INDUSTRIAL ALL RISKS POLICY

NATIONAL INSURANCE COMPANY LIMITED

HYDERABAD REGIONAL OFFICE

TECHNICAL DEPARTMENT

INDUSTRIAL ALL RISKS POLICY

This policy is introduced with effect from 01/07/1997. After De-tariffing w.e.f 01.01.2007, the policy is guided by IRDA approved Internal Guidelines. This as per the updated terms and conditions as on 01/04/2010.

Salient features of the policy are:1) This policy is available for big Industrial clients, where SumInsured is Rs 50 Crores or above and will include both Manufacturing & Storage facilities at all locations all over India.2) Unlike Fire policy or MBD policy, IAR Policy covers All Risks of Physical Damage etc except those excluded by specific exclusions.3) Section I of policy covers Material Damage and

Section II of policy covers Business Interruption Losses following Material Damage under Section I.

4) IAR Policy covers broadly following Perils/Covers

a) Fire policy Perils(As per SFSP policy)

b) Earthquake, Spontaneous Combustion, Spoilage Material Damage, Leakage & Contamination, Forest Fire, Subterranean Fire etc

c) Theft/ burglary( Except Larceny)

d) MBD/ Boilers Explosion/ Electronic Equipment Insurance/ FOES

e) Business Interruption Losses following operation of above a, b, c perils

f) Business Interruption Losses following MBD/ Boilers Explosion/ Electronic Equipment Insurance is optional, can be opted ( This cover of MLOP is not available for New Units during first year of operations)

5) Under Insurance upto 15% is ignored

6) The policy covers Equipment and Machinery sent for repairs outside the premises for period of 60 days

7) Transit risk inside the compound of an Industrial Risk stands covered

8) Usual facilities such as Escalation, Agreed bank Clause, Architects, Surveyors & Consulting Engineers Fees Clause, Designation Of Property Clause, Omission to Insureds additions, alterations or extensions, Temporary removal of stocks, etc are available to the Insured

9) Business Interruption covers can be extended to include Suppliers/ Customers Premises

10) Depreciation is not charged in the event of total loss/ damage of Machinery as is done under the MI/ EEI

11) If the valure of Cables/ Pipelines is declared separately, Machinery breakdown premium is not charged on the Sum Insured of these items though cover is available

12) The rate for MBD has been brought down to Rs 2.25 %0 for all items, whereas the average rate for MBD under Machinery Insurance is Rs 10%0 and above

SUM INSURED

The Sum Insured under this policy shall be the replacement / reinstatement value for Buildings, Plants & Machinery, Furniture, Fixtures, and Fittings etc. For stocks, the Sum Insured shall be the Market value. Declaration facility not allowed for stocks.Excluded Causes :

Faulty/ Defective Design, Material or Workmanship

Inherent Vice, Latent Defect, Gradual Deterioration, Wear & Tear

Collapse or Cracking of buildings

Pollution, Contamination, Shrinkage, Action of Light/ Insects, Corrosion, Scratching, Rust, Extremes or Changes in Temperature

Larceny, Fraud, Dishonesty, Inventory Losses, Shortage in Delivery Damage or Loss due to willful act or wilful Negligence

Cessation of Work, Delay War, Mutiny, Civil Commotion, Nuclear Risk

Permanent or Temporary dispossession resulting from nationalization or requisition

Excluded Property :

Money, Cheques, Stamps, Bonds, Securities, Works of Art, Jewellery, Bullion, Rare Books etc unless specifically mentioned Goods held in trust, Documents, Business Books, Computer Systems records, Models, Moulds, Plans etc, unless specifically mentioned Vehicles, Locomotives, Rolling Stock Property in Transit outside Insured Premises Property damaged as a result of its undergoing any process Property more specifically insuredDEDUCTIBLES UNDER IAR POLICY

Policies having Sum Insured upto 100 cr per location for PD & BI

Material Damage- 5% of claim amount subject to a minimum of 5 lakhs.

Business Interruption (FLOP)-

Other than Petro Chemical Risks - 3 days of Standard Gross Profit subject to minimum 5 lakhs.

Petro Chemical risks - 7 days of Standard Gross Profit subject to minimum 5 lakhs.Business Interruption (MLOP)- 14 days of Standard Gross Profit subject to minimum 5 lakhs.

Policies having Sum Insured above 100 cr per location for PD & BI

Material Damage- 5% of claim amount subject to a minimum of 10 lakhs. Accordingly the first row detailed in the voluntary deductible table automatically stands deleted. The remaining table continues as it is.

Business Interruption (FLOP)- 7 days of Standard Gross Profit subject to a minimum of Rs 10,00,000/.

