Cargo trucks stuck en route in lockdown – Am I covered?

Many trucks in transit are / were stuck during lockdown. Some insured have already taken care of them, while some are yet to take care. Some areas are accessible, some yet under lockdown, and, lockdown in any area can occur overnight. So what is the scenario here? What is required from the assured? This article will try to answer some of the queries.

The all-risk marine cargo policy in all forms when operational for inland transit is governed by “Duration Transit Clause”. The delays are otherwise excluded and no insurers cover them. However due to the above clause, some relief is there. This clause reads as under:

So, Interpretation is as under for lockdown period (ie. delay beyond the control of the assured):

1. If the cargo movement is by rail or rail + road then cover ends after 7 days of the arrival at the destination rail head.
2. If the cargo movement is by road and the truck is stuck enroute and cannot reach its final warehouse then following can happen: 
   1. The material is unloaded enroute and stored in intermediate warehouse.
      1. Effect: The cover ends almost immediately at the time of unloading.
      2. Required action: Take cover for intermediate storage.
   2. The material is taken by alternate modes to the final warehouse, say, 200 bags in single truck are arranged in 10 bag per rickshaw to the final warehouse.
      1. Effect: The cover ends after arrival at the final warehouse.
   3. The material is left in the truck and the truck is stranded somewhere, but is in the safe custody of the carrier. The carrier is waiting for the final delivery at the final warehouse.
      1. Effect: The coverage is automatically extended upto the time the material reaches its destination.
      2. Required Action: Ensure the cargo is safe in the hands of the carrier. This is the duty of the assured. The assured has to act as if uninsured and take care of the material in most prudent manner. Ensure as under:

1. 1. 1. 1. The location of the truck layover is known to the assured.
         2. If possible, keep own person posted at the location of layover.
         3. Ensure that the material is under lock and key and tightly packed tarpaulins.
         4. In case of any mishap, assured should coordinate with the carriers and local authorities and help salvage the situation by active participation.
         5. Lodge insurance claim without delay.
         6. In case, assured cannot contact insurers, services of IRDA licenced surveyors to arrange survey can be used.

The above situation is specific for the cargos by road, which includes couriers, by hand, by air etc. Cargos moving by rail lose their cover the moment they reach destination station. Hence such cargo need special care and need to be immediately taken to the destination and unloaded either at destination or at some intermediate godown. Such cargo cannot be left at the mercy of the carrier. Such claims are liable to be denied by the insurers.

The key take away is “Act as if uninsured”, ask questions and be in touch with carriers and the insurers. Get a grip over the situation and act accordingly in all prudence.

Covid and Mandela, Really?

…we need coverage for “Non damage BI” and that too which are cheap, affordable and easily triggered and which actually pays the money…

Mandela Effect – “We know, yet we don’t know”, i.e., False memory.

People remembered that Mandela passed out in jail in year 1980s. When large group of people were asked in Yr 2010 they remembered seeing his funeral also! Whereas, Mandela was released from prison in Yr 1990 and died in Yr 2013. So that’s a case of collective “False Memory”. Some people also say “Déjà vu” is related to unreal worlds. So people relate such mind tickling phenomenons to parallel worlds, past life memories, unreal worlds and so on.

But we are living in real worlds and the insuring public is asking why my BI does not cover “Pandemic”. Our advisors, brokers, insurers and well-wishers never told us that such a thing can push us into such spiral, are we living in unreal world and victim of Mandela effect.

This news of Reuters appeared in Jan 2020 (2 months before lockdown in India):

“Many global firms, excluded from epidemic insurance, face heavy coronavirus costs”

Yet no policy in India or worldwide were modified to include “Pandemic”. The Wimbledon was covered since last 10 years and they appealed a claim of $141Million as soon as they cancelled the event.

Event policies are normally allowed to cover such risks, but what happens to other industrial policies i.e. IAR policies which cover only for physical accident related losses only, i.e., Fire, flood, storm, strike / malicious damages etc.

So this is a classic case of Mandela effect. “We know, yet we don’t know”.

