Machine owner should interact with the insurance broker in understanding what he is buying.

Amit Agarwal,
Director, Ideal Insurance Brokers Pvt Ltd

Could you let us know the importance of insurance for earthmoving machines?
Earthmoving machines are normally very expensive machines. The average value of these machines starts from Rs 15-20 lacs and goes into crores. Just looking at the price makes us realise the financial loss someone would have to bear if the machines meets with an accident. The cost of repair or replacement is prohibitive, which makes insurance for these machines a very important aspect for anyone who is looking to buy them. Also, these machines work in open and mostly in conditions which is very conducive to accidents. These are mostly used for infrastructure projects like construction of road, railway, dams, bridges, and buildings. Even mining is a very hazardous affair. Looking at their usage we can very well imagine that the risk to these machines is very high compared to lot of other industrial assets. These machines are very complex and even small damages lead to very high repair costs. Since the machines now use more electric panels than mechanical panels, any loss to same would lead to a change in the complete panel and not just the affected part. One more aspect is that these are revenue generating assets for most owners. They cannot be left idle for long in the event of any loss and have to be repaired immediately which requires huge sum of money to be paid. Looking at the adversaries we should make sure that we have adequately covered our assets which can indemnify most of our losses.

What are the key attributes of an insurance policy for an earthmoving machine?
We normally do a CPM policy i.e. contractors plant and machinery insurance for earthmoving machines. Now a basic policy covers certain risks and not all risks. It’s important to know the add-on covers we can take to get a wider cover and not just limit ourselves to the minimum cover. For example, these machines seldom remain in one place for very long. Once the particular job is complete, they are to be shifted to a new location. Now if the original policy does not have floater as an add-on, the new location would not be covered. The retail customer more often is not even aware of these aspects. So they should choose a good consultant who can advise them on the right coverage and not hesitate in making the customer pay more for giving him a wider coverage.

Other key attributes are to add earthquake and Standard Fire & Allied Perils (STFI) in the policy since lot of losses happen because of flood and inundation of water. The policy should not have any special warranties apart from the ones specified by IRDA. Many a times, such warranties are added to avoid certain losses and reduce the premium. So we should check the policy for the attributes mentioned earlier.

How to select the right insurance for right machine?
It’s important to tell the insurance company about the usage of machine. Different work areas attract different insurance like, working in tunnel, water bodies, etc. Based on these, the insurance company would have to change the rates and conditions. Machine owner should interact with the insurance broker in understanding what he is buying. They should not look at the premium only and decide the insurance but also look at the coverage and chose accordingly.

How do you facilitate the insurance claim settlement?
We have experts from the insurance industry who understands the subject and during any accident guides the customer from lodging the claim to getting the money in his account. Since we are based pan India, it’s easier for us to coordinate with any customer speaking any language. Claim settlement is not very easy in India today because of the way the policy is designed. So we guide the customer with every paper work which is required.

Do you also provide insurance for used-machinery?
Yes, we do. The life of most machines are more than 10 years and they need continued Insurance to cover all kinds of risk till such time. Hence, we do have products to renew the insurance every year for all kinds of machines. The value of machines during policy renewal is very important to note. CPM is a Reinstatement Value (RIV) based policy which means, these machines are to be insured at cost of new machinery every year to get full claim during any accident. We do find this particular concept a bit tough to make the customer’s understand as they are used to depreciate the value every year while insuring.