Paper on Burglary Insurance

Contents

Burglary Insurance

            What is Burglary Insurance?

Common Coverage of Burglary Insurance

            Additional coverage under Burglary Insurance

            Common Exclusions under Burglary Insurance

General Business Related Information

            Common terms of Burglary Insurance

            General underwriting guide lines

            Factors that drives premium computation

            General Claim Procedures

General Business Flow

Proposal creation

Policy creation (Approval of Proposal details)

Amendment Process (Policy Servicing)

Common Scenarios for Burglary Insurance

Critical defects

Challenges faced during execution

  

What is Burglary Insurance?

An Insurance policy which provides financial compensation against loss or damage to property contained in premises by acts of Burglary/Housebreaking, theft, robbery. Major benefits which covered under burglary insurance are contents & stocks.

Burglary Insurance takes many forms, some of the major categories are:

1.    Business Premises Policy (Administrative offices, Industries etc.,)

2.    Private Dwelling Policy (Mostly Home)

3.    Jewelry and Valuable Policy (Jewelry Shops, Mining Quarries) etc.,

Burglary / House Breaking

Unforeseen and unauthorized entry to or exit from the premises by aggressive and detectable means with the intent to steal contents there from or an act of breaking into and entering another’s premises with the intent to commit a felony.

Robbery

Robbery is the removal of the personal property of another, either in person or in presence of public, by an act of violence or the creation of fear of violence within him/her.

Theft

The terms are intended particularly to apply to cases where dishonest servants and others, such as delivery men and mechanics having access to the property of the assured, misappropriate such property to their own uses without the consent of the owner. This type is covered as a part of additional coverage in burglary insurance.

Contents

Items belonging to the Insured or for which the Insured is legally responsible

1.    Furniture, furnishings, carpets, curtains

2.     Machinery and plant, tools, instruments and utensils of trade, un affixed or portable equipment, office equipment, safes, strong rooms;

3.    Computers, all equipment connected therein advertising material and display equipment

Stocks

1.    Merchandise or materials of trade manufactured, unmanufactured or in the course of manufacture

2.    Materials used in making and packing

3.    Consignment stock

4.    Goods held in trust or on commission (depends on Insurance organizations)

5.    Pallets and containers

6.    Consumable materials used in the operation of machinery

Common Coverage of Burglary Insurance

            1. The property or any part thereof shall be lost destroyed or damaged by Burglary or Housebreaking or robbery (theft following upon an actual forcible and violent entry of or exit from the premises by the person or persons committing such theft) or Hold-up (Forcible removal by actual or threatened violence against the insured or employee(s) of the Insured);

2. Any damage caused to premises resulting from burglary and/ or housebreaking or any attempt threat.

Sometimes, the below mentioned benefits are also covered as a part of Burglary Insurance to a specified limit (This defers from Insurance Company to Company)

1.    Injury during Burglary and/or Housebreaking

2.    Clothing and personal effects

3.    Damage to Safe and/or Strong-room

4.    Money (Only limited amount will be covered example: Max of 5,000 whichever is lesser)

Additional Coverage under Burglary Insurance

1.    Extension of theft

2.    Damage due to Riot, Strike & Malicious Damage (RSMD)

Common Exclusions of Burglary Insurance

1.    Loss or damage by fire or explosion however caused

2.    Loss or damage caused by wear and tear or gradual deterioration.

3.    Loss or damage occasioned by loot, sack, spillage or pilferage

4.    Unexplained losses, shortages due to error or omissions, losses discovered when making an inventory

5.    Loss or damage to property from yards, gardens, open spaces

6.    Loss or damage due to earthquake, volcanic eruption, typhoon hurricane, tornado, cyclone, or other convulsion of nature or atmosphere disturbance.

7.    War perils

8.    Terrorism (Unless covered separately under the policy)

9.    Nuclear Perils

General Business related information

The following are some of the terms which are used commonly across all insurance organizations:

 Sum Insured

It means the Monetary Amounts shown against item/s insured (Contents + Stocks)

           

Excess

            It means the amount stated by the insured at the time of proposal, which shall be borne by the Insured in respect of each and every Claim made under this Policy.

Business

            What type of business is carried over in the premises?

Ex: Administrative works, Industries involving in manufacturing etc.

Business Hours or Office Hours

It means the Insured’s normal trading hours or whilst the Insured or their authorized employees are on the premises for the purpose of the business.

Market Value Basis

It means replacement value of insured property or item as New at the time of Damage or Loss less due allowance for betterment, wear and tear and/or depreciation. (Mostly Stocks in the premises will be covered on Market Value Basis).