But in times to come, we are about to see such policies. There are policies which provide coverage for such pandemics. So really such policies will cover shutdown due to “Pandemics”?

The standard clause in its various forms may read as under:

“……..this type of coverage, requires an outbreak at the premises itself to claim for “notifiable” disease, as well as a “denial of access” order by public authorities…..”

There are many more events that can interrupt business that would result in loss of income/value, but without direct damage to assets. Examples include:

• Environmental issues – environmental pollution leading to mass shutdown of industries in an area.
• Political unrest – Govt. putting a curfew leading to “denial of access” in particular area.
• Infectious disease – COVID, SARS, MERC, Ebola and subsequent lockdown.
• Insolvency in the value chain – Your supplier or the job worker vendor goes kaput and this affects your business as well.
• Cyber-attacks – Need no explanation.

So the industry needs much extensive coverage than “diseases” – else we shall be again treading the path of “We know, yet we don’t know”. These times has made us aware about need of such policies.

The insurance industry is already aware of this requirement, but they also understand that the claims related to “non damage BI” are like wars, where the magnitude of claims are HUUUUGE. So how to go about it.

One approach can be putting legal tangles where 90% of the business will drop their claims but in long run, the relevance of the clause itself will be lost.

So the second approach is – putting a cap to the claim, i.e, First loss basis. In this, the claim amount has a maximum upper limit. The business can choose the compensation which they may like to receive when such an eventuality kicks in. Say only the fixed cost for 6/12 months (i.e rent, salaries, water and electric bills, etc ), or, like lump sum payments per pax / per adjoining industry or the penalties not exceeding certain amounts. For bigger sums, top up policies can be taken which may trigger after the sum insured in the base policy has been consumed.

So, thats it, we need coverage for “Non damage BI” and that too which are cheap, affordable and easily triggered and which actually pays the money. First loss policies coupled with top up policies are one of the few options and insurers & brokers should bring out such covers. This cover should be made available even to small business owners, which are more affected by such scenarios.

Emerging Technologies – Insurance Dashboard and P2P Insurance

This is the next best thing we will see soon on Indian shores.

Insurance Dashboards

Already PolicyBazaar is offering the online comparison services. They are offering free facility of maintaining an account with them and the various policies appear as in the dashboard as under:

The consumer by using such dashboards is free to compare and buy. Once he has taken the insurance the dashboard keeps the tracks of the renewal and suggests the new policies based upon the searches saved from time to time.

With the limited exposure, the downside of present such dashboards and apps could be that they are probably using machine coding and algorithm only. They are not using AI and blockchains for creating smart contracts. Such dashboards are at present not going beyond standard products offered by insurance companies. These dashboards do not actually compare policies based upon detailed requirement of the clients. They at present do not offer any custom made solutions to even individuals, hence have limited potential. There is need for many such dashboards which can be easily made available by Insurance Brokers.

P2P Insurance (Peer to Peer Insurance)

The P2P insurance operates on various levels, presently being two such models in operation:

1. Premium Level – Like Lemonade, this functions when a social broker consolidates the premium of like risk profile insured and provides them cover. He charges a fee for the cover and at the end of the policy allows the profit from the policy to be given back to the social cause. Now variants of this service could allow user to be given back value additions or refunds even. Hence all such services operates with a assumption that there will be a profit at the end, which is doubtful in Indian scenario.
2. Deductible Level – Inspeer, of France, has come up with another solution. On the existing insurance policy, as you go for higher deductible, the premium reduces. Hence on the existing contract go for higher deductible and let that higher deductible become a concern of the peer group maintained by Inspeer. The service is completely free if there are no claims.  In the case of a claim, InsPeer keeps a small percentage of the claim paid by the insurer. InsPeer allows clients to get full insurance coverage by leveraging a responsible and solidary community. If I have a claim, I declare it to my insurers and upload the confirmation letter to InsPeer, who then collects the money for me among my partners. I can then easily transfer the money to my own account. This can happen after my claim is paid or even whilst is in the process. The best part is that Inspeer inspires the insured to increase the deductible to keep the dependency on insurers low. Imagine, you will be able to include such damages which give you losses, but can not be claimed due to policy exclusions, like losing cameras in foreign countries and not being able to lodge police complaints, like covering for your inventory losses, like covering for that huge Rs. 5 Lakh deductible in a Industrial All Risk Policy etc etc.

