Underwriter considerations and all risk insurance policy
To assess the risks and profitability involved in an insurance policy, insurance brokers and insurance companies conduct a thorough analysis of the party, asset or any other entity that is to be insured. This process is known as insurance underwriting. Since insurance underwriting allows the insurer to know or calculate the probability of having to pay the insurance claim, it is an important part of every insurance policy be it health insurance, life insurance, insurance policies related to business, property insurance, etc. It is based upon the underwriting analysis that the amount of insurance is determined or approved.
Underwriting is a complex process which involves a lot of research, study and even interrogations, therefore insurance providers and brokers hire learned professionals to conduct the underwriting process, these professionals are known as Insurance underwriters. Underwriters collect and assess the available, data which also include statistics, research papers, previous claims made by the party to be insured, existing policies if any, guidelines provided by the actuaries and government, etc to make the underwriting report. This report is then utilised by other departments of the corporate insurance brokers and providers to put forward the sum insured, premium, coverages, etc.
Insurance underwriting is aimed at protecting the financial interest of the insurance company. In their role of analysing and determining the type and level of the risks involved, underwriters also conduct a deep study of the financial aspects of the entity to be insured. Therefore, they also benefit the financial interests of the investors, shareholders and even loan providers.
What is an all risk insurance policy?
An Industrial all risk policy is an insurance contract, a comprehensive package policy which provides coverage to the insured party against unforeseen circumstances. It is an important part of the risk management plans of industries that operate on a large scale as it provides coverage against operational risks and losses that can lead to the stoppage of a company’s everyday operations.
Why do industries need all risk insurance policies?
Industries are considered to be the building blocks, the backbone of our economy. This is because they are responsible for meeting the everyday demands of consumers from all sections of the economy. Although most of us, the common people are only concerned with the end products, the operations including sourcing, manufacturing, shipping, etc are extremely complex and require a huge amount of investment. The processes that are conducted inside large-scale industries are far more complicated and risky than we can even imagine. These industrial units are constituted of large, complicated machinery that is under the constant risk of damage to assets, unforeseen breakdowns and consequential losses which can negatively affect their operations. Even minor losses might lead to huge shutdowns and such shutdowns might cause a huge loss in the market share and reputation of the company leading to long-term percussions.
Shutdowns like these might even affect customer satisfaction rates. This is because even a minor disruption or change in their operations leads to a huge impact on the end product that reaches the consumers. Therefore, it is imperative to protect the financial interests of these industries by offering coverage which can help them keep their activities going in case an unfortunate event happens. This is where all risk insurance policies come to the rescue by offering comprehensive coverage to these industries.
An all risk insurance policy offers much wider coverage than regular, individual insurance policies that cover only a specific risk like fire insurance, property insurance, etc. Covering these, all risk insurance policies also include other operational risks.
Benefits of investing in an all risk insurance policy
Managing an industry is a huge task, although the managers might be extremely efficient and would try to execute everything exactly as planned, unforeseeable events like fire, machinery damage etc could take place. An all risk insurance policy is one such cover which reduces the complexity of managing operational and financial risk to a well-planned protection mechanism.
Here are the benefits that investing in an all risk insurance policy might offer:
· Dual Coverage
This policy provides a combined coverage against losses due to asset damage and its impact on the balance sheet post the loss.
· Wider Coverage
Other than the exclusions specifically mentioned in the contract, the policy provides compensation for all damages and losses.
· Customised Plans
An all risk insurance policy can be easily customised and modified to match the specific needs of every industry. The option to add more coverage is also available.
· All-step coverage
A comprehensive all risk policy provides coverage against risks at steps such as manufacturing, storage, etc.
Underwriter considerations under all risk insurance policy
These are the various factors that underwriters take into consideration for an all risk insurance policy
1. Assets
All assets and machinery that are involved in the regular operations of the company are considered. These include fixtures, machines used, infrastructural assets like buildings, inventory, etc.
2. Factors that might disrupt business
The factors that might lead to business interruption by causing damage to machinery and other tangible assets are also taken into consideration and the probability of their occurrence is analysed thoroughly.
3. Materials and designs used by the industry
Underwriters make sure that the company to be insured uses the right technologies, appropriate designs and good quality materials so that faulty claims cannot be raised for damages that might be caused due to inappropriate designs and poor quality materials.
4. Age of the assets
The age and capacity of every asset such as the machines used, building, etc is studied so that no claims have to be paid for losses arising due to structural defects and old age of the assets.
5. The efficiency of human resources
It is mandatory for the management and staff to prove their efficiency because losses might occur due to the negligent behaviour of the staff and management and those are not covered under the policy.
6. The legality of operations and government interference
It is imperative for the underwriter to ensure that the operations of the company are legal and as per the government guidelines. Government interference in the industry as a whole is also studied because losses that might occur due to the destruction of property or the ceasing of operations by the order of public authorities are exempted from the policy.
Along with these geographical factors like the location of the company, vicinity to dangers like animals, Naxalites, etc are also studied.
All risk insurance policies can be of great help to various industries in different sectors which include heavy machinery, whose operations are conducted round the clock and that has a large work population.
Contact Deinon Insurance Brokers LLC at infra-energy@deinon.ae for the best insurance solutions.
