History of Engineering

Insurance

 The origin of Engineering Insurance dates back to the

19th Century.
In Great Britain it originated with James Watt's invention
of the steam engine.
As many as 500 steam engines of modest output
capacity were already in operation at the beginning of
the 19th century.
Nevertheless many teething troubles were experienced
with this new energy production machinery.
An alarming situation was created due to explosions in
steam boilers resulting into heavy losses to property
and personal injury.
1/28/17

1/28/17

1/28/17

 An independent organisation called the "Manchester

Steam Users Association" was founded by a group of
engineers in 1854 for the purpose of inspection and
revision of steam engines and boilers.
The M.S.U.A. was not an insurance company but it was
soon realised that inspection with insurance would
provide a comprehensive service to the users of steam.
With this idea the first Engineering Insurance Company
viz. The Steam Boiler Assurance Company, was formed
in 1858.
This was followed by formation of other similar
companies. These companies offered insurance policies

Material Damage, Personal

Injury and Third Party Liability resulting
to cover

from explosion of boilers and other pressure vessels.

1/28/17

 The Boiler Explosion Act was passed in Great

Britain in 1882 and provided for compulsory
periodical inspections of steam boilers by
Government authorities.
Around the same time, a number of engineers of
the "Polytechnic Club" in the United States of
America decided to establish a company to effect
boiler inspection service and to provide insurance
in the event of a boiler explosion.
The "Hartford Steam Boiler Inspection & Insurance
Company" was formed for this purpose and its first
policy was written in 1867.
1/28/17
6

 The Factory & Workshop Act 1901 in the U. K.

made it compulsory for all steam boilers in
factories to be thoroughly inspected once in 14
months by a competent person.
It may be clearly noted that the various Acts
related only to compulsory inspections and not
insurance.
However the insurance companies have
tailored the policies to meet the needs of the
factory owners by combining insurance and
inspection services.
1/28/17

 In addition to boilers, many other types of

machines (such as turbines, electric generators,
motors, pumps, compressors etc. etc.) were
invented during the rapid technological
developments that took place towards the end of
the 19th century.
More frequent damages were experienced by
owners & operators of such machinery due to novel
& prototype design.
This lead to a change in the insurance
requirements and by 1920 the Machinery
Breakdown Insurance policy came into existence.
1/28/17

 The period after the second world war saw

urgent need for development of larger & more
efficient machines and technical installations.
In today's age of advanced technology, many
different types of plant & equipment of
complex nature substantially increase the
probability of failures and longer periods of
interruption after such failures.
The requirements on insurance also have
correspondingly changed.
1/28/17

 Why Engineering Insurance Needed

1/28/17

10

 Post Independence period has seen rapid industrialisation

in India with ever increasing use of machinery for various
purposes.
Machines reduce human Labor and increase
production capacities, while they are potential sources of
damage.
Though accidents and damages can be minimised
by proper care and maintenance of machinery, it is not
possible to eliminate such accidents altogether.
With technological developments achieved by the
country the use of most modern & complex machinery is
very wide in all Indian industries.

1/28/17

11

Economic Significance
In addition to the protection against accidental
damage, the insurance of plant, machinery &
equipments etc., during construction/ erection
and operation phases has an important
economic significance.
It is practically impossible for any industrial
organisation to provide enough reserves for
replacement of costly machinery, which may be
damaged by an accidental breakdown.
Insurance replaces need for providing such
capital reserves. Moreover, insurance provided
the required guarantee for the creditors / banks
to extend loan to the industrial organisations
1/28/17

12

 Development of Engineering Insurance is of

comparatively recent origin in our country. The New
India Assurance Co. Ltd. started transacting Engineering
Insurance on a modest scale in 1953 with the technical
assistance of Munich Reinsurance Co.
Around the same time, The Oriental Fire & General
Insurance Co. Ltd., had set up their own Engineering
Insurance Department in Bombay.
In the Eastern part of the country a Syndicate of five
Companies viz. the 'London & Lancashire', the 'Concord',
'Atlas, 'Yorkshire', and 'British India General' was formed
in the year 1954 with a view to pool their resources and
expertise and come to a sharing agreement for
transaction of Engineering and Allied risks in India.
1/28/17

13

 Insurance Policies besides offering

indemnification in case of accident or
damage, also render an inspection
service during currency of the policy.
This enables clients to comply with
various statutory requirements, which
make periodical inspection of certain
plant and machinery obligatory
1/28/17

14

 Engineering Insurance policy provides only for

insurance coverage and not inspection service.
Inspection Service at present rendered by the
Insurers in India is by way of goodwill gesture
only and is not obligatory under an insurance
contract.
Such inspections are carried out mainly to
assess the risk from underwriting angle and
also to recommend loss minimisation and risk
improvement measures.
1/28/17

15

STATUTES & REGULATIONS THAT AFFECT CONDUCT OF INSURANCE BUSINESS IN INDIA

The primary legislation that deals with insurance business

in India are:
The Insurance Act 1938
The Insurance Regulatory and Developing Authority Act
1999.
Though not directly connected with conduct of Insurance
Business, some other statues are equally important as
they impose certain obligations on the owners / operators
to protect their machinery to ensure safety and security of
employee / workmen, other personnel.