So personally I feel that both P2P insurance models will be soon seen in Indian markets. “Premium Level” for small individual insurance groups which are distributed yet homogeneous types like home or shop insurances. The “Deductible Level” will be seen for large corporate who want seamless coverage for their assets.

We are quite close and in touch with all the InsurTech above and once launched they will be easy to understand and adopt.

Coming Soon – Robo Advisory & Gamification – Increasing the interaction of humans with machines

Emerging Technology in Insurance – AI, Meet Brolly and Trove

InsurTech, is all about the use of technology to bring efficiency and the savings in insurance.

Insurance is one of the oldest business in world, with some inherent traits. The insurance operates on

“driving front, while looking in rear view mirror”

model. The industry uses business models which pools various risk groups into one and then does the pricing based upon the risk experience of such perils which are predominant for that particular group. Say premium for commercial vehicles will be higher than pricing for private vehicles, as commercial vehicle are more accident prone. Now here is the problem, the best discounts will be negotiated by the individuals in the group depending upon the size of the premium they command in the particular risk pool. There is nothing which is scientific or methodical to the discounting. It is a crazy scenario and everybody is arm twisting insurers by one method or the other. In fact broker strength is gauged by this parameter.

InsureTech like AI (Artificial Intelligence) brings sanity to this entire process.

Use of AI in Insurance industry has given birth of “Digital Insurance Concierge Apps” named “Brolly” and “Trove”. Both are brits and yet in beta stage.

 

“Brolly” is the brit slang for umbrella. The app can be downloaded for iPhone. This app brings all the policies of individual at one place and then AI engines analyses the coverage available under each policy. The user is then suggested to reduce the costing by deleting duplicate covers or take extra covers where the required risk coverage is missing. Hence essentially the app analyses if the individual is “under insured” or “over insured”. Further since it is keeping track of your various policies it will suggest alternate pricing from competitors, it will keep track when the policy are due for renewal, it will be your digital record which can be fetched any time after the loss, without worrying about the physical copy.

“Trove” means storage place for treasures. The trove app uses another pattern of AI. The users are allowed to insure their treasures on “pay per use” pattern. The individual users buy lot of things which they initially insure and then after few years when the usage stops the need for insurance also is lost. The losses occur only to find that such items were uninsured. Say a DSLR will be bought and used, but not often. The DSLR will be used less than 30 days in entire year by most individuals, so why pay the full coverage premium for entire year. Hence this app learns your usage pattern and allows you switch “ON” or “OFF” your insurance for that DSLR. The product remains registered in the data and you just have to flick that button to start the insurance coverage. Same goes for your super car, super bike, your Rolex, your costly jewelry, even need for extra medical cover while visiting foreign countries etc etc. Just flick that button ON and you are insured. The app over a period of time learns and suggests various covers. The company offering this “Digital Insurance Concierge App” intends to take it to the next level, when you may rent out the “treasures” when you are not using them.

Many more such apps may be existing in market or are upcoming. The traditional industry need to upgrade itself and embrace InsurTech.

More to Come……….Insurance Dashboard – brick to brokers.

 

Emerging Technology in Insurance – Blockchain

Starting today, 1st November the readers will be treated with new and emerging technology which is about to change the insurance industry. I will be picking up mostly from the internet and explore the usage and impact on the insurance industry.

BLOCKCHAIN

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

–  Don & Alex Tapscott, authors Blockchain Revolution (2016)

To understand it further, we must refer to the analogy of “Word DOC file” v/v “Google DOC file”. If I would have prepared a contract in DOC file and I wanted you to make any corrections, then I prepare it and store it in a central server and send you a link so that you can make the corrections. While you are making corrections I can not make any corrections as the file will be locked for that time. Now if it was a DOC file which was shared over Google, then both of us could share and make and do corrections in real time without locking out the file for each other’s usage. So ideally Google DOC file was a convenient way of such sharing as it is more transparent, independent and would be keeping track of all such corrections with name of the user, date and time stamp, and yet verifiable at all the times. However both keep the file in central server, hence anybody can destroy the file.

