Since August 2013, India has seen at least five major industrial accidents ranging from fire to ceiling collapse to gas leak. On the one hand, the number of claims from such accidents is going up; on the other, premiums have remained soft owing to a competitive market.
“Rates are holding up, since there has not been any major natural catastrophe-related event where the losses are very high,” said Amarnath Ananthanarayanan, managing director and CEO, Bharti AXA General Insurance. He pointed out that in mega-risk projects, it is the re-insurers who determine the rate.
Usually, large industries and industrial houses take up package policies under the Industrial All Risk cover. These are packaged policies that provide cover against damage to the materials, business interruption apart from fire, burglary and other man-made perils. Further, corporates dealing with items such as chemicals and other toxic materials also take up public liability policies that provide cover against loss of life or injury during the operation of the factory or industry.
The premiums can come up to a few lakh rupees for policies worth Rs 10 crore and above to several crores for sum insured of Rs 100 crore and above. Large organisations, especially public-sector undertakings, take mega-risk policies where sum insured could go up to Rs 2,500-3,000 crore and cover all major risks apart from terrorism-related losses. However, to cover individual lives, they are required to take public liability policies.
Rakesh Jain, CEO of Reliance General Insurance, said: “Industrial insurance cover is opted by most of the major organisations, but many smaller organisations either do not opt, or opt for inadequate cover. A proper appreciation of the risks involved for each industry is required to be analysed before deciding on the covers.”
Jain said that for example, the risks involved in an industry which has domestic suppliers may differ from risks where foreign suppliers are involved. Also, a manufacturer should insure the profits, which may be affected as a result of the damage due to fire or natural calamity, to fully protect the earnings of the business.
“Another important aspect, which is overlooked is the liability cover against various risks associated with an industry. An injury or death of worker may result in the liability of the employer,” said Jain. He explained that premium rates continue to be very competitive and the safety measures employed and past loss history of the industry are instrumental in deciding the rates."
Last week, an explosion in a GAIL pipeline in Andhra Pradesh killed at least 15 people and injured 18 others. The explosion, which happened near Nagaram village in East Godavari district of the state at around 5 am, left a trail of destruction as fire gutted houses, vehicles and coconut orchards. Nearly 50 houses were damaged in the mishap.
“In incidents like a pipeline burst where lives are lost and compensation is to be paid, it is essential that an organisation has a public liability policy to cover these risks. If there is a legal liability to pay, the losses faced by the company can be as high as Rs 100-200 crore,” said a senior general insurance executive.
Claims have also seen a year-on-year rise in this segment. According to industry estimates, the rise could be in the range of 10-15 per cent compared to last year, with average claims of Rs 50-100 crore. However, with the average base of these policies going up, experts say that number of claims will also rise.
Sushant Sarin, senior vice-president (commercial lines) at Tata AIG General Insurance, said there has been a rise in claims with respect to industrial accidents. However, he added that this was more linked to the rise in policies being purchased. “With respect to premiums, the market is soft right now. Increases if any will be slow and gradual,” he noted.
The corporate insurance segment has also seen a lot of competition with respect to under-writing. K G Krishnamoorthy Rao, managing director and CEO, Future Generali India Insurance, said there has been a reduction in premiums, especially in segments such as fire, as the claims experience has gone up.
On an average, yearly losses in the industrial risk segment have been in the range of Rs 80-100 crore, and the combined ratios exceed 100 per cent since it is not a very profitable segment. However, since the country has not seen major nat-cat (natural catastrophe) events or major gas leak/nuclear-energy related accidents (except a few minor reported incidents with low losses), premiums have stayed on track, say insurers.