Operation of Material Damage and Business Interruption Covers

1
Operation of Material Damage and Business
Interruption Covers

• An Underwriters Perspective
• September 3. 2005

2
Underwriters Perspective - Its No different from
the Customers or the Intermediarys !!

• Both want to be sure that
• What was intended and proposed to be covered, is
  covered .
• What was paid for, is covered .
• Period for which it was required to be covered,
  is covered .
• Both want to appreciate the larger canvas
  together
• Both need to paint this canvas together since
  God is in the Details
• Insurance is a Contract
• Discuss it and Debate it - Give it some time
• Agree and then, Seal
• Avoid Surprises !!

3
So what do these Details mean?

• Check the Sum Insured
• Adequacy Proper Sum Insured at all times
• Declaration or Floating
• Mkt Value Vs RI Value
• (RI Value - inflationary as well as deflationary
  assets !!)
• Definition of Sum Insured
• Check the Locations
• Declaration/ Floating/ Specific
• Limits per locations in Projects/ Marine
• There is no change of use or occupation of the
  location or any other material alteration without
  seeking u/wtr approval and endmt
• Be sure on the Coverage Period
• Project Extensions
• Check the Clauses
• RI Value Clause
• Designation of Property Clause
• Excess / Deductibles

4
Details also are relevant

• For a Consequential Loss Policy
• Define and Specify properly
• Net Profit,
• Standing Charges, Increased Cost of Working in
  detail
• Indemnity Period
• Formula for ascertaining the liability at the
  time of a loss
• Check the extensions / perils
• Architects fees
• Debris Removal
• STFI perils exclusion EQ extension Terrorism
  extension
• Suppliers extension in CL policy
• etc. etc. etc.

5
Since God is in the details ..

• Proposal Forms have an importance or atleast a
  written basis
• Study and Share your Contract conditions, where
  applicable
• Give detailed schedules in time for quick policy
  issuance, better at quotation stage
• Encourage Risk Inspections and focus on
  Implementation .
• Take Coinsurance decisions in time
• Pay your premiums in time
• Study the policies, when delivered
• .

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And, may be .?

• Sensitise and Educate your other departments,
  branches, units
• how management of risk is much of their
  responsibility as is yours !!
• have it made as part of their performance
  objectives and KPIs - offer regular training/
  seminars
• how risk mgmt / safety audits are of use to them
• involve insurers at blue print stage

7
What concerns the Underwriters ?

• Accumulation
• Bhiwandis, Panvels, Okhlas.
• Quality of Risk Risk Management Approach
• Godowns and Warehouses in Basements in Low Lying
  areas in narrow inaccessible lanes in
  Mahipalpurs . With crores worth of stocks
• Hanging electricity wires in the locations where
  godowns are !
• Fire Extinguishers installed, but not many know
  to get it to work
• With bad quality construction with water
  seeping in thro cracks
• Careless Stowing and Stacking
• Illiterate Chowkidars instead of trained godown
  managers
• Perils that seem to be inevitable
• Mumbai can happen to any city !!
• Reinsurance Support
• Increasing reinsurance rates
• Coinsurer partners casual approach, sometimes !

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What worries the Underwriters, the most ?

• Last minute requests for quotes !!!
• Since God is in the Details !!!!