Business Interruption (MLOP)- 14 days of Standard Gross Profit subject to a minimum of Rs 10,00,000/.

Note: The limit for sum insured is combined limit for PD/MD + BI per location.

Voluntary Deductible Option is available which also provides discount upto maximum of 25% for each section under this policy

Section II- BUSINESS INTERRUPTIONCover for Loss of Gross Profit due to Reduction in Turnover

Increase in Cost of Working- Less any Sum Saved during the Indemnity Period, if Business is interrupted or interfered as a consequence of Loss/ Damage/ Destruction due to perils covered under SECTION-I.Excluding those attributable to (if MLOP cover is not opted) Damage to Boilers Electronic Equipments, Computers

Mechanical/ Electrical Breakdown of Machinery or Equipment

The Policy Defines:

Gross Profit, Turnover, Annual Turnover & Standard Turnover, Indemnity Period, Rate of Gross profit in the same way as the existing Fire LOP cover.

It also defines uninsured working expenses

PROCEDURE FOR TAKING IAR POLICY

Application on Prescribed Format

Risk Assessment Inspection by Engineer of Insurance Company

Application & Inspection report to be sent to RO/ HO for fixing Premium rates & discounts

Premium rates will depend upon

Discounts based on favorable or adverse features as per report

Voluntary deductibles opted

Claims experience for past five years

PREMIUM RATING STRUCTURE

1. Fire & Special Perils- IRDA approved Guideline rates will be applied with suitable discounts as per prevalent practice.2. Machinery Insurance- Flat premium rate of Rs 2.25 per mille

3. Business Interruption (Fire & Special Perils) - IRDA approved Guideline rates will be applied 4. Business Interruption (MB- Optional) - IRDA approved Guideline rates will be applied. This will be provided by HO only. [Note: Market practices prevalent at the moment render these discount provisions redundant. Hence rating and discounts aspects need periodical updating and current practices on the date will influence these aspects for rating and discounts.]

DISCOUNTS

Discounts may be allowed based on the following:

Favorable Claims Experience

Good features of the risk as per Inspection report

Availability of stand by for Critical Machinery

The above said factors are considered for allowing discounts under the Fire and MBD sections of the IAR policy.

[Note: Market practices prevalent at the moment render these discount provisions redundant. Hence rating and discounts aspects need periodical updating and current practices on the date will influence these aspects for rating and discounts.]

COMPARISION WITH EXISTING COVERSAFire material DamgeIAR PolicyAssessment

1Option for Basis of IndemnityNo Option only RIV BasisNot a Disadvantage as cover is mostly taken on RIV Basis

2Policy for Stocks on Declaration BasisDeclaration facility not availableDisadvantage

3Special Rating Discouts for FEA & Low ClaimsIn Built in the rating structureSimilar Provisions

IAR policy has the additional advantage of waiver of Under insurance upto 15%

BMI, BOILER, EEIIAR POLICYASSESSMENT

1Selection of Machinery is possibleNot possibleDisadvantage

2Various item-wise rates as per various tariffs Flat premium rate of Rs 2.25 per milleHeavy advantage

3Conditions of AverageSame as for FireAdvantage

4Differential Slab for excessHigh excess flat amountDisadvantage

5Depreciation for Limited Life itemsNo such ProvisionAdvantage

6Depreciation in case of Total lossNo Such ProvisionAdvantage

7Separate cover for Express Freight, Overtime, Air Freight, Additional Customs DutyNo Such ProvisionDisadvantage

8Special Declaration/ Excess clause for DG Sets, Turbo Chargers, Gear Boxes etcNo Such special ProvisionAdvantage

9TP Extension under boilerNo Such ProvisionDisadvantage

10Transit within CompoundProvidedAdvantage

A COMPARISION OF PREMIUM UNDER EXISTING & IAR POLICIES

SUM INSURED

Risk: Engineering workshop (processing of Metals) Premium rate @0.95%0

Machinery: Taken in general as 1% and Boiler Prem rate @0.85%0 and EEI as 0.68%

Material Damage: Rs 187 Crores

Business Interruption:Rs 50 Crores

Machinery Insurance: Rs 60 Crores

Boiler

: Rs 70 Lakhs

Electronic Equipment: Rs 25 LakhsPremium Calculation (in Rs )

EXISTING COVERSIAR POLICY

Fire( Various rates)13090001309000

Earthquake9350093500

Flood Group467500467500

Machinery Insurance6000000@ 2.25%01371375

Boiler5950

EEI17000

Business Interruption445000445000

TOTAL PREMIUM83,37,950/-36,86,375/-

Saving of Rs 46,51,575/- i.e 55.78% of the Existing covers premium.

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