- TIO Insurance

Report
The Devil You Know…
A practical application of
risk surveying…
Hugh Khull, Risk Survey Manager, Cerno
1
The Devil You Know…
The devil you know is better than the one you don’t.
Old idiom
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EPS Building – $2.7 Mil
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Jumping pillow – $4.6 Mil
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Underinsurance
• Buildings
• Bushfire Attack Level – effect on rebuilding costs.
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Surveyors need …
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Knowledge of underwriting
Research skills
An insatiable curiosity
A technical bent – buildings, contents, processes
Observation skills
Ability to follow a logical process
Relate well with people
Write clear and meaningful reports
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Surveying …
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Research the business
General observation of site
Follow a logical process
Ask questions
Be observant
Remember (what you see)
Photographs
Review & summarise before leaving the site
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Cases: A country hotel
Like this one …
Or this one
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But not this one …
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Plastic factory …
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Plastics warehouse & factory
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Plastics factory (cont) …
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Plastic injection
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Window factory…
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Powder coating …
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Window manufacturing …
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Engineering factory
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Underwriting Risks …
• Physical Risks
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Construction
Occupation
Exposures
Fire protection
Electrical systems
Security
Liability hazards
– Warehousing & storage
– Cooking
– Dangerous goods (incl
flammable liquids)
– Safety procedures
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Moral Risks …
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Insured
Approach to business
Type of business
Housekeeping
Indifference to Safety & Security
Indifference to Fire Risk and prevention equipment
Poor maintenance & presentation of the work place
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Classes of Construction...
• Massive – solid brick, stone or concrete, concrete
floors & support beams of brick stone or concrete;
• Brick stone or concrete buildings with a reinforced
steel concrete or steel I beam frame but only if the
steel frame or reinforcing steel is encased in
concrete…
Note: small quantities of combustible materials are sometimes allowed
but usually only up to about 10% of the material in the building.
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Massive building …
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Classes of construction ...
Other features of Massive buildings:
• Internal separation
• Stairs & lift wells enclosed...
• Fire doors
• Parapets
Why no unprotected steel...?
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Behaviour of steel in a fire...
Steel loses its strength in a fire. At:...
• 300 degrees C it starts to lose strength
• 550 degrees C it has lost 60% strength
• 800 degrees C it has lost 90% of its strength
• Continues to lose strength at an increasingly slower
rate until around 1,500 degrees C when it fails
completely.
• Typical fire: 1,200 degrees C
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Classes of construction...
• Fire resisting construction - steel or reinforced
concrete supporting frame, steel roof trusses with
concrete or brick infill panels or sheet steel
cladding. Floors should be of concrete.
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Fire Resisting Construction
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Classes of construction...
• Inferior - all other combustible materials such as
timber, fibro cement sheets, timber floors
• Mixed construction – a combination of materials.
Some non combustible and some inferior.
• Glass curtain
• Tilt up concrete slab
• EPS
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Inferior & mixed construction
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EPS...
• Expanded Polystyrene Foam Sandwich panel
(EPS)
• A sandwich of a central core of expanded
polystyrene foam between steel sheets.
• Used in freezers cool rooms and similar buildings
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EPS (Expanded Polystyrene Foam
Sandwich Panel)
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EPS Building
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EPS building
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Cool stores …
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EPS Management system…
Regular inspection of panels to ensure no damage
Immediate repair of any damaged panels
Preventative measures - impact
Removal or isolation of heat/ignition sources –
including switchboards
• Minimise and protect penetrations
• No attachment of items to panels – switchboards
• Hot Works Permit System
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Impact prevention – EPS
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Unprotected openings…
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Damaged panels…
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Classes of construction...
• Glass curtain: Steel or reinforced concrete frame
with external cladding of glass panels
• Typically seen in CBD high rise buildings
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Glass curtain buildings...
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Cinema – steel & glass
extension …
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Asbestos …
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Asbestos ….
