GIC risk cover has few takers

The IAR policy was aimed at companies whose overall sum insured was Rs 100 crore and above in different locations across the country. As the name suggests, the risks covered by IAR include fire, material damage, business interruption including loss of profits. Depending on the safety measures taken and previous track record, the companies can get discounts of upto 35% on the premium. IAR also has the advantage of cutting down administrative cost of buying different policy for different risks.

Sources say that one of the main reasons behind the lack of enthusiasm in the industry about the IAR policy is the high sum which is left uncovered. According to the policy, damage to machinery which is less than Rs 5 lakh will not be covered (this is 5 per cent of the minimum total sum insured of Rs 100 crore). This means that the policy will be triggered into action only if the losses are more than Rs 5 lakh. The policy states that these deductibles will be a minimum of Rs 5 lakh and a maximum of Rs 50 lakh where the total sum insured is more than Rs 100 crore. But companies feel that this is too large a sum to be left uncovered. Ideally the minimum deductible figure should be between Rs 2-3 lakhs.

Other factors which worry the industry is the timely settlement of claims and the rating system for different units. Industry’s disappointment with the policy became apparent within a couple of weeks of the launch, but GIC was hopeful that policy would pick up momentum by the end of this year.