Mundane Insurance

D. Stuart McCreadie

• Publisher: Austin Macauley Publishers
• Year: 2020
• ISBN:
  9781528923330
• Topic: Commerce
• Subtopic: Biographies d'entreprises

Manufacturing industries are a common knowledge as are the likes of the motor car, television, foodstuffs and electrical goods that exist around us every day and are forcefully advertised. Banking too but it is only true to a lesser degree regarding insurance because if canvasing the average person in the street about insurance they would think only about their life insurance, health insurance, motor cover, house and contents, pet plan insurance and so on. Put like that, it is all very wearisome and therefore hardly a subject worth writing about, or is it? That was certainly the author's impression of insurance even up to the point of moving into the financial sector from manufacturing industry.
Pursuing the subject a step further, hazarding a guess, if those very same people were quizzed regarding the types of people they imagined are employed in insurance they would probably describe their insurance broker or simply a voice at an insurance call centre. This account therefore will, in all probability, dispel the notion that all insurance dealings are routine and in the main, predictable as did an international group of young insurance delegates at a Middle East seminar, many of whom were totally unaware that the insurance industry's activities were so diverse.

The Unexpected – Be Prepared

I never imagined what was in store for us as insurers once Independent began venturing overseas and yet in those ten years, while my role never changed, my attitude and approach had to. It is true that I continued conducting surveys and reported back to my customers, the underwriters, regarding what the insured did and from a loss control point of view how they managed their undertakings. Surveying a small-medium engineering risk in Derbyshire was one thing, whereas surveying an open cast mine in the Borneo jungle or an off-shore pipe-laying interest in the Indian Ocean was another matter. My surveys could cover everything from a bakery in Belfast to rock boring 100 metres below the ground in New Zealand, cutting a new tunnelling system for a passenger rail service in Bangkok, or a small cement quarry in Kent, a building site in London or gold mining in the USSR. That is not to overlook those non-UK active military bases in the likes of Iraq, or dam construction in central Africa, maybe oil fields in remote areas of the Argentinian pampas, that, while all being poles apart and out of the ordinary, nonetheless required surveying, constructive reporting and opinion.

The problem is where to start given the variety of those risks, yet still making allowances for culture, overcoming language and literacy obstacles and beginning to get some idea about putting the value of life in perspective, which were concerns that were particularly pertinent in some third world countries. There are allowances of course but where the problems increase is where these insured import cheap labour which in many instances went hand in glove with the levels of risk management. The building of a fossil fuel power station in Chennai was different to the one I surveyed in Rayong, Thailand, where employees and public safety standards were concerned; however, when a tower crane collapses it doesn’t matter whether it is Sharjah or Singapore; the material loss results in terms of claims for a similar amount. These issues pose problems during the surveys when trying to persuade an insured to protect the workforce with the same level of care as his mobile plant. The employer has a queue of people outside the proverbial ‘gate’ just waiting for employment whereas the availability and value of the insured’s dumper trucks or those tower cranes in Dubai come at a heavy premium.

In first world countries, we can bring pressure to bear on haphazard businesses by them being made aware of their statutory duties, enforcing authorities and exactly how much clout they have. I mention the enforcing authorities because when it comes to applying the country’s statutory requirements, the level will be greatly dictated by who the employer is and their level of investment. Alternatively, in third world countries, your opinion could be met with a shrug or more often or not a plea of the insured simply not understanding. The best example that comes to mind was the building of BTS (Skytrain) in Bangkok where, along the entire unprotected edge of the elevated road, there were posted signs ‘Safety First’ while immediately next to the unguarded edge, some sixty feet above the road below, were several workers without fall arrestors even though there have already been three fatal falls. While being critical of lax safety, while the Burj Dubai was being constructed several workers fell over 100 feet to their deaths. Against this type of apathy, it was a tough ask to get the insured to respond positively and maintain their standards over a protracted period.

Of course, there is a saying that risk is a risk; however, just for a moment, throw into the mix additional factors such as climate, environment, location, other unusual hazards such as those that existed in the likes of Afghanistan, Chechnya, Iraq, Yemen, Libya, Bangladesh, Pakistan, Ethiopia and Somalia etc. In many cases, your presence as an insurance surveyor is unwelcome even though we are the business connection providing essential insurance coverage. The climate coupled with the environment can play a major part in a surveyor’s thinking; for instance, while in Kuwait, I was conducting a survey with a temperature above 46℃. Here, the labour law was being broken, but the employers took no account of the unbearable temperature, save the wood mill operations where the insured simply sprayed water onto the cut timber and wood dust to prevent fire but offered the labour no such luxury. While on another Middle Eastern site, in Oman, some construction employees collapsed due to the heat. They were carted off to the sickbay, cooled off with a water spray, hydrated and then sent back out into the heat. In fact, it was so hot that on the same site where workers were drilling the rock to lay explosive charges, the laying of the charges was suspended for fear of a premature explosion.

