand highest wind speeds
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


Theft, pilferage

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
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