Insights into Textile Industry Fires in Pakistan
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December 4, 2012
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Claims Department – Head Office, Karachi
Textile Industry Background
Textile Industry Main Functions
IAP Data Analysis
Role of Risk Management
Claims Management
PRESENTATION OUTLINE
Textile sector plays a pivotal position in the exports of
Pakistan
Pakistan is the 8th largest exporter of textile products.
World Textile Growth Rate is 2.5 percent per annum
Pakistan’s Global Share constitutes to less than one
percent
Pakistan has at present:
1,221 Ginning Units
650 Spinning Units
TEXTILE INDUSTRY PAKISTAN
Exports
52% OF TOTAL EXPORTS
Manufacturing
46% OF TOTAL MANUFACTURING
Employment
30% OF TOTAL LABOUR FORCE
ABOUT 15 MILLION PEOPLE
Gross Domestic Product
8.5% OF TOTAL GDP
TEXTILE SECTOR:
PAKISTAN’S TEXTILE EXPORT SPLIT- FY 2011
Ginning:
The seed cotton goes in to a Cotton gin. The cotton gin
separates seeds and removes the "trash" (dirt, stems and leaves)
from the fibre. The ginned cotton fibre, known as lint, is then
compressed into bales
Spinning:
The process of making fibrous material into yarn or
thread. It includes:
Opening & Loosing
Carding
Combing
Drawing
Roving
Winding
BASIC TEXTILE FUNCTIONS:
Bleaching: In this process, the natural or original color
of the textile is removed by chemicals or exposure to
sunlight.
Dyeing: This process involves adding color to textiles. A
vast range of dyes, natural and synthetic are available,
some of which require mordents.
BASIC TEXTILE FUNCTIONS:
STATISTICS- LOSS RATIO LAST 3 YEARS
It is clearly evident that Average Loss Ratio for past
three years of the following Textile Functions pose a
huge financial impact on the insurance sector
The traditional focus of an underwriter is usually on
areas such as Cotton Spinning, Weaving and Ginning.
The underwriters must also focus their attention and
strategically manage these areas as well.
ANALYSIS
For the past three years 2009 – 2011
These huge number bring us to a fact that much
emphasis is needed to readdress the Risk Analysis and
the Underwriting in order to bring up such strategies
which are mutually beneficial to each and every
stakeholder.
ANALYSIS Cont….
The Risk Management is now becoming the utmost
important step, which gives the underwriter vital
information and highlights the flaws which if countered
before insurance cover is issued, can have a colossal
impact on the balance sheet of the company.
Risk Management Steps:
RISK MANAGEMENT
Fire Packed Bales
Electrical Faults (Short Circuiting)
Mechanical Equipment (e.g. Defective Lift Trucks)
Friction
Lightning
Cutting & Welding
Smoking
POSSIBLE CAUSES OF FIRE
The few necessary Risk Countering Measures which needs to be
undertaken are as follows:
An automatic fire alarm system conforming as per insurance "Code
of practice for selection, installation and maintenance of automatic
fire detection and alarm system" would be advantageous for cotton
godowns.
Proper separation must be there as per “Defined Separation in
Insurance Tariff” and use of measures as per tariff must be made
mandatory e.g. Double Fire Proof Door etc.
Portable fire extinguishers provided in many mills were often found
to be non-standard ones. Mill management should purchase only
reliable extinguishers and must ensure proper refilling at the time of
expiration of the same and they must be provided at suitable
locations in the vicinity of godowns.
RISK MANAGEMENT
Installation of
fire hydrant system
as per Tariff norms is
recommended.
For extinguishment of flash fires involving cotton in process, DCP
type extinguishers backed up with low velocity water spray system
are more effective and must be installed.
Installation of a
sprinkler system
. Automatic sprinklers are
recommended for all processes and high value storage areas.
Smoke detectors
would be appropriate for fire detection.
Wherever neither hydrant nor sprinkler system is available,
a water
tank of at least 50,000 litres
becomes a necessity.
Proper
Storage Practices
The risk managers must ensure that maximum safety measures
must be implemented and must also highlight contingency measures
to provide alternatives in case of failure of a system installed. This
effectively helps to reduce the overall risk and in turn helps the
client do a better safe guard of its assets.
