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

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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

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 Property more specifically insured

DEDUCTIBLES 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 INTERRUPTION

Cover 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.

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Excluding those attributable to (if MLOP cover is not opted)

o Damage to Boilers
o Electronic Equipments, Computers
o 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
o Discounts based on favorable or adverse features as per report
o Voluntary deductibles opted
o Claims experience for past five years
PREMIUM RATING STRUCTURE
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.
1.

[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.]

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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 COVERS
A Fire material Damge
IAR Policy
Assessment
1 Option for Basis of Indemnity No Option only Not a Disadvantage as cover is
RIV Basis
mostly taken on RIV Basis
2 Policy
for
Stocks
on Declaration facility Disadvantage
Declaration Basis
not available
3 Special Rating Discouts for In Built in the rating Similar Provisions
FEA & Low Claims
structure
IAR policy has the additional advantage of waiver of Under insurance upto 15%

B
1
2
3
4
5
6
7
8

MI, BOILER, EEI

Selection of Machinery is possible
Various item-wise rates as per various tariffs

IAR POLICY
Not possible
Flat premium rate of
Rs 2.25 per mille
Conditions of Average
Same as for Fire
Differential Slab for excess
High
excess
flat
amount
Depreciation for Limited Life items
No such Provision
Depreciation in case of Total loss
No Such Provision
Separate cover for Express Freight, Overtime, No Such Provision
Air Freight, Additional Customs Duty
Special Declaration/ Excess clause for DG No
Such
special
Sets, Turbo Chargers, Gear Boxes etc
Provision

ASSESSMENT
Disadvantage
Heavy
advantage
Advantage
Disadvantage
Advantage
Advantage
Disadvantage
Advantage

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9 TP Extension under boiler

10 Transit within Compound

No Such Provision
Provided

Disadvantage
Advantage

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
:
Business Interruption :
Machinery Insurance :
Boiler
:
Electronic Equipment :

Rs 187 Crores
Rs 50 Crores
Rs 60 Crores
Rs 70 Lakhs
Rs 25 Lakhs

Premium Calculation (in Rs )

EXISTING COVERS
IAR POLICY
Fire( Various rates)
1309000
1309000
Earthquake
93500
93500
Flood Group
467500
467500
Machinery Insurance
6000000 @ 2.25%0
1371375
Boiler
5950
EEI
17000
Business Interruption
445000
445000
TOTAL PREMIUM
83,37,950/36,86,375/Saving of Rs 46,51,575/- i.e 55.78% of the Existing covers premium.

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