On this occasion, I was accompanied by a broker’s surveyor from India who, in his enthusiasm, wished to view the rock boring taking place on a hillside 20 metres away from the nearest access point from our vehicle on a track. I warned him about venturing out of the vehicle due to the heat but he clearly didn’t appreciate my concern. Within ten minutes he staggered back to the vehicle, wet from head to toe, as if he had been in a shower. He was clearly distressed, so we had him remove his tie and loosen his collar before he collapsed back into his seat. When he recovered he stated the obvious concern by remarking that if he was affected just walking and watching, what about those workers involved in manual labour? He began to see the problems more clearly following that visit.

Another problem that I encountered involved civil unrest where high levels of security were being provided by the armed services of that country. At a location on the Indian subcontinent, the insured lived with it day in day out; however, my presence and my movements allegedly made the insured’s task even more difficult simply because of the fear for my safety and his own by virtue of accompanying me. Security was provided at the location, which was a key point installation, being one of the country’s main sources of income, where gas from off-shore wells was being piped in, refined, stored and distributed. Normal activities were being conducted acceptably; however, the armed militia was in the area with high-velocity firearms backed up with two armoured cars, mounted with 70mm main armament and secondary armament. I quickly established, even though the military commander was very guarded in his responses, that that there were no real terms of engagement, thus putting the gas tanks, premises and the surrounding areas at risk should there be either a stray high-velocity round or random small arms fire. Once again when the risk was written the underwriter had not been informed about the army providing the site security as the provided information only detailed the high-security fence, floodlighting and manned security.

Nonetheless, there was so much diversity to surveying that it followed there had to be some pleasant, albeit somewhat bizarre situations that I found myself in, such as the products liability survey undertaken in the People’s Republic of China. The business was Taiwanese, engaged in the production of baby and junior products, which were therefore considered high risk, and insured through the London Market. These products ranged from strollers to carrycots to baby feeding bottles where all were for exports to the US, Europe and Japan, but designed and developed in Taiwan. They were at that time a brand leader producing, as far as baby strollers were concerned, over 55%, of the world’s market. Following the survey of the research and development establishments in Taiwan, surveys were required of the manufacturing plants based in Shanghai, Guangzhou and Shenzhen. Due to perceived language difficulties, I was accompanied by two English speaking Taiwanese brokers for the entire survey, which took about five days to complete in the PRC. Once in Guangzhou, we met up with senior quality and production staff who were briefed on the intended programme to commence at 9 a.m. the next morning. Making a point of never being late, I suggested to the brokers that we should meet in the designated meeting room at 8:45 a.m. sharp so as to ensure we at least were setting off on the right foot. I had never worked in mainland China before but by and large, I had already learned that punctuality was not on most Asian countries’ lists of priorities.

The next morning at 08:45 a.m. we found that the pre-arranged meeting room had been set up with fourteen nameplates, all in Chinese, that I was to learn held the person’s name and designation. Obviously all this meant nothing to me so I never really got to understand who was responding to my questions. Regardless, the room quickly filled and all were seated by 08:55 save for an empty place at the head of the long table, adjacent me. As if designed to impress, the entire assembly were clad in very smart grey overalls and as I recall the same colour and type of male/female footwear. All of it was very impressive which made me change my opinion of Chinese punctuality at least.

Now the position at the head of the table remained vacant which was to me insignificant for two reasons: firstly, everyone was so prompt and secondly there was unlike every other position, no nameplate for that seat at the table. As I like to lead, I proposed, through the brokers, that we could proceed given that we had a long day ahead of us. My translator, Ms. Wo, put the proposal to those present and without having the necessary language skills the responses were unanimous and an unequivocal, Bo. I can safely say that was almost the first word I ever learned in Mandarin.

With that reaction, my first thought then took in the empty chair and I assumed that a very senior staff member was due, probably running a bit late and was going to make an ‘entrance’. I was wrong on both counts as it turned out because precisely at 09:00 a.m. the door swung open and a young lady entered the room; medium height, and immaculately dressed in a dark green two-piece woollen suit; over knee-length skirt with the jacket buttoned up to a Mandarin collar. The arrival of this person prompted all present to stand, that is save the two brokers and me, as if caught a little by surprise, due to the reaction of the remainder present in that meeting room. Without the slightest hint of any acknowledgement or introduction the lady sat at the head of the table, stone-faced, simply bowed her head, so as giving her approval for the meeting to start.

