Designer's Risk under the Contractor's All Risks Insurance

Many thanks to the 200 odd Agents who attended the CPD Training on Contractor's All Risk Insurance held at Concorde Hotel, Kuala Lumpur today, 15th June 2011.

The Q&A time was most beneficial with some very good questions posted by Agents to the Trainer. One of the question that needs further clarification is related to "Designers Risk".

I have enquired with 2 experienced Underwriters and made further reading on the CAR Policy wordings on the same subject, I can conclude as follows:

1) The Policy does not contained words like "Designer's Risks" nor "Defective Design"
2) The Policy does mentioned the words "Faulty Design"
3) There are no such combination of words like "Defective design, defective workmanship or defective materials" but only defective Workmanship and defective materials
3) The words "Designer's Risk" are used in the endorsement to provide part cover (DE3) or full cover (DE5)due to faulty design


Meaning, loss or damage due to Faulty Design is a total exclusion (expressly stated under Section c of Special Exclusions to Section 1) but can be extended by payment of additional premium to include resultant damage only (exclude the part caused by faulty design) or full cover (include the damage caused by faulty design). Please note that Underwriter does not usually grant the full cover.

On the defective materials and/or workmanship, it excludes the items immediately affected by the defective materials and/or workmanship but resultant damage to the correctly executed items is covered.

They are two stand alone exclusions.

Any comments are welcome.

General Insurance Claims Handling Seminar

Seminar on General Insurance Claims Handling held at Holiday Inn, Melaka on 2nd June 2011

Topics delivered:

An overview of claim sequence
Onus of Proof of Loss
Case studies on fire/PA/theft/motor losses
Rights of Insurers
Role of Loss Adjusters
Claims Adjustment
Average and Contribution
Reinstatement of Loss
Surogation and  Discharge Voucher
Post Loss Improvement

Fire & Fatalities Losses in Malaysia

According to the Fire & Rescue Department in its press statement on Sunday Star, 8th May, 2011, they had received 55,529 emergency reports this year compared to 56,643 reported the year before.

Of the 55,529 reports, 29,333 were categorised as fire cases, which saw a decrease of 0.25% compared to 2009. Rescue cases also saw a decrease of 4.63% from 24,669 to 29,341.

The department also saved RM 16.32 billion worth of property in fire cases last year, an increase of 61% compared to 2009 where RM10.36 billion were saved.

There were 17% increase in deaths (with 89 fatalities) due to fires in households and much can be attributed to the lack of basic awareness of fire safety.

The use of unsuitable electrical appliances, excessive use of flexible cords and overloaded socket points, children playing with fire, oil lamp (for altars) placed at precarious position, lighted mosquitos coil, use of paraffin lamp, carelessly discarded lighted cigarette butts, fire from gas stove etc are common hazards found in households.

Perhaps every household should be equipped with fire extinguishers and smoke detectors so that the occupants would be prepared to deal with any fire related incident.

Every household should also purchase a Houseowner/Householders Insurance which will compensate them for (i) loss or damage to the building/contents caused by fire and lightning as well as other special perils in the form of flood, storm, impact, explosion, aircraft damage etc (ii) theft of household goods (iii) death of Insured caused by fire or theft (iv) legal liability for injury or damage to property belonging to third party arising from the occupancy of the property (iv) loss of rental (v) property temporary removed etc

Minimum premium for such insurance is RM60.00 excluding stamp duty

Problems with Fire Protection Appliances installed in many industrial risks

From the general perspective of Insurers, backyard operators are amongst the many industrial risks who are the least concerned about fire protection and fire prevention at their premises. To them, there is insurance to claim, for any loss or damage to their properties, so why bother with fire prevention measures.  They do not realize the long term damage caused by interruption to their business which can result in loss of goodwill, loss of customers, reduced market share or worst, goes into liquidation etc.