• Risk management of asbestos:
– Have an asbestos survey done by a qualified asbestos
surveyor
– Create an asbestos register
– Review and update the asbestos register regularly
(annually)
– Refer to it whenever work is to be done on the building
– Any asbestos in work area to be removed by a properly
qualified asbestos removal contractor before work starts
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Tilt up concrete
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Why things burn …
• Three requirements:
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Fuel
Oxygen
Heat (ignition source)
‘Flash point’ & ‘ignition point’
• Important to know what the fuel is …
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Fire fighting equipment
Classes of Fires
• ‘A’ – combustible materials (wood, paper, textiles,
plastic, etc)
• ‘B’ – Flammable liquids
• ‘C’ – Combustible gases
• ‘D’ – Metals (magnesium etc)
• ‘E’ – Electrical
• ‘F’ – Cooking oils
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Types & uses of extinguishers…
Type
Colour code
Class of fire
Water
Red
A
Foam
Red with blue band
A&B
Dry Chemical
Red with white band
A,B,C & E
CO2
Red with black band
E
Vaporising
Red with yellow band
A&E
Wet Chemical
Red with oatmeal band
A&F
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Typical extinguishers…
Dry Chemical & CO2
Hose reel & Dry Chemical
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More extinguishers…
Dry Chemical & Wet Chemical
Dry Chemical & Wet Chemical
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Water on burning oil…
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Sprinkler systems…
• The most effective way of controlling fires
• First sprinkler system (manually operated) – 1812
• First automatic system – 1874
• Grinnell system - 1881 (improvement on 1874
system)
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Sprinkler head …
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Sprinkler Systems
Classification
Temperature Activation
Temperature (degrees C)
Bulb colour
Ordinary
57 - 68
Orange (57 degrees C)
Red (68 degrees C)
Intermediate
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Yellow
Intermediate
93
Green
High
141
Blue
Extra High
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Purple
Ultra High
227 - 260
Black
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Sprinklers…
Sprinkler heads – (Green – 93 C)
Blue (141 C) over deep fry
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Drenching system …
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Sprinkler stop valves …
• E
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Older style stop valves …
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Water supply …
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Dangerous goods…
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Gas Storage …
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Dangerous goods storage …
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Hazardous goods signs
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Gas Bottles …
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Kitchen
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Deep fryers – from this …
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… To these …
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Filters & hoods …
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Flue fires …
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Electrical systems…
Two types – wire fuses & circuit breakers
• Fuse type & positioning
• Apparent age & condition
• Wiring
• Temporary wiring
• Thermographic scan done
• Test & tag system in place
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Switchboards
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Hotel switchboard …
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More switchboards …
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Electrical…
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Electrical…
Hot spot
Wiring in old conduits
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Electrical…
Switchboard in pub
Conduits from that switchboard
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Electrical…
Overloaded?
In a joinery…
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Underinsurance…
• Underinsurance is a major issue in Australia…
• Reasons for underinsurance are many and varied,
• And they are complex…
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Reasons for underinsurance…
• Lack of understanding of the actual replacement
cost
• Confusion between market value and replacement
cost
• Building too large or unsuitable for current
operations
• Increased cost of reinstatement not understood
• Not reviewed for years – believed to be adequate
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Calculating replacement cost
• Estimated Replacement Cost not a valuation
• To identify the risk of underinsurance…
• The only accurate cost is when there is a full set of
plans, drawings, specifications, engineering
requirements and a contractor has costed it to do
the job.
• Even the he adds a contingency margin, and
• There are usually variations during the build.
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What is in an ERC…
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Cost of the building
Car park, driveways, fences, gates etc
Cost of demolition and removal of debris
Professional fees
Builders mark-up
Location allowance
Escalation allowance
GST
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Calculating Replacement Cost...
Steps in the calculation process...
• Type of building – office, factory, warehouse etc
• Construction – brick, tilt up slab, steel etc
• Class of Building
• Area of building
• Other inclusions in the estimated replacement cost
• Construction cost rates
• Special fixtures & fittings
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Class of building...
• Buildings are classified as Average, Quality or
prestige
• Measurement: Australian Standard Method of
Measurement of Building Works – 5th Edition
• Provides a uniform basis for the measurement of
buildings
• Three classes...