As was usual, Ms. Wo would make the introduction: who I was, where I came from, the purpose of products insurance and what exactly we hoped would be achieved. During this five or so minutes I was looking for reactions which involved smiles, nodding heads and so on save the lady at the head of the table who sat stone-faced and silent without so much as a blink. Handing over to me, I explained what I needed in terms of information, knowledge of supervisory levels, quality accreditation and so on, all adequately I assumed translated by Sharon Wo. The problem faced was that even what I considered a simple question took an age when translated. In fact, some of the responses were so time-consuming I was continually making sure I remembered what I had asked in the first place and the reason why. Unsurprisingly, the meeting was taking much longer than I anticipated but nonetheless I was getting good feedback and felt that positive headway was being made.

After an hour or so, the lady at the head of the table had offered nothing but continued sitting motionless and impassive throughout the entire period. This lack of involvement had me wondering why at all she was present. Finally, when at long last I mentally noted that everyone present had offered something in response to my questions, I turned my attention to the lady seated at the head of the table. Speaking through Sharon, all the while observing the lady, I felt certain she knew exactly what I was saying. Over the years you soon learn when interviewing whether or not that person understands or is interested, so I decided to challenge her.

My question was more of a statement which was simply put, “Please excuse me but you are understanding every single word I say, do you not?” To which she responded in a superior manner and perfect English, “Mr McCreadie, every single word.” Admittedly I was taken aback but not being one to come second in a debate and being as diplomatic as I could, I suggested to her that while everyone else present appeared to have contributed, why not her? Or did her role entail working on a different agenda? She then spoke directly to me, again in perfect English, explaining that just as I had a job to do so did she, adding that her role was in many respects similar to mine, insofar as she firstly had to ensure that both my questions and staff responses were being correctly translated by Sharon. Second, she had to make sure that the answers to those questions were correct, again insofar as they were a true reflection of the company’s efforts and they would not in any way shape or form damage the reputation of the People’s Republic of China. I had heard of the USSR’s strict political approach but I was a little stunned experiencing the same thing first-hand in China involving strictly speaking Taiwanese products.

Her appearance and aloofness were clearly no act; in fact, during lunch, she sat next to me again whereupon I complimented her on her English. Her responses were again not so surprising with her actual reply going along the lines of, “I know, I have a Masters from Beijing University and attended language courses in the United Kingdom.”

Purely out of curiosity I enquired exactly how long she had worked for the insured and true to form I got it all wrong yet again. “I do not work for your insured,” she responded. “I am employed by the People’s Republic of China, the lady mentioned the department or bureau but it slipped my memory. We have an unjust reputation regarding the quality of our manufactured goods; therefore, the PRC wants people such as you to see first-hand that we are a nation that promotes quality.”

Taking a chance with this government employee I said, “I have never met a commissar before which I have to say has made this trip worthwhile.” She laughed for the first time and asked me for my opinion which, for the record, read: The insured rated extremely high as the workforce was totally dedicated to producing products to their ISO accreditation, and all in a positive spirit. Understanding the way of the Chinese was difficult at the outset but I did learn that their manufacturing philosophy was one of identifying defective products as early as possible and the need to encourage as opposed adopting a culture of blame.

This quality control approach of identifying defective products very early on in the manufacturing process was identified in another manufacturer that regardless failed to avoid seven separate claims for injuries allegedly due to defective products. The Taiwanese insured at the outset I identified as an above average risk, this following my survey there some eighteen months before. The risk surprisingly during that period of insurance, based solely on claims experience, had rapidly deteriorated to one rating almost uninsurable, in fact, our underwriters were refusing to offer renewal terms. Apparently with all seven of the claims being so quickly settled in the US it initially left me doubting the integrity of those involved excluding the insured and the insurer. In fact, initially because I had conducted a products liability survey of the business, I began to question my own ability to differentiate between a substandard risk and one above average because I had placed the insured’s products in one of the highest of categories. Now following my involvement where the precise circumstances and chain of events were established, I believe there was a conspiracy and not as it first appeared a catalogue of incompetence.

So now in Taipei yet again, undertaking some surveys of other major manufacturers the broker’s representative was very persuasive requesting that I should revisit the insured, a garden furniture manufacturer, as they were beside themselves as they just couldn’t understand where and why after years of successful trading the design and quality of their products were now failing. After explaining that I could and should not become involved, as it was an underwriting decision, the badgering continued until I submitted with the proviso that the visit had to be off the record. The reason for the change of heart was that we had an excellent broker relationship; the client just wanted my opinion on the quality of the furniture in the face of the claims given that my previous assessment was so positive.