Now imagine this a little bigger and imagine this happening with digital transactions, business contracts, public records like health data, traffic and weather data, court room data, land records and every other such data which is touching our lives, with certain great features i.e.,

a) Full transparency about who modified it, when modified it, what modifications are done, who accessed it and the stated purpose of usage;

b) Every usage is verifiable and can only be added, nothing can be deleted, as their is no central server, because such transactions create “block” and their are traceable “chains”.

c) The “blocks” are virtually indestructible as no one person controls the “blockchain”, the blockchain is multiplicative and available on hundreds of computers. Even a single attempt to destroy a single block will mean removing such hundreds of blocks in hundreds of computers which are connected to each other under P2P network (Peer to Peer network). Hence blockchain is also hackproof. 

“What the internet did for communications, blockchain will do for trusted transactions.”

— Ginni Rometty

Now it is easy for us to understand its use in our industry. Any insured who comes for insurance has to execute a contract with the insurer. The contract hence can be a smart contract which will take in consideration the requirement of insured, profile of insured, the profile and experience of insurer and ability to pay the claim; all this totally verifiable in real time and ever evolving without anyone going and redrawing the whole contract. This contract grows and builds over a period of time as the policy proceeds from inception of the business to the commencement of the business. Imagine a single fire policy taken out at the time when business is setup and which grows with the needs of the insured for years and years. At the time of claim the insured or insurer has no chance of backdating a even a single endorsement. Every incident of change in policy, insurer, address, claim, addition or deletion requested remains recorded in the policy and is totally authenticated and verified by block nodes.

There can be endless uses related to insurance industry. The health data which is totally transparent and verified can be accessed by the insurers. The vehicles can never be involved in staged accidents leading to bogus or fraud claims.

Such a technology has a huge potential and the world is fast shifting to it.

“As revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved. Above anything else, the most critical area where Blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.” 

– Ian Khan, TEDx Speaker | Author | Technology Futurist

Next to come “Driverless Cars”. Another game changer for insurance industry. But how?

So keep following for more moolah……….

New India IPO – Investors, What’s at stake?

The New India IPO is the dream run of New India Assurance Company Limited. This is a Mumbai based insurers managing large portfolio world over and still ranking at nowhere. So Why? Why is this race to throw the IPO in the market. What’s happening in P&C market world over? Why India? What can be expected from such an IPO in long run? Is it really overpriced, as some stock gurus are claiming?

I am not a avid investor, but my all the questions gets answered when I see that what New India is all about. To start with – New India was a TATA group company. When you enter their any of the office, a sense of strong business sense with ethic trickles from everywhere.

They are the only company who have expanded to so many countries. They are the number one in India always consistently. They are always the pioneers in Indian Insurance Market. Every insured asks for the quote from them. No tender is complete without quote from New India.

So with such a brand value, why do they need money for? Don’t they have earned enough in so many years? Anyhow what do they intend to do with this 10K Cr? They having been showing fall of profit margin since last 2 years? Is my money doomed if I invest in the IPO?

The insurers world over know that Indian economy is booming, and, they are also going to make money from this market. The New India is a PSU and faces so many challenges. The Indian insurance market is needing penetration. The penetration has been brought by agricultural insurance but lot needs to be in areas of automobile insurance, health insurance, marine cargo insurance, property insurance, home insurance. The recent catastrophes has forced many people to look for the insurance as savior but still GOD is at number 1.

Alliance went back last year, as they did not wanted to remain invested in this stagnant market. Can New India do that? It has to improve its bottom line. It has to bring technology. It has to bring innovation. It has to bring solid claim settlement ratio. It has to keep the consumer satisfaction at top notch.

So New India needs love from the investors. The investors need to show the spirit of nationalism by investing in New India. The solid grounds of New India will payoff in future runs. The asset base of New India is the highest among P&C Insurers of India. Hence don’t worry investors your money is in safe hands. It is one of the best PSU.