Reinstatement Value Basis

It means replacement of an existing asset by a new asset of similar type, capacity and utility. The insured here will have least financial strain.

First Loss Basis

It means insuring the property up to a specified amount only which is calculated to be the maximum likely loss on any one occasion. This type of policy is taken where a total loss is a physical impossibility. First loss policies are usually taken for bulk commodities. The amount insured is always specified as a certain percentage of the full value, say, 10% or 12.5% of the full value (Sum Insured).

Full Sum insured Basis

            It means insuring the property up to maximum of the amount mentioned as Sum Insured under the policy. I.e., the sum insured for insurance represents the full value of the property insured.

Voluntary Deductible

Voluntary deductible is the minimum amount that you declare to bear at the time of claim. When you opt for a higher deductible, you are eligible for a higher discount. There is an inverse relationship between the deductible and the premium. When voluntary deductible increases, the amount of premium falls.

If the mentioned option is opted , the amount that declared in the policy have to be compulsorily borne during the event of a claim  e.g. if your claim amount is Rs. 20000 and the voluntary deductible is Rs. 3000 then you have to bear the first Rs 3000 and the claim will be worth Rs 17000. Mostly the value is specified as %. Ex: 5% or 10% of the claim amount.

 Type of Policy

1.    Floater Policy

2.    Declaration of Policy

Floater policy

A policy under the terms of which protection follows movable property, covering it wherever it may be.

Underwriting

            The process of evaluating a risk and readiness to accept the risk at a specified premium or reject the risk.

           

General Underwriting guide lines of Burglary Insurance

The following are common underwriting rules common across major Insurance organizations

1.    Nature of Insured property:

a.    The value of the property and the weight and/or volume of the property are two aspects of risk considerations. Small volume/weight having high values are attached more risks of burglary.

2.    Premises in which the insured property is housed:

a.    The class of construction of the premises situation of the premises etc. are considered for risk evaluation premises situated in densely populated areas are less risk prone than those situated in lonely areas.

3.    Occupancies:

a.    It is noted how many hours the premises are occupied. The hours for which the premises are unoccupied are noted.

4.    Safety Measures:

a.    Safety measures if adequately taken will give less risk.

5.    History:

a.    History of post claim and insurance policies are considered for risk evaluation.

6.    Moral Hazard:

a.    Underwriters take into consideration moral hazard of the proposer. Survey of heavy sum assured and special attributes thereof are taken into consideration.

7.    Conditions:

a.    Whether sum insured have been given separately against the insured's own stock, similar goods held in trust or on commission, furniture etc., cash or valuables in safe.

Survey Report:

Acceptance and the terms of cover of are based on the report given by the surveyors for the following particulars:

(i)            Proposer's name, address and business

(ii)           Exact description of the property proposed for insurance

(iii)         Highest value of a single article

(iv)          Whether the stock books are properly maintained and whether the exact amount of loss can be ascertained

(v)           Maximum possible loss

(vi)          Whether the proposer resides on the premises

(vii)        Hours and time the premises are left unoccupied

(viii)       History of burglary in the locality and steps taken to present them

(ix)          Number of doors, windows, skylights and other openings

(x)           Whether there is a special precaution like alarms, collapsible gates, warning clock etc.

(xi)          Points of entry, exit, guards etc.

Factors that drives Premium Calculation

Mostly Premium calculation logic is referred as “Rating” in insurance terminology

Rating is done as per standard percent of the sum assured. The rate varies according to the following

1.    Type of Business carried in the premises

2.    Type of goods/contents covered in the premises

3.    Construction of premises (information about Widows, doors etc.)

4.    Security measures such as CCTV, armed guards, locked Bars, electronic alarms.

Sample table for Other Rating Factors

Risk Factors	Exposure Analysis
Location / region  factor	Certain locations can pose increased exposure to Burglary.
Shared Warehouses	Risk exposure changes if the stocks and contents are stored in share warehouses
Open storages	If a premise is totally enclosed from outside, and there is no threat exposure from external means, it is a positive feature
Multiple occupancy complexes	If the risk is a multiple occupancy complex with good security arrangements, it is a positive factor
Physical Security of  premises	If the building has bars and grills on windows, deadlocks on all doors and no opening on ground floor then it is a positive feature. Whereas if there are no bars & grills or deadlocks, then risk exposure increases.
Level of monitoring	Intruder alarm systems, CCTV, security guards would be considered as positive feature, whereas absence of it would  be considered as negative feature
Previous Loss  experience	Good claims experience is a positive factor in pricing
Voluntary Deductibles	Deductibles as 5%, 10%.... n% of the claim amount, so that discounts will be provided on the premium.

