Risk Management and Adjusting

 

Kazem Talaii is the Managing Director of CTC-IGS Kish Ltd, a joint venture between an Iranian and a British companies that specialize in risk assessment, damage surveys and adjusting.

Events- What services do you provide and who can benefit from your services?

Kazem Talaii- Our main clients are insurance companies but others such as those to be insured can also use our services. One of our jobs is assessment of risks. When insurers are asked to insure a certain property they cannot do so unless they are aware of the exact risks involved. They must know if the people in charge of controlling the risks are capable of doing so. Insurance companies can use our services at three stages: before the property is insured, during the period of the cover, and after an incident occurs, this last time in order to assess exactly how much should be paid as compensations. Insurers can easily use our services at any of these three stages.

E- Can you give us an example to clarify the matter?

KT- Suppose an insurer is asked to insure a certain factory. He refers to an assessment company like ours, which appoints an expert or a team of experts in the field, to inspect the factory and assess the risks. The team proceeds to the factory and carries out inspections from three aspects. First, the dangers that can occur naturally such as earthquakes, floods, lightnings and so on. Second, the risks involved with the production process which depends on the product that is made in that factory, and the various stages of production. For instance, in a petrochemical plant the danger is highest where we have vapor under pressure and where one product is turned into another by adding certain additives and there is danger of explosion. The assessment team studies the process carefully and estimates the losses that can occur in case of an accident. They must also investigate what precautions – such as safety valves in case of vapor and boilers – have been foreseen and put in place. Does the sensor work? Do the people in charge carry out regular inspections and check the safety devices? Are the fire-extinguishing facilities in good order? Are the people in charge of maintaining and using them capable and experienced in what they have to do. The detectors must be in good condition; so must be the sprinklers. All these points have to be audited and the weak points must be detected. Sometimes conditions are so bad that the insurer refuses the case.

In other cases the property is insured conditionally, that is to say the insurer demands that certain improvements must be made by certain dates and these will be checked by the inspectors on time.

E- And what happens if an accident occurs and the recommended steps have not been taken?

KT- Then it depends whether the management has taken the necessary measures or not. For example, if a fire erupts in the insured factory and the management proves that it has taken measures, for instances has bought and provided all the workers with safety clothes and has trained them on how and when to use them, but some workers neglected these instructions, then the management is not at fault, and the insurer will pay the compensation. But if the inspectors point out to the management that changes must be made so that certain dangers that exist are eradicated and the management fails to take proper measures, then the insurers will not responsible to compensate. One of the main tasks of the assessor, acting as the adjustor, is to come in after the accident has occurred to determine the main cause of the accident and thereby establish whether or not the insurer is liable. Suppose there is an earthquake and following it a fire. If it is established that the fire has occurred because of the earthquake and the factory is covered for earthquake then the insurer will have to pay for the damages caused by the fire as well.

The adjustor determines how much the insurer should pay based on current prices and real values. For example, there is a huge difference between cost of apartments in the north and south of Tehran. But this is mainly the difference in the cost of land which is still there after the fire and cannot be destroyed. The insurer pays for the rebuilding to the same condition as before the incident, which may only be 10-30% higher in north of Tehran than in the south of the city.

E- Could you not do the work by yourself? Why did you have to form a joint venture with CTC?

KT- We could and we did act as adjustors for small cases which were entirely insured in the local market. But for large cases, say a huge petrochemical complex, Iranian insurers do not and should not take all the risk by themselves and must take a large share to the international insurance market. The reinsurers that are large international companies demand the work to be performed by internationally known adjustors, such as CTC. Hence our joint ventures.

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