Published on November 16, 2016
1. PONDICHERRY UNIVERSITY Karaikal Campus Assignment On Engineering Insurance MBA (Insurance Management)
2. Engineering Insurance Submitted To Submitted By S.A SENTHIL KUMAR PRASOON VERMA Associate Professor MBA Ist Year Department of Management Pondicherry University Pondicherry University
3. Definition : Engineering insurance refers to the insurance that provides economic safeguard to the risks faced by the ongoing construction project, installation project, and machines and equipment in project operation. Product categories: Depending on the project, it can be divided into construction project all risks insurance and installation project all risks insurance; depending on the attribute of the object, it can be divided into project all risks insurance, and machinery breakdown insurance.
5. ERECTION ALL RISKS (EAR) INSURANCE EAR insurance provides a very wide and comprehensive insurance cover to the client in respect of any sort of contingency from the moment the material is unloaded at the site of the project and continues during storage, physical erection commissioning, testing and maintenance (if covered). Since the duration of the cover can be as long as 36 months or even more, care must be taken while negotiating the proposal as well as assessing the moral hazard of the client.
6. SCOPE OF COVER This is a comprehensive insurance cover that is available to the client in respect of any sort of contingency from the moment the materials are unloaded on the site of the project / works and continuous during storage, physical erection and till the test run is over which covers all physical losses or damage as under: • Fire, lightning, theft & burglary. • Impact from falling objects, collision, failure of changes or tackles. • Failure of safety devices, leakage of electricity, insulation failure, short circuit, explosion. • Carelessness, negligence, fault in erection, strike & riots. • Storm, tempest, flood, landslide, rockslide, earthquake.
7. EXTENSION OF COVER • While the standard policy include all Acts of God perils, it has to be noted that the earthquake peril is covered at an appropriate additional premium as per the erection tariff. • Extension of basic cover to provide for extension of the policy period itself can be given at additional premium per erection tariff. • Dismantling cover in case of already erected second hand plant can be given at an appropriate additional premium as per tariff. • Additional premium are also chargeable for the removal of debris, contractor’s plant and equipment, third party liability, if they are to be included in the sum insured.
8. CONTRACTOR’S ALL RISKS (CAR) although a CAR policy may be taken by the principal or by the contractor, but usually, under the terms of the agreement between the contractor and the principal, it is obligatory on part of the contractor to effect a CAR insurance in their joint names before the commencement of the project. The sum insured under the policy must not be less than the full value of the contract works at the completion of contract inclusive of all materials, wages, freight, custom duties, construction cost and material or items supplied by the principal. TYPE OF PROJECTS The CAR insurance policies generally issued for all types of Civil Engineering projects like dwellings, office building, commercial building, go downs and warehouses, hospitals, schools, silos, steel structure, roads, water supply lines, construction work, etc.
9. EXTENSION OF COVER • While the standard policy include all Acts of God perils, it has to be noted that the earthquake peril is covered at an appropriate additional premium as per the erection tariff. • Extension of basic cover to provide for extension of the policy period itself can be given at additional premium per erection tariff. • Dismantling cover in case of already erected second hand plant can be given at an appropriate additional premium as per tariff. • Additional premium are also chargeable for the removal of debris, contractor’s plant and equipment, third party liability, if they are to be included in the sum insured.
10. MATERIAL DAMAGE SECTION • The Scope of insurance is virtually the same as that of EAR insurance. Under this section the insurer agreed to indemnify for any loss or damage to the insured property by any cause other than those specifically given under the exclusions. • The various exclusions under the CAR policy: • General exclusions (applicable to Section I and Section II). • Exclusions applicable to Section II - Third Party liability. • Exclusions applicable to Section I - Material Damage are exactly the same as under EAR Policy.
