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

Local Supplier

Fabricator

Intermediate Storage

PortForeign supplier

SiteCivil const.

StorageErectionTestingCommn.

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 MEG

A

Project insurance – Erection All Risk

04/18/23

Operational insurance - Industrial All Risk Policy

Fire Insurance

FireLoss of Profit

Machinery Insurance

MLOP

Boilerinsurance

Burglaryinsurance

Electronicequipmentinsurance

•A single simplified, convenient, cost effective policy

• Most Comprehensive coverage

–Not a named perils policy•Underinsurance to the extent of 15% waived

• depreciation not deducted in Machinery Breakdown total loss or partial loss claim

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

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

Risk Management

Risk Identification

Risk Evaluation

Risk Reduction

Risk Transfer

Safety

Insurer

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

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

Losses arising due to

Insurance company expects claims from

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%

10%8% 7% 7%

4%

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Ove

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Ho

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Bu

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Sp

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Must be as per ISI

Key causes of fire

Safety measure

No smoking

Proper lubrication

Away from combustible

Purged or inert condition

Proper stacking

Loss prevention measures for ‘safety’ - Fire

Conduction Convection

Radiation

Concept of passive fire protection

Loss prevention measures for ‘safety’ - Fire

Compartmentation Segregation

Concept of passive fire protection

Loss prevention measures for ‘safety’ - Fire

Perfect Party walls Fire proof doors

Concept of passive fire protection

Loss prevention measures for ‘safety’ - Fire

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

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’ - Erection

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 arising out of

Some examples of prevention measures for safety

Earthquake & similar natural hazards

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

Storm, tempest, cyclone, flood

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

Losses arising out of

Examples of prevention measures for safety

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

Loss prevention measures for ‘safety’ – Other perils

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

Contents

Reduction of claims to insurance companies

Awareness of safety among allImplementation of safety processes

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

Increase in surplus of the insurance companies

A ‘win-win’ for both insurer and insured

Thank you