Below are amongst the evidence of "neglects" in majority of risks:

Portable fire extinguishers (PFE) are often misplaced from their original position, or past their service date or damaged due to vandalism. Theft of PFE is not uncommon.

Hydraulic Hose Reels (HR) are sometimes used for the wrong purpose (for washing car) when they are supposed to be used only for fire fighting. Pumps, at times, were found malfunctioned when tested. External Flexi hose, due to prolong exposure to heat under the scorching sun became brittle and caused leak Those installed internally are damaged by the impact of moving vehicle like forklift.

Pillar Hydrants in the compound, especially those fed from the public mains often suffered from low water pressure making fire fighting ineffective. Those installed with own pump sets were found to malfunction at times when tested. Effective capacity of the water storage tank failed to meet the minimum requirement of the hydrant system. . Canvas hose and nozzle kept next to each hydrant point were found missing. Often the view of hydrant is obstructed by overgrown lalangs or bushes.

Break Glass Fire Alarm and Smoke/Hear Detectors are meant to detect fire and summon help to the affected area. Often they are poorly maintained with weak battery, faulty bulb and wrong positioning. Sometimes, the Control Panel is not even manned.

Automatic sprinkler system suffered from faulty pump sets, ineffective capacity of the water storage tank and obstructed sprinkler heads etc

Thank You, Agents

Dear Agents

Thank you so much for your positive comments and for following my blog. Am glad that you all find the class interesting but more importantly you have acquired the necessary knowledge that can helped improve your sales.

Hope to see you all again soon.


Hello Mr Steven, I'm not a computer expert, don't know where to click to become a follower. Anyway I enjoy the seminir on 12/4/2011. Thanks for share with us.

Hi, Mr. Steven I am also one of the participants of your event but not at Concorde Hotel KL but I just attended your class yesterday at Seri Mutiara Hotel at JB. Your presentation was wonderful (I ticked Execellent). All the technical knowledge and clauses you had highlighted are very useful (some of the clauses were the first time I had ever heard) to we agents to up our stake and beat the competition in this industry. Hope to see you in JB again soon for your next talk.

/I'm 29 follower today.. Generation now put yr blog explore at Facebook now. I'm Wayne.. MSIG agent and come to support.. Nice to meet u and feel yr seminar very interesting.. Thanks. ;-)

/Hi Steven , i am one for of the participant of your event in Concorde yesterday. Allow me express my thanks and gratitude for giving us a lively and interesting presentation . I reckon that the points highlighted are very relevant to our industry today .

PROGRAM LATIHAN 1MALAYSIA

TITLE OF TRAINING PROGRAMME

OPERATIONAL/ HAZARD ASSESSMENT &
IMPROVEMENT NEEDS FOR THE SMALL TO MEDIUM SIZED INDUSTRIES (IN-HOUSE PROGRAMME)

PROGRAMME OVERVIEW

Designed to enhance the technical knowledge and skills of its people who are involved in the day to day operations of the plant or facilities through the use of a proper and systematic risk management tools to identify, analyze, control or eliminate the inherent or potential hazards present in the plant or facilities.

If left unchecked, accident can caused wide spread damage to properties, injuries or death to its people, liability suits for negligence from the public at large and loss of business earnings through the physical disruption of the plant/facilities caused by the accident through one’s own negligence.

TARGET GROUP

Technicians, Plant Manager, Site Supervisors, Security & Safety Officers, Production Crews

CONTENTS

Session 1

Concept of Risk Management and its application at the workplace
The Risk Management Process:

• Identification,
• Analysis,
• Prioritize,
• Control

The various Risk Management Tools:

• Process Flow Chart,
• Risk Questionnaires,
• Check List,
• Annual Financial Report,
• Fault Trees,
• Site inspection etc

Session 2

Understanding the hazards via power point and visual presentation

• Physical Hazard
• Moral Hazard
• Morale Hazard

The impact on the organization

Session 3

Identification and Analysis of the Hazards via video presentation

• At the Work place and the facilities provided
• The use and maintenance of Tools and Equipments
• The Competency of its workers
• Liability arising from the workplace, use of equipments and action of its employees

Session 4

Study tour of factory (for in-house program)

• Putting theory into practice

Identification

• What are the hazards identified during the tour?