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Average
• Buildings of Average specification are defined as
generally being of a simple design with a basic
square or rectangular shape. The materials and
workmanship are sufficient to satisfy Building
Codes. Low construction costs are of higher
importance than distinctive features
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Quality...
• Buildings of a quality specification are generally of
simple design (as for average) with additional
features to give a distinct point of difference. The
materials and workmanship are of a high quality
and exceed Building Codes. Attention to detail is
construction and design is of high importance.
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Prestige...
• A building of a Prestige specification is generally of
a complex design with additional features to give a
unique and distinct point of difference. The
materials and workmanship are of the highest
quality and exceed Building Codes. Attention to
detail in construction and design is of high
importance. The primary concern is for the tenants
comfort and pleasure.
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Area of the building...
• Building rates are per square metre
• They apply to the total of the area of all floors, not just
the footprint of the building
• Area can be obtained:
 from plans,
 by measuring,
 Insured may be able to advise, or provide a valuation
 From a source such as Council, Government etc
Google Maps/Earth
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A calculation - office & factory…
• Building Area:
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Office - 463 square metres
Factory – 1,200 square metres
Asphalt car park – 520 square metres
Fencing – 150 linear metres (1.8 m high, steel clad,)
Gantry crane (4 tonne lifting capacity) - $85,000 (installed)
• Construction: Tilt up concrete panel, Steel clad roof,
steel roof trusses
• Concrete floor
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Building costs/m2
• Rate per square metre:
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Office - $2099.28
Factory - $893.49
Car park - $186.14
Fencing - $126.92 per linear metre
Demolition & Removal of Debris – 266.10
Professional costs - $29.33
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Building cost …
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Office – 463m2 @ $2099.28
Factory – 1200m2 @ $893.49
Car park – 520m2 @ 151.82
Fencing – 15 lm @ 126.92
• Total base building cost:
971,966
1,072,188
78,946
19,038
2,142,138
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Plus …
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Dem & RoD
1663m2 @ 266.10
Professional costs 1663m2 @ 29.33
Subtotal
Plus – 15% Builder’s margin
Location allowance – 1.7%
Escalation - 9%
442,524
48,775
2,633,387
395,008
51,483
277.189
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• Net rebuilding cost:
• Plus GST @ 10%
$,3,357,066
$ 335,706
• Total rebuilding cost
$3,692,773
• Plus Crane
$
• Total ERC
$3,777,773
85,000
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Example 1…
Warehouses, offices, display rooms and motor
wreckers:
• building was owner designed, engineered & built
• input from family & associates
• Drastically underinsured at $3.150 million
• ERC - $5.9 Million
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Examples 2…
Retail shop…
• Massive construction
• Previously occupied as an office
• Purchased for $1.5 million
• Insured for $1.5 million
• ERC - $4.4 million (average); $5.0 million (quality)
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Example 3 …
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Farm shed …
Area: 1,380 square metres
11 metre ridge height
Steel clad on steel portal frame
Concrete rim foundation and asphalt infill floor
Insured for - $400,000
ERC – $1,860,000
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Case study – Cinema complex...
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Cinema
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Cinema
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New steel & glass extension
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Cinema – steel & glass extension
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Cinema complex floor plan
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Thank you.
Questions?
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Occupation…
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Single or multiple occupancies
A description of the business activities & processes
Housekeeping
Storage & warehousing
Dangerous goods
Cooking
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Exposures…
• Internal - other tenants
• External – occupancy, proximity, construction of
neighbouring businesses
• Separation – distance or physical barriers
• Environmental - land
• Type of area
• Exposures to extraneous hazards
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Typical risks surveyed…
Mushroom growers
Flower growers
Plastic extrusion factories
Hotels & restaurants
Take away food outlets
Go Kart Club circuit
Electronic component
Nursing homes
• Cinemas & theatres
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Abrasive blasting works
Timber mills
Hardware & timber outlets
Joinery factories
Strata title residential
Surf club
Furniture carriers/stores
Retail
Seafood factories (EPS)
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