 

 

,

Increase in FDI

Today in India we saw approval of new insurance bill which increases the FDI limit from present 26% to 49%. Now in general nobody is reacting to it as they do not have future glimpses to the scenario.

In my opinion this will bring lot of money to the insurance sector. This is going to bring lot of rate cutting competition to the market. Insurance sector is a market where premium is collected in advance for the promise of service. This is the only business where you collect money in advance to the promise of fulfillment of promise. There may be the possibility that entire year or the policy period may pass thorough without opportunity to fulfill this promise. Hence the entire premium collected by the underwriter goes to it’s balance sheet. There is also a possibility that a single claim may wipe off even twenty years collection of premium by the underwriter from a single insured. But the insurance does not operate on strength of single insured. Hence when insurers are already making profits then why is the need of giving this profit making opportunity to foreigners?

When Indian private underwriters are already working with improved efficiency than their PSU counterparts, why this FDI? Is there actually any benefit to the industry?

Burning cost is already in place in Indian market. So this competition thing will also not work here. What benefit will actually FDI bring to Indian market and to consumer?

I think though there is no need of FDI at this stage but in future we can expect to see improvement on services front. Insurers armed with lot of backup money will expand to smaller towns and villages. Insurers will be more competitive to the service front. They will be more compensative and compassionate to the needs of insured. Like in western countries we may also start paying monthly premium instead of annual premium. But here it is also to be seen that insurance rates world wide are much higher than India. Hence this FDI is also ultimately going to increase the rates at par with world standards which is many times higher.

We may not know or perceive the services benefits but surely will feel the pinch of higher rates, as anyhow we are insurers mercy when a claim arises. Regulations will soon be in place for compulsory insurance. Already everybody is buying medical insurance because just for that cashless facility hospitals are charging three times the regular rates, workshops of motor vehicles are feeding vehicle manufacturers day and night. So your hard earned money first goes to insurer with FDI and then that money again goes to FDI funded hospital or the vehicle manufacturer.

We Indians can overcome all this if we pledge to remain with those brands which are Indian. We still have Indian insurers with no FDI like National, New India Insurance; We can get treated in Indian hospitals like Jaypee, Medanta; and use Indian cars like Tata, Mahindra. We can pledge to remain patient even if the services are little lethargic, products and services will improve if show our commitment to the Indian brands.

Anyway that was just my opinion on the matter. Narendra Bhai hope you listen to this. Happy Holi!!!

Emergency Ward Off (EWO) Situations

Emergency ward off situations could be

preloss

or

postloss

.

Preloss Situations: When one decided to arm themselves with suitable tools and engagement of such services which help them in such emergency situations. Such could be simple risk mitigation techniques like installing fire extinguishers in home or office. One could decide to keep emergency tools / torch in his car. Organizations could engage consultants for the purpose who would visit them n guide them on correct risk underwriting and suggest them suitable tools.

Postloss Situations: Now when loss has occurred there still be use of service and products. One could engage crane and towing vehicles to recover that accidental car. One could use expert drycleaning washers or detergents to clean those flood effected carpets. Similarly if that building needs to be torn down with further minimum damages.

We at Adwiti Technocrats India can help you with above such situations. Call us now.

What is Salvage?

Salvage is the left over of any asset after it has lived its useful life. The useful life though may have been shortened as the asset may have suffered damages due to fire etc.

Once we attach some value which it may fetch in open market, that value becomes salvage value.

Now mostly such assets need to be recovered from their present location for safe disposal to suitable buyer. The process of recovering the asset hence is known as salvaging. Some times when the entire ships go down, the cost of recovery may be prohibitive to the expected salvage value fetchment. Such decisions are hence not easy. Salvaging agencies are the experts in this field. They calculate the possible recovery v/s the salvaging expenses.

The direct buyers have their profit on top of the mind. They try to negotiate least salvage value. As salvaging agency we have noted that salvaging expenses may not be that high. The salvage value should always be calculated separate than the salvaging expenses.

So we wish you happy salvaging. If you have any question please feel free to write.