Additional coverage Rating

S.No	Title	Additional Premium Rate
1	RSMD	Certain % of predefined rate, varies from company to company
2	Extension of Theft	Certain % of predefined rate, varies from company to company

General Claim Procedures:

1.    Immediate notice has to given to the insurer about the circumstance of loss, happening or event giving rise or likely to give rise to a claim under the policy.

2.    There is certain buffer time for the insured is given by the Insurance Company to give a detail statement about the loss or damage with an estimate value of loss. (Buffer time may differ from company to company ex: 15 days from the date of incident)

3.    Survey of the claim will be done by the surveyors appointed by the Insurance company

4.    Assessment report will be submitted to the Insurance company by the surveyor

5.    Settlement of claims will be happening at last.

Reasons for declining a risk

The following cases are to be declined as they present hazards that we are not comfortable with.

Unacceptable insured’s

ü  Sick Companies, firms having unsound financial position

ü  Companies involved in any fraudulent activities

General Business Flow

Proposal Creation

            It means any signed form by filling up the questionnaires and declarations, written statements and any information in addition thereto supplied to Insurance Company by Insured. The same data will be fed into the IT system.

Policy Creation (Approval of Proposal details)

            It means acceptance of the risk which is mentioned in proposal creation. Also the Insurance Company declares that it insures the property under certain period of contract (Policy Period mostly 1 year). For continuous benefits, renewal of the same has to done by the insured.

General process Flow chart

    

 Amendment

            Any type of change which has to be done in the policy, Insurance Company provides a process called amendments (endorsements), modifying or correction of monetary or non monetary details in a policy, sometimes cancellation of the policy too.

Monetary Changes

            An amendment which is done in such a way that it impacts the premium which is already paid by the insured to the Insurance Company.

Example:

1.    Increase/Decrease in Sum Insured which is declared in the policy.

2.    Addition/Deletion of coverage which is not included/ included in the policy.

Non Monetary Changes

            An amendment which is done in such a way that it does not impact the premium which is already paid by the insured to the Insurance Company. (May be extra fee might be processed which depends from company to company basis). Most common example is Rectification of Insured Name.

Cancellation of Policy

            It means discontinuing the policy before its natural expiry. Mostly all general insurance products are covered for 365 days. Voluntary termination of the policy before its end date is cancellation of policy.

Cancellation of policy happens mostly on the following cases

1.    Cheque given by the insured is bounced.

2.    Wrong entry of data into the system, which found after policy issuance.

3.    Fraud details given to the insurance company

4.    Discontinuing the policy upon customer’s interest

The refund of the amount to the insured also depends upon the reason of cancellation. If the policy is cancelled due to fraud details provided by the insured or cancelled after any type of claim settlement, no refund will be processed (depends on Insurance Company Policies).

The refund of amount can happen on pro-rate basis or short period basis. Mostly if the cancellation of policy is initiated upon customer’s request then refund of amount will be calculated on short period basis (depends from Insurance Company to Company).

Common Scenarios for Burglary Insurance

1.    Premium Computation logic

2.    Referrals to underwriters (approver of the proposal)  based on proposal details

3.    Rectifications (addition/deletion/correction) of proposals by the underwriters

4.    Updating survey details, which is carried over the insured premises

5.    Rejection of proposal due to inadequate details given by the insured

6.    Resuming rejected proposal

7.    Issuance of Policy

8.    Monetary amendments done in a Policy

9.    Non Monetary amendment done in a Policy

10.  Claim Initiation

11.  Claim Rejection due to fraud activities

12.  Claim surveys

13.  Claim processing & approval (settlement)

14.  Cancellation of Policy

15.  Validation logic on policy start date, endorsement start date

Challenges faced while execution of Burglary Insurance in SBIG

1.    Computation of premium for different type of test data

2.    Rate for most of the occupancies where not available in the master

3.    Frequent data loss while creating proposal creation

Critical Defects

1.    Rectification (addition/deletion/modification) done in the proposal by the underwriter were not reflecting in the policy

2.    Computation of incorrect premium

3.    Proposal is referred to incorrect level of underwriters (approvers) based on risk covered

4.    Incorrect details where getting printed in the output form (mostly called as Policy Schedule), which will be provided to the insured after policy issuance.