11. MACHINERY BREAKDOWN (MB) • Machinery Breakdown insurance was developed to grant industry effective insurance cover for expensive plant, machinery and mechanical equipment. This insurance is important for everyone who operates the machines. This policy should support our property insurance and hence this insurance must not be granted on a stand - alone basis. SUBJECT MATTER INSURED • All types of machinery, plant, mechanical equipment and apparatus may be covered under MBD insurance, such as for example power generating units, power distributing plant as well as production machinery and auxiliary equipment, etc. SCOPE OF COVER • By its nature, Machinery Breakdown Insurance is an “accident” insurance on machinery. Thus, • It covers unforeseen and sudden physical loss of or damage to the insured items. • Faulty design faults at workshop or in erection, defects in casting and material. • Faulty operations, failure of safety system / lubrication system / control system, lack of skill, negligence.
12. EXTENSION AVAILABLE UNDER THIS POLICY • Third party liability. • Expediting costs. • Additional customs duty.
13. BOILER AND PRESSURE PLANT (BPP) • This policy covers explosion of boilers and pressure plants but does not cover rupture of tubes inside the boilers. Both these perils can be covered under MB policy and hence we should wherever possible include this in our MB portfolio since it would practically mean granting extra cover within the scope of tariff provisions. TYPES OF EXPLOSIONS • It can be broadly classified under two categories for the purpose of insurance cover. Chemical Explosions • It is a matter of common knowledge that gun powder, similar explosive compound could cause explosion under the influence of mechanical or thermal shocks. Highly inflammable fluids and dusts can cause explosions if their concentration in the atmosphere exceeds the explosive limits. From the insurance concept, these explosions are considered as very rapid form of combustion. Physical Explosions • In respect of pressure vessels handling inert fluids such as steam, explosion can occur due to variation in fluid pressure. The variation being only in physical form and there no chemical reaction or changes responsible for such explosions as such these are classified as Physical Explosions.
14. SCOPE OF COVER • The policy covers pressure vessels both fired & unfired against the risk of explosion and collapse and indemnified the insured against: • Damage to the boilers & / or other pressure plant. • Damage to surrounding property of the insured or the property held by the insured in trust for which he is responsible. • Death or bodily injury to any person. • Damage to property not belonging to the insured or held in trust or on commission for which he is responsible.
15. EXCEPTIONS OF POLICY • Loss or damage raising from fire and allied perils which can be covered separately. • Damage by chemical explosion except in recovery boilers and waste heat boiler. • Contractual liability, manufacturer’s supplier’s liability. • Loss arising from an existing defect. • War group of perils, social group of perils. • Nuclear perils. • Loss due to gross negligence. • Failure of individual tubes.
16. OTHER EXTENSIONS AVAILABLE UNDER THIS POLICY Steam Pipes • The portion of the steam pipe up to the safety valve alone is deemed to form integral part with boiler. The remaining portions of the steam pipes can be included under this extension. Expediting Costs • Expenses towards overtime, night work, work on public holidays, express freight can be included under this extension. The same will be indemnified after a loss provided these expenses are incurred following a loss due to an insured peril under this policy. Air Freight • Expenses towards air - lifting parts of the boiler following a loss can be included under this extension. Policy Period: This policy is issued on annual basis.
17. CONTRACTOR’S PLANT & MACHINERY (CPM) • Whilst it is possible to have the Contractor’s plant and machinery covered under an EAR or CAR policy at specific project sites, CPM policy has been designed to provide a cover on an annual basis to a contractor who may be using his plant and machinery at different projects during the course of the year. The cover under a CPM policy is not limited to a specific project site and is operative at all sites wherever the plant and machinery is in use and even while the same is lying at the contractor’s own premises. We therefore have to ensure that all the sites where the insured items are being used are mentioned on the face of the policy. SCOPE AVAILABLE UNDER CPM POLICY • The Contractor's plant and machinery insurance comes under the policies available under the Project Insurance and like the EAR / CAR Policy offers a comprehensive cover as given below: • Fire, lightning, external explosion, earthquake, flood, inundation, subsidence, landslide and rockslide. • Storm, tempest, hurricane, typhoon and tornado. • Burglary, theft, riot and strike and malicious damage. • Accidental damage while at work due to faulty man - handling, dropping or falling, collapse, collision and impact.