These claims came about due to faulty plastic garden chairs and one faulty garden hammock collapsing, all of which resulted in the users suffering injuries. This left the manufacturer extremely vulnerable to increased premiums once they secured terms elsewhere and this to what allegedly was a highly reputable designer and manufacturer. The business was housed in a heavily industrialised area, yet the premises stood out from the other units by way of being particularly smart: organised car park, neat flower beds, etc. The broker and I were met in the main reception by the owner, a smart middle-aged Chinese lady, who, in very presentable English, thanked me for coming yet again and assured me the visit was unofficial. My first impression was again how well laid out the factory was: the workforce was smartly dressed and productive; nothing had changed! Given other conditions, I began wondering why and where things had gone so wrong. Upon viewing the insured’s range of garden chairs, I was once more taken aback by the quality of not only the chairs but also the other plastic items being produced. What really perplexed me was, in particular, the garden hammocks that incorporated a safety feature to avoid collapse. This entailed two spiral anchors that had to be unwound naturally and would have had to defy the laws of physics to result in a collapse as was the claim.

Perusing the quality manual, as the business was ISO accredited, meeting the quality manager and so on, it was difficult not to be impressed by the whole organisation. All the while in the back of my mind were the seven claims. My initial thoughts were that there must have been a faulty batch or that the chairs at the centre of the claims had possibly been misused, abused or that there had been some other reason for the failures. Added to this, how could the insured’s dynamic and static loading tests have failed to identify these alleged defective chairs; not one but at least six? My conclusions were that just maybe the goods had been damaged during the journey from Taiwan to the US as perhaps the packing arrangements were substandard. However, the owner informed me that they already had checked with the carriers and that they had their US counterparts checking the consignments on arrival, after which they were unsure because it was the wholesalers who delivered to retail outlets.

Having looked at all possible avenues where damage could have been inflicted, I wanted to look at the product manufacturing process again, just in the event, I had overlooked something. As these were plastic injected products and the supplied plastic granules came from an accredited source I was fast running out of possible causes regarding the strength of the chairs. It couldn’t be the design, because this had not changed in a decade and had not been suspect before this latest batch. In the final analysis, I looked at the testing, quickly concluding that there had to have been a defective batch. We reviewed the load testing and I suggested that while they were weight tested, they should consider fixing a label to the chairs indicating the maximum loading and that the chairs should be used on a firm, level surface particularly, as all of their products were bound for the US markets. I was, of course, envisaging overweight users dumping themselves into the chairs, where the static weight for the average US male was about 88 kilograms while dynamically as much as ninety-five kilograms or more. I added that, as a form of defence if the user was found to be over the recommended loading, it could prove decisive in the events of a claim.

To my astonishment when I requested a sighting of the defective products, I was informed that they had not been recovered, which had me now questioning why we had sanctioned claims settlement? The insured informed me that we had, following notification from the retailer’s legal team that the claims were settled following a loss adjuster’s report, again with us approving the appointment. I had to confess to the insured that my previous rating remained but what they should demand that the defective products are recovered. Once back in their possession I suggested they examine these items without prejudice and make necessary design changes, if warranted, to prevent a recurrence. The insured assured me they would recover the chairs and hammock and keep the broker informed bearing in mind I was not officially involved.

On my way back from Australia and New Zealand to the UK some three weeks later, I received a phone call from the Taiwanese broker requesting I contact the owner again as there had been some interesting developments. Speaking over the phone the owner informed me that they had received back from the US their alleged faulty chairs and in an attempt at humour added that they were not in fact manufactured by her company, in fact, the products were bearing the trademark of another Taiwanese company! Following a moment of silence, she thanked me and informed me that while protecting my involvement they were seeking legal advice as she felt that the claims reflected badly on her business. Feeling both sympathy and justification, due to the poor claims handling of the case, I requested that I be given the opportunity to try and put matters right at our end before they did anything, to which the owner agreed.

Once back in London, I immediately made my way to the underwriting room and sought out the individual who handled that account. The underwriter was a close colleague and friend so I was about to enjoy his moment of predictable panic then have the satisfaction of providing him with the solution. I informed him that I had visited the insured to which he responded by chastising me about the visit and that I shouldn’t have got involved as the case was soon to be off the books. I suggested that he closes his office door as I had something rather important to tell him.

Simply put I said, “How do you feel about paying seven claims for faulty products that were never produced or marketed by the insured?” Now startled, the underwriter leapt up from his desk and in one movement had closed the door and resumed his seat. As if he hadn’t heard properly, he asked me to repeat what I had just said. I put it as succinctly as I could. I explained that upon rece...

Table of contents

• Mundane Insurance
• Mundane Insurance
• Copyright Information ©
• Introduction
• Early Days – Ford Motor Company
• Boring, Boring Insurance?
• Expansive Insurance Surveying
• Post Loss Surveying
• Surveying for Non-Negligence
• Surveying Services
• Brokerages
• The Unexpected – Be Prepared
• Routine Surveying with a Twist
• Up Market Surveying
• State Securities and Enforcement
• Related Challenges
• Legacies
• Taking My Leave