1/28/17

16

Other relevant Statutes

1.
2.
3.
4.

Indian Factories Act 1948.

Safety Rules of Plant and Machinery
The Indian Boiler Act 1923
The Indian Mines Act 1923

1/28/17

17

INDIAN FACTORIES ACT 1948

Government Inspectors who have powers to

(1) enter any factory
(2) make examination of Plant and Machinery
(3) make examination of premises
(4) request for any prescribed information or
any other document relating to the factory and
(5) even call for on the spot or otherwise a
statement of any person which he may consider
necessary.
The purpose is to ensure safety, security within
the factory
1/28/17

18

What is factory

Section 2 (m) of the Factory Act defines

'Factory' as any premises including limits
there of, where ten or more workers are
working, or were working on any day of
the preceding 12 months and in any part
of which a manufacturing process is
being carried on with or without the aid
of power, or is ordinarily so carried on.
1/28/17

19

SAFETY RULES OF PLANT &

MACHINERY

The provision of safety for various

types of plant and machinery are
specific and include :
Rules of Hoists or Lifts:
Rules for Lifting machines, chains /
ropes and lifting tackles: .
Rules for Revolving Machinery:
Rules for Pressure Plant:

1/28/17

20

Crane

1/28/17

21

Hoist

1/28/17

22

Difference between Crane and Lift

Crane= Crane can move an object in
many direction including vertical
and horizontal .
Hoist= Hoist can move the object in
vertical direction only,
1/28/17

23

Lifting Tackles

1/28/17

24

INDIAN BOILER ACT 1923

Boiler has been defined under the Act as any

closed vessel exceeding 22.75 litres capacity which is
used expressly for generating steam under pressure
This also includes any mounting or other fitting
attached to such vessel which is wholly under
pressure when steam is shut off.
The Act also provides for registration of Boiler
before it can be used for industrial purpose.

1/28/17

25

Boiler

1/28/17

26

 Chief Inspector register the boiler and issue

a certificate in the prescribed form
authorising its use of a period not exceeding
twenty-four months.
The owner of the boiler / economiser may
apply to the Inspector for renewal of the
Certificate and on completion of inspection
and certain formalities such renewal
certificates in prescribed forms are generally
issued from the Office of the Chief Inspector.
1/28/17

27

 This is done following thorough

examination by the Engineer
Surveyor. Such inspection includes
examination of Corrosion,
examination of seams(joints), sign of
any leakage, as well as amount of
scales inside the boiler.
All 'fittings are examined. A further
survey is carried out when the boiler
is back in service and under steam.
1/28/17

28

 Section 18 of the Act stipulates

compulsory reporting of accident to
appropriate authority (Inspector)
within 24hours of accident.
Report must contain a true
description and nature of accident
and of the injury to enable the
Inspector to judge the gravity of the
situation
1/28/17

29

THE MINES ACT 1952

The basic objective of the Act is to ensure

safety and security in Mines. The Act
ensures these through active supervision
of Inspectors and other officials.
Mine has been defined under Section 2 (i)
of the Act. This means any excavation
whereby operation for the purpose of
searching for or obtaining minerals has
been or is being carried on and includes.
1/28/17

30

 (i)
All boring, bore holes and oil
wells

(ii) All channels or adjacent to an

belonging to a mine whether in the
course of being sunk or not.

1/28/17

31

.
(v) all conveyors or aerial ropeways used in
mines.
(vi) all machinery, works, railways, tramways &
slidings in or adjacent to & belonging to a mine.
(vii) all workshops situated within the
confinement of a mine and under the same
Management and used solely for purpose
connected with that mine or a number of mines
under the same management.
(viii) all power stations for supplying electricity
solely for the purpose of working the mine or a
number of mines under the same management.
1/28/17

32

Common Engineering
Policies
Erection all Risk or Storage cum Erection or
Marine cum- Erection Insurance Policy;
Contractor all Risk policy;
Machinery breakdown Insurance Policy;
Contractors Plant and Machinery Policy;
Electronic equipment Insurance Policy;
Boiler Explosion Policy;
Deterioration of Stock Policy
Loss of Profit Policy;
Advance Loss of Profit Policy
1/28/17

33

 Common Features of Almost All

Engineering Policy :

Sum Insured :It represents the present Day New

Replacement value. It would include the cost of
new machinery / subject matter + freight + Taxes
+ Duty + Cost of erection.
Compulsory Excess is applicable
Claims In case of partial loses no depreciation is
applicable except on parts with limited life. In case
of total loss however, depreciated value is paid.
1/28/17

34

1/28/17

THANKS

35