An insurer’s perspective of safety

1. An insurer’s perspective of safety A SARKAR Chief Manager, New India Assurance Co. Ltd. HO,Mumbai

2. 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

3. 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.

4. 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

5. Project insurance – Erection All Risk Local Supplier Fabricator Intermediate Storage Civil const. Storage Erection Testing Commn. Foreign supplier Port Site • TRANSPORT • MARINE (IMPORTS) • MARINE (LOCAL) • MARINE LOP • INTERMEDIATE • OFFSITE • STORAGE • ADDITIONAL • TRANSIT • OPERATION • FIRE • FLOP • MB • BOILER • MLOP • EEI • IAR • CONSTRUCTION • MCE • EAR (SCE) • CAR • TPL • CPM • ALOP MEGA

6. Operational insurance - Industrial All Risk Policy • A single simplified, convenient, cost effective policy Fire Loss of Profit Machinery Insurance Fire Insurance MLOP Boiler insurance Burglary insurance Electronic equipment insurance • depreciation not deducted in Machinery Breakdown total loss or partial loss claim • Most Comprehensive coverage • Not a named perils policy • Underinsurance to the extent of 15% waived

7. 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

8. 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 Safety Risk Reduction Insurer Risk Transfer

9. 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

10. 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

11. 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

12. 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

13. Fire losses – key causes & safety measures Key causes of fire Safety measure Must be as per ISI Away from combustible Purged or inert condition Proper stacking No smoking Proper lubrication

14. Loss prevention measures for ‘safety’ - Fire Conduction Convection Radiation

15. Loss prevention measures for ‘safety’ - Fire Concept of passive fire protection Compartmentation Segregation

16. Loss prevention measures for ‘safety’ - Fire Concept of passive fire protection Perfect Party walls Fire proof doors

17. Loss prevention measures for ‘safety’ - Fire Concept of passive fire protection Encasing Separating distances

18. 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

19. 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

20. 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.

21. Loss prevention measures for ‘safety’ - Process

22. Loss prevention measures for ‘safety’ – Other perils

23. Loss prevention measures for ‘safety’ – Other perils

24. 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

25. 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

26. Thank you