Likelihood and Severity Studies

• What is the likelihood of accident happening from the hazards identified?
• How serious can the damage be to the properties or injury sustained by its people?
 How long will the business be interrupted by the accident resulting in loss of earnings?

Improvement Needs

• What must be done to control or eliminate the accidents from happening?
• Where must it be done?
• When must it be done?
• Why must it be done?

Session 5

Drawing up a Business Contingency Plan to safeguard and ensure the continuity of its business

Compliance with Occupational Safety & Health Act (OSHA) to safeguard its people from disease, injury or death at workplace

LEARNING OUTCOMES

Posses the knowledge, the awareness, the right attitude and the ability to help manage the facility and create a conducive and a safe working environment for its people and also bring immediate business benefits to the organization.

DURATION

2 full days including lunch and 2 tea breaks in between

COURSE FEE (INHOUSE PROGRAMME)

To be quoted upon request


CONTACT INFORMATION

Training Provider
CSH Knowledge Management Sdn Bhd
Royal Palms Business Suite
21, Jalan Putra Murni 3/3A, Putra Heights,
47650, Subang Jaya, Selangor

Training Provider Registration No. 2053

Contact Person:

Ms Mary Tan
Contact No

Handphone No: 016-337 3837
Handphone No: 012-337 3837
Tel/Fax No:03-51925227

E-Mail Address:

stmailto:stevencheah@csh.com.my
mary@csh.com.my

Singapore: GIA urged to set up central fraud database. Read the Malaysia Context

Asia Insurance Review reported on 1.4.2011

"With fraudulent claims on the rise, the General Insurance Association of Singapore (GIA) was urged by Ms Luz Foo Mei Lan, Executive Director, Insurance, Monetary Authority of Singapore, at GIA's Annual Luncheon to get members to share their individual fraud experiences and explore the possibility of setting up a central database to enhance fraud detection"

In actual fact, making individual fraudulent claims are not uncommon in the malaysian environment. Majority of Customers who purchased insurance often misunderstood the principles of Insurance. After they have made the premium payment and no claim was made under their policy, they would constitute the insurance as a "investment" lost to them (paid for the premium but no returns).

So be it themselves or in cohort with their partners in crimes, some would find ways to make a fraudulent insurance claims at the expense of Insurers.

Would you believe that an individual can even chopped their fingers off in order to make a claim out of their PA Insurance in times of financial difficulty?

Have you witnessed people with pre-existing medical ailment, declaring in the proposal that they are in the best of health, taking up medical insurance at the last minute. Then painfully waited 3 months for the waiting period to expire before admitting themselves to a private medical centre for treatment. Medical bills are then presented to the the Insurer to seek reimbursement?

Heard of patients working in liason with the attending physician in charge to alter the medical findings and inflate the cost of treatment?

Some lazy people with monday blues, for no apparent medical ailment, would asked to be admitted to medical centre for observation citing pain in stomach etc and then asked to be discharged from the medical centre few hours later.

Heard of Motor vehicle owners purposely crashed their car into objects then inflate the repair costs. Motor cycle owners even reported their machines stolen when they have just dumped them into the river or sea?

For theft related claims especially personal items like jewelry or watch, customers may not have the original purchase receipts with them anymore. Insurer would require proof of purchase to justify the claim. How then can the customer make an insurance claim. Very simple, just get an old official receipt from friends similar to the items lost and present same to the Insurer.

The list goes on.

Onus is on the Insurer to proof that the claims are fraudulent.

India: Insurers reel from underestimated third party auto losses. Read the Malaysia Context

India's non-life insurance industry stands to lose almost three times the profit it made last year because of the need to increase provisions for motor third party insurance claims, reports the Times of India (Source: Asia Insurance Review 10 March 2011).