18. EXCLUSIONS • The insurer will not indemnify in respect of loss or damage given below: • Excess as stated in the policy schedule, which has to be borne by the insured in any one occurrence. If more than one item is lost or damaged in one the occurrence insured has to bear the highest single excess applicable to such items. • Loss or damage due to electrical or mechanical breakdown, failure breakage or derangement freezing of coolant or other fluid, defective lubrication or lack of oil or coolant, but if as a consequence of such breakdown or derangement an accident occurs causing external damage, such consequential damage will be indemnifiable. • Loss of or damage to replaceable parts and attachments such as bits, drills, knives or other cutting edges, saw blades, dies, moulds, patterns, pulverizing and crushing surfaces, screens and sieves, ropes, belts, chains, elevator, and conveyor bands, batteries, tyres, connecting wires and cables, flexible pipes, joining and packing material. • Loss or damage due to explosion of any boiler or pressure vessel subject to internal steam or fluid pressure or of any internal combustion engine. • Loss of or damage to vehicles designed and licensed for general road use unless these vehicles are exclusively used on construction sites. • Loss or damage to the hull and machinery of water borne vessels.
19. • Loss or damage while in transit from one location to another location. • Loss or damage due to wear and tear corrosion, rust etc. • Loss occurring while an insured item is undergoing any test. • Loss to any plant or machinery working underground. • Losses arising out of war and war like perils and due to nuclear radiation or radio active contamination. • Damage due to faults or defects existing at the time of commencement of the policy with the knowledge of the insured. • Any willful act or gross negligence of the insured resulting in a loss. • Loss for which the supplier or the manufacturer is responsible. • Loss discovered only at the time of taking the inventory or during routine servicing. • Loss to plant and machinery mounted or operated on a floating vessel / barge.
20. ELECTRONIC EQUIPMENT INSURANCE (EEI) • The Electronic Equipments such as computers, Micro - processors, Word - processors, Tele - communication equipments. Machine meant for medical use and other misc. Equipments like films, television studio equipments can be covered under this policy. This scope of this policy is ALL RISK. SCOPE OF COVER This insurance indemnifies the insured against any physical loss or damage due to following perils: Location Perils • Fire, lighting, explosion, flood, storm, etc. Break Down • Any electrical / mechanical breakdown. Faults • Faulty design, faulty materials, faults in manufacturing / assembly erection. Effect of Moisture • Damage due to moisture and humidity. Carelessness • Damage due to faulty / careless / negligent operation by employees. Riot & Strike • Riot & strike damage and malicious damage.
21. SUBJECT MATTER INSURED • This policy is recommended for the following instruments: • Electronic data processing equipment comprising central processor with flexible programmability. • Peripheral equipments such as readers, printers, tape or card punchers or sorters. • Tapes, and discs. • Auxiliary equipment such as air conditioning, heating and power conversion or main power control plant. • Electronic office equipments, material testing and research equipment. • Electro medical installations. • Telecommunication equipment, etc. • Computerized numerical control system used in connection with production machinery. INSURED PARTIES • The insured can be either the owner or the hirer of the electronic equipment. The insurance protects, on the basis of the insurance conditions. The Owner • As operator against material damage, for which the manufacturer is not responsible under a guarantee. The Hirer • Against material damage for which, he is responsible either legally or through a leasing agreement.
22. GENERAL EXCLUSIONS Inherent Vice • Wear & tear, loss due to defects known to the insured at the time of commencement of the policy. Manufacturers responsibility: • The loss / damage for which the suppliers are responsible under guarantee. Willful Act • Due to any willful act or willful negligence of the insured or his representatives. Cessation • Cessation of work whether total or partial. Expected Perils • War, invasion and the like, nuclear reaction / radiation, loss or damage due to interruption caused by the failure of any gas, water or electricity service or supply. Functional Failure • Maintenance costs. Hired Equipments • For the equipment hired for which the owner is responsible.
23. Process of Insurance
24. Claim settlement Process
25. Thank You