Page 41 - Insurance Times December 2015 SAMPLE
P. 41
CASE implies Circumstances, Activity, Security and
Event, which are being explained below;
Circumstances: Nature and condition (social, economic,
plant, process, product, people, plant, personal,
professional etc), spread of activity (local, regional, national
and global). For example - drugs or products of a
pharmaceutical company may be used globally and
customers thereof may exist all over the world and
consequently liability risk exposure for such pharmaceutical
product will be much higher compared to products used
locally or nationally.
In those circumstances, for a product liability policy for the In IT age today ‘Internet of Things’ has become a much
producer of internationally used drugs, the policy terms and bigger issue for cyber security as more and more devices
conditions will be decided in view of international standards link to the internet, commuter system, and various control
or trends and premium rate will be also determined at the systems. From the recent event that Chinese students
higher rate compared to product liability insurance meant hacked a Tesla Motors electric car, as part of a competition,
for producer of drugs locally used. Similarly in Doctor's in 2014, remotely controlling the car's locks, horn,
Indemnity Policy, the underwriter must consider the nature headlights and skylight while the car was in motion. This
and circumstances of his professional service of the proposer indicates that almost all operating system based on IT and
- whether his professional service as a general practitioner Internet must have adequate security measures, which the
or a medical surgeon. Legal liability risk exposure for a underwriter must consider while accepting any liability risks
medical surgeon is much higher than that of a general of any MNC especially. It is said, the 'Internet of Things'
medical practitioner. could bring increased potential for physical loss or data
breaches which poses a huge risk for every underwriter for
Activity: Volume, Value and variety or multiplicity of the liability risks.
activities carried out by the prospect insured need to
examined and considered for determining policy terms, Event: Legal liability risk exposure may increase if the
conditions, exclusions and rates. For example- In a public individual or enterprise concerned change the even or take
liability insurance policy, premium amount consists of two up the project or extend their operations into area, market
components- Indemnity Limit & Turnover Loading. or jurisdiction. For example- if an enterprise may launch new
Indemnity limit is decided on the basis of AOA limit, Risks product or export products to a new country, liability
Group, Ratio of Limits of Indemnity (AOA; AOY) and exposure will increase for the intended product liability cover.
Turnover Loading depends on Annual Turnover or volume
of transaction. Similarly a manufacturing company might have plans for
producing a new product which requires handling and
Security: The Security measures of the prospect insured storing more hazardous chemicals unlike before.
count a lot in respect of deciding coverage, exclusions, Developments in technology and their use in mobile devices,
terms, conditions and finally rating for the risks to be like smart phones, ATMs, watches, glasses, computers,
covered by the policy. In case of a company which is internet, Apps etc are constantly increasing cyber risks
professionally managed and is having proper quality control which count event risks for future.
system, for product liability policy, terms and conditions may
be lenient and relaxed and rate may be less while in case All such events which increase third party liability risks need
of a company which is not professionally managed and is to be thoroughly enquired, examined, and analyzed for
having poor quality control system, policy terms and issuing the cover so that appropriate terms, conditions and
conditions should be standard or stringent and rate of exclusions can be decided for the policy to be issued or
premium may be comparatively high. renewed.
The Insurance Times, December 2015 37
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