In the Malaysian insurance environment, the increase provisions for motor claims had long being in place. Losses suffered by General Insurers especially from third party bodili injury and death claims had progressively deteriorated with claims ratios exceeding 200% since 2006.

In 2010, for every ringgit of third party bodily injury and death premiums received, Insurers paid out RM2.82 in claims before factoring in other related costs. The growing gap between premium collected and claims paid out by the industry had contributed to the displacement of third party insurance covers as more Insurers are not able to sustain such business on a financial viable basis.

As a result, some motor vehicle owners have had to purchase their motor policies from the Malaysian Motor Insurance Pool which has seen a sharp increase in the number of policies issued from 128,058 in 2009 from 5,897 in 2007 (The Star 24 March 2011)

For vehicle owners wishing to take up the motor insurance directly with the Insurers, additional premium or an accompanying PA Insurance, sometimes, is required as a pre-requisite to insuring their motor vehicles.

Latest news on Japan's Earthquake and Tsunami

1.0 Global impact: Historic quake shoves insurers into unprecedented territory

As Japan's Meteorological Agency upgrades the magnitude of the country's biggest recorded earthquake from 8.8 to 9.0, several estimates place global insured losses from last Friday's quake at US$10 billion to US$50 billion while many more insurance industry players demur that it is too early to assess the losses. So far, neither the Japanese government nor the country's insurers have provided provisional estimates of insured losses.

2. Local impact: All eyes on payouts by domestic insurers

Attention is focused on Japanese domestic insurers, for which earthquake insurance claim payments from Friday's devastating quake could exceed 100 billion yen (US$1.2 billion), reportsDow Jones. The estimate is based on the increase in the number of earthquake insurance policyholders in the country since 1995.

3. Nuclear damage: Insurers likely to be spared from liability

Liability costs associated with damage at the quake-hit Fukushima nuclear plant will ultimately be borne by the Japanese government instead of the private insurance market, reports The Wall Street Journal.

4. Lloyd's: London watching Japan closely

The Lloyd's Market Association (LMA) says that it is monitoring closely the effects of the earthquake and tsunami in Japan and adds that it is too early to give any accurate assessment of the likely impact on the Lloyd's market.
5. Cat bonds: Up to US$1.5 bln at stake in quake

Financial investors, in the wake of  last Friday's massive earthquake in northeastern Japan, could lose millions in investments in catastrophe bonds that have more than US$1 billion in exposure to Japanese earthquakes, reports Reuters.

Asia Pacific: Insurers to invest more in mobile access and online marketing

Asia Insurance Review 8th March 2011 reported

"Advances in mobile devices and online social networks, and their accompanying changes to consumer behaviour, are the top two factors driving investment priorities for insurers in mature Asia Pacific (Apac) economies, says the international consulting firm, Accenture, in a report titled "Distribution in the palm of your hand - The race to mobile distribution".

As a matter of fact, purchasing a product on line is now a norm in the buiness world, what with the modern and advanced technologies in place. For the younger generation of purchasers they have no qualms about making a purchase citing convenience and the many options (like credit card , interest free installment, minimum payment etc) which are available to them. Majority of these people are IT savvy and they can follow the purchase and payment transactions like a duck in the water.

In the insurance sector, however, except for the minority, most are still sceptical about purchasing insurance on line as it would mean exposing their personal details, credit card number,bank account number etc. I, for one, subscribed to this belief. For the older generation of purchasers, they would still prefer the traditional way of purchasing insurance  through their trusted agent where personal service or personal touch is assured. Not only that, premium can be owed to agents who may be kind enough to pay the premium in advance free of interest on behalf of the customer.

The old generation of thoughts had to be phased out.eventually. With the advanced technology in mobile phones, the fast growing social network sites and change in consumer behavior, purchasing insurance online will be the order of the day.