RISK MANAGEMENT
Cotton/Phutti in Boras
ASTOUNDING FIRE LOSSES TEXTILE SECTOR
Fire in Bales
ASTOUNDING FIRE LOSSES TEXTILE SECTOR
Textile Unit
ASTOUNDING FIRE LOSSES TEXTILE SECTOR
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Adequate insurance coverage, which does not leave the insured
high and dry in time of need, with right pricing.
Timely delivery of defect free policy documents with relevant
endorsements / warranties / conditions / guidelines.
Should a claim happen, quick settlement to utmost satisfaction.
CUSTOMER EXPECTATIONS
General insurance being a market driven service industry, the
customer has to be kept satisfied. With so many options available, a
customer once lost is most likely a loss forever.
Remember!!! A dissatisfied customer is a bad publicity. It has all the
potential to damage the reputation of the company.
Claim settlement can be used as a marketing tool. Bringing in a new
customer is much more costly than retaining the existing ones.
In a de-tariffed market, pricing will be the key factor. Proper claims
management – quick settlement at optimal cost will help keep the
price competitive.
CLAIMS MANAGEMENT IN GENERAL INSURANCE
IMPORTANT ASPECTS
Note!!! It is an accepted fact that most of the customers
complaint relate to claims. Therefore, it should be the endeavor
of an insurance company to ensure that such complaints do not
occur in the first place and in some cases if they do occur it is
attended promptly, efficiently and transparently.
Delayed claim settlement generally result in higher claims cost.
Claims cost is a very important factor impacting on the
profitability of the company.
Claims must be monitored as they progress. A little time spent
thinking clearly right from the beginning will avoid a lot of
unnecessary and time consuming patch-ups and straightening
out later on. Unpleasant decisions conveyed timely with proper
justification is better than procrastination which is bound to
create more problems and unpleasant situations.
CLAIMS MANAGEMENT IN GENERAL INSURANCE
IMPORTANT ASPECTS CONT…..
Claims Process:-
As soon as a claim is reported, the claims handler
checks as to whether the cover was in force at the time
of loss and whether the peril is covered under the policy.
A surveyor is appointed who visits the spot, does the
assessment and submits the report.
The claims handler examines the report, calls for
relevant supporting documents.
On receipt of survey report and documents, the same
are examined.
The claim file is processed and settlement is offered.
TRADITIONAL CLAIMS HANDLING
Risk inspection
:
Risk Inspection is also a part of Claims Management
Effective Guidance
:
It is of utmost importance that the client is made aware
in very clear terms about what exactly is covered and
what is not
Adequate Reserving:
Adequacy of claims reserving is important for any
insurance company to meet its claim obligation
CLAIMS MANAGEMENT
STEPS- VIEWPOINT
Loss Adjuster:
Relevant Selection must be done based on certain
decisive factors
Time is of the Essence:
Immediate deputation of the Loss Adjusters and prompt
actions by the Claim Handlers are vital to success
Record Retention
The proper maintenance and unveiling (at the time of
risk Inspection) of the above does not give rise to the
following:
1) Average Clause
2) Under-Insurance
CLAIMS MANAGEMENT
Salvage is very important and every precaution must be taken to safeguard it.
Claims handler must coordinate with the loss adjusters and the insured to
effectively save the property from being at maximum loss.
All bales must be removed to a safe outside location.
Keep a
good supply of water
.
Wetting agent
must be available in a substantial quantity
The
bales not burnt must immediately
be separated one by one
without
removing the bands
or wires which in turn exposes more lint to the fire
and threatens the loss of entire bale.
Salvaging
crew
should be ready to move the cotton out of the involved
sheds as rapidly as possible.
The
path
on which the bales are removed must be monitored carefully and a
hole or a dig must be made in two or three instances so that a
fire path
cannot be made .
CLAIMS MANAGEMENT
SALVAGE HANDLING
SALVAGE MANAGEMENT
The losses involving inventory or stock such as Grey Cloth,
Yarn etc requires efficient and timely coordination of the
claims manager with the loss adjusters & client for salvage
purpose because of the fact that these items if are in
prolonged contact with the water can be devastated
completely.
