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Benefits of having an insurance
October 24, 2015, 4:33 pm
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With more than 50 years’ of experience in the insurance industry, and over 20 years with a leading insurance and re-insurance broking company in Kuwait, Rameshi Kohli who currently heads Aarkay Insurance is an indisputable expert on all matters related to insurance. In this exclusive article Mr. Kohli speaks about the benefits and other aspects of insurance, as well as the clauses that people need to be aware of while entering into insurance agreements.

A graduate from Delhi University in India, he worked in various managerial capacities with Oriental Insurance Company, one of the leading insurance companies in India, and for 12 years with Heath Lambert Group, a UK-based re-insurance broker. He is widely recognized and respected in the insurance and reinsurance industry in India, the Middle- East, Hong Kong, Singapore and London. He also served for five years with the Singapore Monetary Authority as director of Studies under the UNDP Colombo Plan.

Loss of property, damage or liabilities arising from accidents and adverse natural events may result in financial loss, which an individual or business may not be able to sustain easily. Even if one is able to absorb the same, it may leave wide gaps in restoration and continuity at existing levels. Further progress could also be hampered, says Mr. Kohli. Clarifying some of the benefits of having insurance, Mr. Kohli adds that insurance protection is the best way to transfer such risks to insurers at a known annual cost, thus converting the possibility of un-quantified financial loss to quantified expense by spending a certain known amount. Indemnity and compensation available from insurance protection also maintains continuity of business, ensures that the financial obligations of corporate and individuals are protected and confidence of public and equity holders is maintained in case of any loss event.

Pointing to those insurances that are essential under Kuwait law and practice, Mr. Kohli said that it is mandatory under Kuwait law to have Third Party Liability (TPL) Insurance for motor vehicles, yachts and other vehicles. The law requires insurance coverage for unlimited legal liabilities arising for bodily injuries/ death of third parties and or third party property damage caused due to fault of insured / driver. New vehicles are also sold with three-year cover in place by the motor vehicle dealers and has to be renewed hence forth by the owner.

Standard TPL policy gives the insurance company a right to recover from the insured the amount of compensation paid by them to third party, in cases where the insured driver is found guilty of jumping red light, being under influence of alcohol / drugs, is not authorized to drive etc. This can be very expensive situation for the insured, particularly when he has a fleet of vehicles used by various employees/ drivers etc. In order to protect the insured from the above situation, it is recommended that they obtain ‘Waiver of Liability’ optional additional cover, which costs a small amount per annum per vehicle.

The person insuring should also ensure timely renewal of the insurance before due date and to obtain the necessary ‘Waiver of Subrogation Rights’ cover With regard to the liability under labor law, arising out of work related injuries to workmen, Mr. Kohli specified that as per Kuwait Labor Law, all employers are obliged to compensate an employee / worker with compensation on stipulated terms for injuries / death resulting from work. The compensation payable in case of work-related death shall be equal to 1500 days wages or Blood Money of KD 10,000/- whichever is higher. In case of total permanent disablement, compensation payable is 2000 days wages or the equivalent of one and one third of Blood money i.e. KD13,333/-, whichever is higher.

In case of partial permanent disablement, the compensation shall be equal to percentage determined by the Medical Committee of a Government Hospital, applied to either 2000 days of wages or one and one third of Blood money, whichever is higher. Additionally compensation for the wage for rest days recommended by the Medical Committee / Doctors is also provided.

All government contracts and many private contracts and sub-contracts stipulate for providing insurance cover for above liabilities. Some contracts additionally require common law liability cover as well.

Though such liabilities need not necessarily be insured, unless the contracts provide so, the quantum of such liabilities can be very high and irreversible for monetary health of any employer. Explaining about the worker’s compensation insurance or employer’s liability insurance, Mr. Kohli adds that the policy compensates the insured for liabilities arising out of injury or death sustained by workers during the working hours and during the course of work, including whilst traveling to and from work place, as required by Kuwait Labor Law. Employer’s liability insurance provides for extended liability cover at common law if the claimant opts for the same.

There are several things that employers need to adhere to with regard to worker’s compensation, including making sure that:
• Annual policies covering worker’s compensation be obtained in comparison with contract wise policies to avoid overlapping and duplication.
• Ensure adequate declaration procedure and proper declarations.
• Automatic coverage for addition of new employees and adjustment for exits
• Protection for unnamed or casual workers
• Protection for sub-contractor’s workers
• Inclusion of passive war cover
• Employer’s liability endorsement wherever required
• Obtaining certificates of ‘Held Covered’ for various contracts
• Timely renewal

Going on to the topic of contractor’s third-party liability and property damage, Mr. Kohli points out that all government contracts and most private contracts / sub-contracts require protection by insurance policy. Generally all construction contracts require Construction All Risk/ Contractor’s All Risk /Erection All Risk/ Engineering All Risk (CAR / EAR with Third-Party Liability) protection for loss or damage to contract works, material supplied by principals, plant and machinery and Third Party Liability.

Thus it becomes obligatory for contractors to obtain protection in the joint names of principal and contractor / sub-contractor. CAR and EAR Insurance provides cover for: Loss or damage to contract works, including principal’s existing property, materials and facilities at site; Liabilities arising for bodily injuries and material/property damage of others; Damage to existing property etc., on All Risk basis.

Policies are subject to standard exclusions / conditions and deductible per loss event. However, the following need to be kept in mind:
• Compliance of contractual requirements
• Adequate period of insurance plus maintenance period
• Adequate limits of liability
• Passive war extension
• Competitive premium cost
• Lower deductibles
• Provision for extensions
• Negotiate premium payment’s mode for long term contracts.
 
Under large and long-term contracts, umbrella CAR / EAR policies are obtained by principals for which a fixed premium charge is deducted from the contractors/subcontractors. Such insurances usually contain heavy deductibles for which contractor’s / sub-contractors are held liable and to provide for themselves.
 
In such situations we recommend that such insurance clause be analyzed and adequate protection in the shape of supplementary deductible insurance with lower / normal deductibles be obtained by contractors/sub-contractors to adequately protect their own bottom line, said Mr. Kohli.
 
With regard to coverage of construction or contractor’s plant and machinery, he added that the policy provides cover for loss or damage to machines, equipment and tools on reinstatement value basis. Most contract conditions, he noted, require adequate cover for the same. Once again, in this case, we
suggest annual cover for all plant and machinery to have adequate protection at economical cost with lower deductibles.
 
Annual policies, as compared to contract wise covers avoid duplication, overlapping and saves premium cost. And, adequate sum insured equal to reinstatement cost (new for old) timely renewal negotiations.
 
Special to The Times – Kuwait

 

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