Page 27 - The Insurance Times February 2025

to lack of direct experience of insurance and information of BI insurance, Interruption period commences from the
insurance-based products and distribution channels. date of loss and ends after resumption of commercial
production.
The Insurance Regulatory and Development Authority
(IRDAI) has been taking measures to bring maximum Keeping Bharat Laghu / Sookshma Udyam Suraksha Insur-
MSME's under insurance coverage. They have issued guide- ance on the focal point, other contingencies like Business
lines to introduce Standardized Products for Micro and Small Interruption due to Fire and allied perils, Burglary and
Business to provide coverage for Fire and Allied Perils. The Housebreaking, Money Insurance, Machinery Breakdown of
Insurers have been providing these products even with vari- electrical/mechanical appliance, Electronic Equipment and
ous Add-ons to this Sector with effect from April 2021. The Appliances. Goods in Transit, Plate Glass/Neon Sign/Glow
Insurers have been providing the following products to these Sign, Baggage, Fidelity Guarantee, Personal Accident to
enterprises. employees, Cyber Liability, Legal Liability to employees and
i) Bharat Sookshma Udyam Suraksha (for enterprises Third Parties is included in one Package Policy. Package
where the total value at risk at one location is up to policy has several advantages. It provides a comprehensive
Rs. 5 Crore) approach to risk management by consolidating multiple
perils into a single policy, simplifying administration, and
ii) Bharat Laghu Udyam Suraksha (for enterprises where
often reducing costs through bundled coverage.
the total value at risk at one location is more than Rs.5
Crores and up to Rs.50 Crores).
An outline for different section is given below:
To attract this segment, only the standard insurance prod- Section I
uct is not sufficient. The understanding of the value chain
of different MSMEs and innovative thinking is necessary to Subject matter of Insurance:
develop customized products. Building and Plant and Machinery, Stocks, Raw material,
semi-finished, stock in process and finished stock.
In this article an effort is being made to take care of the
pain points faced by the enterprises. Perils covered:
1) The main feature of this insurance is that there is a fixed Fire, Explosion/Implosion, Lighting, Landslide, Bush fire, for-
sum insured. Indemnification will be limited to the maxi- est fire, Impact damage of any kind, Missile testing opera-
mum amount to be indicated in each section during the tions, Riot, Strikes, Malicious Damage, acts of terrorism,
entire period of insurance. The condition of Average will Bursting or overflowing of water tanks, apparatus and pipes,
not be applied-a great relief for the customers. Leakage from automatic sprinkler installations, Earthquake,
2) At present, the Standard Business Interruption (BI) Storm, cyclone, Flood, Inundation, Tsunami.
Policies issued to cover industrial units are cumbersome
Theft within 7 days of the occurrence of, and proximately
and not so popular though it is very scientific, taking
care of all contingencies and time tested. Unfortu- caused by, any of the above Insured.
nately, in one study, it is found that less than 1% of the Few add on in-built covers: Additions, alterations or exten-
Fire policy is covered under BI insurance. In this con-
sions, Temporary removal of stocks, cover for specific con-
text an effort is made to design an innovative, easily
tents, Start-up expenses, Professional fees, Removal of de-
understandable BI insurance to take care of MSME
units. It will be easily understood by the customers and bris, costs compelled by Municipal Regulations.
marketing forces. The methodology adopted here is
that the value of different components like Net Profit Section II
and All Standing charges of last Financial Year will be Business Interruption Insurance:
taken as standard and agreed. The basis of BI insurance a) Identify the Standing Charges (Fixed cost) which are
will be based on this Agreed Value. Assessment of loss incurred by the Insured even if there is no production
will be based on the Per day loss of Gross Profit and to following upon the loss caused by insured perils. e.g.,
be applied for the interruption Period. In the existing Bank instalment, Rent, Salary of Manager and supervi-
BI policy, the Interruption Period commences from the sory staff, conveyance, Depreciation of building, ma-
date of loss and ends when production is back to the chinery, insurance premium etc. These charges will be
normal planned anticipated level. But in the proposed termed as Agreed Standing Charges.

The Insurance Times February 2025 25