Hence, immediate action must be taken to cater for the same
and the items are then handed over to the highest bidder to
ensure maximum recovery i.e. Loss Minimization
The claims handler simply cannot waste time in making a
decision and wait for the bids from salvage dealers, as doing
so may deteriorate the goods to considerable extent with
every hour passing by.
If the Insurers and Loss Adjusters sincerely make a joint
effort then, salvage at times, been sold while the fire has not
even been fully controlled.
CLAIMS MANAGEMENT SALVAGE HANDLING
CONT……
CLAIMS MANAGEMENT IS AN ART NOT A SCIENCE
THANKS & BEST REGARDS!!!
Delve into the presentation by Syed Imran Rabbani of Jubilee General Insurance Company Ltd. on textile fires in Pakistan. Explore the textile industry's significance in Pakistan's economy, its functions, and the role of risk and claims management. Gain insights into Pakistan's textile exports, sector statistics, basic textile functions, and loss ratios over the past three years.
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Presentation Transcript
December 4, 2012 A Presentation On Textile Fires in Pakistan Syed Imran Rabbani Joint Executive Vice President Jubilee General Insurance Company Ltd. Claims Department Head Office, Karachi
PRESENTATION OUTLINE Textile Industry Background Textile Industry Main Functions IAP Data Analysis Role of Risk Management Claims Management Jubilee General Insurance Company Ltd. 1 Textile Fires in Pakistan
TEXTILE INDUSTRY PAKISTAN Textile sector plays a pivotal position in the exports of Pakistan Pakistan is the 8th largest exporter of textile products. World Textile Growth Rate is 2.5 percent per annum Pakistan s Global Share constitutes to less than one percent Pakistan has at present: 1,221 Ginning Units 650 Spinning Units Jubilee General Insurance Company Ltd. 2 Textile Fires in Pakistan
TEXTILE SECTOR: Exports 52% OF TOTAL EXPORTS Manufacturing 46% OF TOTAL MANUFACTURING Employment 30% OF TOTAL LABOUR FORCE ABOUT 15 MILLION PEOPLE Gross Domestic Product 8.5% OF TOTAL GDP Jubilee General Insurance Company Ltd. 3 Textile Fires in Pakistan
PAKISTANS TEXTILE EXPORT SPLIT- FY 2011 Madeups 5% Yarn, 14% Others, 6% Synthetic 5% Cloth 17% Towel, 7% Knit Wear, 17% Bed Wear 16% Garment 13% Jubilee General Insurance Company Ltd. 4 Textile Fires in Pakistan
BASIC TEXTILE FUNCTIONS: Ginning: The seed cotton goes in to a Cotton gin. The cotton gin separates seeds and removes the "trash" (dirt, stems and leaves) from the fibre. The ginned cotton fibre, known as lint, is then compressed into bales Spinning: The process of making fibrous material into yarn or thread. It includes: Opening & Loosing Carding Combing Drawing Roving Winding Jubilee General Insurance Company Ltd. 5 Textile Fires in Pakistan
BASIC TEXTILE FUNCTIONS: Bleaching: In this process, the natural or original color of the textile is removed by chemicals or exposure to sunlight. Dyeing: This process involves adding color to textiles. A vast range of dyes, natural and synthetic are available, some of which require mordents. Jubilee General Insurance Company Ltd. 6 Textile Fires in Pakistan
STATISTICS- LOSS RATIO LAST 3 YEARS 2011 2010 2009 165.08% 151.39% 128.93% 112.02% 85.02% 78.06% 77.09% 70.61% 68.41% 65.96% 63.62% 46.99% 42.95% 38.87% 26.04% Ginning/Press Factories Cotton Mill Cotton Weaving Cotton Dyeing & Bleaching Cotton Garments Jubilee General Insurance Company Ltd. 7 Textile Fires in Pakistan
ANALYSIS It is clearly evident that Average Loss Ratio for past three years of the following Textile Functions pose a huge financial impact on the insurance sector Cotton Garments 148% Cotton Dyeing & Bleaching 73% Cotton Mill 78% The traditional focus of an underwriter is usually on areas such as Cotton Spinning, Weaving and Ginning. The underwriters must also focus their attention and strategically manage these areas as well. Jubilee General Insurance Company Ltd. 8 Textile Fires in Pakistan
ANALYSIS Cont. For the past three years 2009 2011 Average Sum Insured Rs. 1.13 Trillion Average Premium Rs. 2.03 Billion These huge number bring us to a fact that much emphasis is needed to readdress the Risk Analysis and the Underwriting in order to bring up such strategies which are mutually beneficial to each and every stakeholder. Jubilee General Insurance Company Ltd. 9 Textile Fires in Pakistan
RISK MANAGEMENT The Risk Management is now becoming the utmost important step, which gives the underwriter vital information and highlights the flaws which if countered before insurance cover is issued, can have a colossal impact on the balance sheet of the company. Risk Management Steps: Jubilee General Insurance Company Ltd. 10 Textile Fires in Pakistan
POSSIBLE CAUSES OF FIRE Fire Packed Bales Electrical Faults (Short Circuiting) Mechanical Equipment (e.g. Defective Lift Trucks) Friction Lightning Cutting & Welding Smoking Jubilee General Insurance Company Ltd. 11 Textile Fires in Pakistan
RISK MANAGEMENT The few necessary Risk Countering Measures which needs to be undertaken are as follows: An automatic fire alarm system conforming as per insurance "Code of practice for selection, installation and maintenance of automatic fire detection and alarm system" would be advantageous for cotton godowns. Proper separation must be there as per Defined Separation in Insurance Tariff and use of measures as per tariff must be made mandatory e.g. Double Fire Proof Door etc. Portable fire extinguishers provided in many mills were often found to be non-standard ones. Mill management should purchase only reliable extinguishers and must ensure proper refilling at the time of expiration of the same and they must be provided at suitable locations in the vicinity of godowns. Jubilee General Insurance Company Ltd. 12 Textile Fires in Pakistan
RISK MANAGEMENT Installation of fire hydrant system as per Tariff norms is recommended. For extinguishment of flash fires involving cotton in process, DCP type extinguishers backed up with low velocity water spray system are more effective and must be installed. Installation of a sprinkler system. Automatic sprinklers are recommended for all processes and high value storage areas. Smoke detectors would be appropriate for fire detection. Wherever neither hydrant nor sprinkler system is available, a water tank of at least 50,000 litres becomes a necessity. Proper Storage Practices The risk managers must ensure that maximum safety measures must be implemented and must also highlight contingency measures to provide alternatives in case of failure of a system installed. This effectively helps to reduce the overall risk and in turn helps the client do a better safe guard of its assets. Jubilee General Insurance Company Ltd. 13 Textile Fires in Pakistan
ASTOUNDING FIRE LOSSES TEXTILE SECTOR Cotton/Phutti in Boras Jubilee General Insurance Company Ltd. 14 Textile Fires in Pakistan
ASTOUNDING FIRE LOSSES TEXTILE SECTOR Fire in Bales Jubilee General Insurance Company Ltd. 15 Textile Fires in Pakistan
ASTOUNDING FIRE LOSSES TEXTILE SECTOR Textile Unit Jubilee General Insurance Company Ltd. 16 Textile Fires in Pakistan
CUSTOMER EXPECTATIONS Out of any insurance contract, the customer has the following Expectations: Adequate insurance coverage, which does not leave the insured high and dry in time of need, with right pricing. Timely delivery of defect free policy documents with relevant endorsements / warranties / conditions / guidelines. Should a claim happen, quick settlement to utmost satisfaction. Jubilee General Insurance Company Ltd. 17 Textile Fires in Pakistan
CLAIMS MANAGEMENT IN GENERAL INSURANCE IMPORTANT ASPECTS General insurance being a market driven service industry, the customer has to be kept satisfied. With so many options available, a customer once lost is most likely a loss forever. Remember!!! A dissatisfied customer is a bad publicity. It has all the potential to damage the reputation of the company. Claim settlement can be used as a marketing tool. Bringing in a new customer is much more costly than retaining the existing ones. In a de-tariffed market, pricing will be the key factor. Proper claims management quick settlement at optimal cost will help keep the price competitive. Jubilee General Insurance Company Ltd. 18 Textile Fires in Pakistan
CLAIMS MANAGEMENT IN GENERAL INSURANCE IMPORTANT ASPECTS CONT .. Note!!! It is an accepted fact that most of the customers complaint relate to claims. Therefore, it should be the endeavor of an insurance company to ensure that such complaints do not occur in the first place and in some cases if they do occur it is attended promptly, efficiently and transparently. Delayed claim settlement generally result in higher claims cost. Claims cost is a very important factor impacting on the profitability of the company. Claims must be monitored as they progress. A little time spent thinking clearly right from the beginning will avoid a lot of unnecessary and time consuming patch-ups and straightening out later on. Unpleasant decisions conveyed timely with proper justification is better than procrastination which is bound to create more problems and unpleasant situations. Jubilee General Insurance Company Ltd. 19 Textile Fires in Pakistan
TRADITIONAL CLAIMS HANDLING Claims Process:- As soon as a claim is reported, the claims handler checks as to whether the cover was in force at the time of loss and whether the peril is covered under the policy. A surveyor is appointed who visits the spot, does the assessment and submits the report. The claims handler examines the report, calls for relevant supporting documents. On receipt of survey report and documents, the same are examined. The claim file is processed and settlement is offered. Jubilee General Insurance Company Ltd. 20 Textile Fires in Pakistan
CLAIMS MANAGEMENT STEPS- VIEWPOINT Risk inspection: Risk Inspection is also a part of Claims Management Effective Guidance: It is of utmost importance that the client is made aware in very clear terms about what exactly is covered and what is not Adequate Reserving: Adequacy of claims reserving is important for any insurance company to meet its claim obligation Jubilee General Insurance Company Ltd. 21 Textile Fires in Pakistan
CLAIMS MANAGEMENT Loss Adjuster: Relevant Selection must be done based on certain decisive factors Time is of the Essence: Immediate deputation of the Loss Adjusters and prompt actions by the Claim Handlers are vital to success Record Retention The proper maintenance and unveiling (at the time of risk Inspection) of the above does not give rise to the following: 1) Average Clause 2) Under-Insurance Jubilee General Insurance Company Ltd. 22 Textile Fires in Pakistan
CLAIMS MANAGEMENT SALVAGE HANDLING Salvage is very important and every precaution must be taken to safeguard it. Claims handler must coordinate with the loss adjusters and the insured to effectively save the property from being at maximum loss. All bales must be removed to a safe outside location. Keep a good supply of water . Wetting agent must be available in a substantial quantity The bales not burnt must immediately be separated one by one without removing the bands or wires which in turn exposes more lint to the fire and threatens the loss of entire bale. Salvagingcrew should be ready to move the cotton out of the involved sheds as rapidly as possible. The path on which the bales are removed must be monitored carefully and a hole or a dig must be made in two or three instances so that a fire path cannot be made . Jubilee General Insurance Company Ltd. 23 Textile Fires in Pakistan
SALVAGE MANAGEMENT Jubilee General Insurance Company Ltd. 24 Textile Fires in Pakistan
CLAIMS MANAGEMENT SALVAGE HANDLING CONT The losses involving inventory or stock such as Grey Cloth, Yarn etc requires efficient and timely coordination of the claims manager with the loss adjusters & client for salvage purpose because of the fact that these items if are in prolonged contact with the water can be devastated completely. Hence, immediate action must be taken to cater for the same and the items are then handed over to the highest bidder to ensure maximum recovery i.e. Loss Minimization The claims handler simply cannot waste time in making a decision and wait for the bids from salvage dealers, as doing so may deteriorate the goods to considerable extent with every hour passing by. If the Insurers and Loss Adjusters sincerely make a joint effort then, salvage at times, been sold while the fire has not even been fully controlled. Jubilee General Insurance Company Ltd. 25 Textile Fires in Pakistan
CLAIMS MANAGEMENT IS AN ART NOT A SCIENCE THANKS & BEST REGARDS!!!
