TO ALL MANAGING DIRECTORS/CLAIMS/UNDERWRITING CHIEFS FOR THEIR PERSONAL STUDY IDENTIFYING USUAL CAUSES OF FIRE, FIRE SPREADING, HAZARDS,

COUNTER MEASURES & FEW SUGGESTIONS TO MAKE STRATEGY TO CONTROL CLAIMS IN COTTON GINING & PRESSING FACTORIES ----------------------------------------------------------------------------------------------------------WITHOUT PREJUDICE

During my professional career of 27 years in cotton zone i.e. Multan I have conducted thousands of surveys related to cotton fire losses in cotton ginning and pressing factories through out the Punjab and Sindh on behalf of number of Insurers working in Pakistan. Lot of experience gained during these years was shared with people related to this industry i.e. underwriters, surveyors, Bankers, Industrialists, fire fighters, salvage dealers, buyers & sellers of cotton etc. Technical, theoretical, practical information regarding safety, measures to minimize the expected losses, measures to minimize the quantum of loss, measures to improve the design, ginning/pressing process, stacking of raw cotton, cotton waste, baled cotton, maintenance, house keeping, handling hazardous materials, waste specially, providing clean and tidy atmosphere for stack of cotton, observation of insurance warranties, conditions, availability of fire fighting facilities in order to arrest the initial spreading of fire, training of factory, fire brigade, Banks staff to handle emergencies etc have been the topics under discussion. Briefly I would comment upon the topics to provide some information to the concerned people to review their policy, consideration, ideology, strategy, way of thinking, to suggest further measures, care/cautions to be taken against certain factors, making the warranties up to date, training of staff, creating awareness regarding the insurance conditions/warranties etc. We start with the common causes of fire origination in factories come to our experience during the past 27 years to give a look at and address the safety measures to be taken. USUAL CAUSES OF FIRE ORIGINATION
1. ARSON 2. ELECTRIC SHORT CIRCUITING. 3. SMOKING ACTIVITY. 4. FRICTION OF ANY HARD MATERIAL WITH MACHINERY FAST MOVING PARTS LIKE SAWS, ROLLERS, FANS BLADES ETC. 5. CONGESTION IN FEEDER/DELIVERY SYSTEM. 6. SPARKS FROM THE OVER-HEATED ELECTRIC MOTORS, SWITCHES, and STARTERS ETC. 7. SUDDEN BREAKAGE OF IRON HOOP WHICH PRODUCES SPARK.

8. SMOLDRIG LINT PRESSED IN THE BALE WHICH BURST OUT IN TO FIRE AFTERWARD. 9. MALICIOUS ACTS 10. FIRE WORKS DURING MARRIAGES/SHAB-E-BARAT ETC. 11. BURNING OF BUSHES/CLEARANCE OF LAND BY FIRE OUTSIDE THE FACTORY. 12. MOVEMENT OF VEHICLES IN THE FACTORY. 13. COOKING IN THE FACTORY IN EMPLOYEES/LABOR QUARTERS. 14. FROM ANY EXPOSURE HAZARD. 15. WELDING/MAINTENANCE WORK IN THE FACTORY. 16. RAW COTTON SPREADING/DRYING/CLEANING MACHINE. 17. PRESENCE OF GLASS PIECES IN THE STOCK OF RAW COTTON WHICH REFLECT AND FOCUS SUN RAYS LIKE CONVAX LENS. 18. SUN RAYS PASSING THROUGH THE DROPS OF WATER CREATING THE SIMILAR AFFECT. 19. SPONTANEOUS COMBUSTION (VERY RARE) 20. RESIDENTS CHILDREN FUN MAKING WHILE PLAYING IN THE FACTORY. 21. STATIC CHARGE 22. LIGHTNING 23. H.T CONDUCTORS PASSING OVER THE COTTON BALES AND HEAPS. 24. PLACING EYE-SITE SPACTICLES ON STOCK DURING SUN SHINE. 25. BULK STORAGE OF LOOSE OIL CAKE FOR A LONG DURATION WHICH IS SUSCEPTIBLE TO SELF HEATING AND SPONTANEOUS COMBUSTION. 26. MOVEMENT OF VEHICLES.

CAUSES OF FIRE SPREADING After first the fire originated how does it spread and goes out of control in some cases, involve large amount of stocks with heavy percentage of loss in many cases. Each and every cause may further be explained in detail and measures may be suggested to over come but this is not desired here in this brief report.
1. ARSON 2. NON-AVAILABILITY OF INITIAL FIRE FIGHTING FACILITIES IN THE PREMISES. 3. NON-AVAILABILITY OF LABOR DURING OFF-SEASON OR HOLIDAYS. 4. LOCATION OF FACTOR (REMOTE AREAS) 5 NOTICING THE FIRE ORGINATION AT LATE STAGE WHEN IT ALREADY SPREADED OUT BEFORE TAKING ANY COUNTERS MEASURE 6. INCORRECT STACKING. 7. PRESENCE OF HAZARDOUS MATERIAL NEAR AND AROUND THE STOCK. 8. KEEPING RAW COTTON CLOSE TO COTTON BALES 9. STORAGE OF WASTE MATERIAL NEAR THE STOCK. 10. UN-SKILLED WORKERS AND MANAGEMENT. 11. LONG DISTANCE OF FIRE BRIGADE. 12. NON-AVAILABILITY OF ELECTRICITY IN THE PREMISES AT THE TIME OF FIRE. 13. STRONG WIND CURRENT. 14. UN-SKILLED FIRE FIGHTERS. 15. LOOSE PRESSED COTTON BALES. 16. SUB-STANDARD IRON HOOPS/WIRES. 17. SUB-STANDARD BALE MAKING PROCESS. 18. BREAKAGE OF HOOPS OF FEW BALES IN THE STOCK 19. STACKING OF RAW COTTON WITH OUT MAINTAINING DISTANCE IN BETWEEN THE HEAPS 20. NON-AVAILABILITY OF WATER LOCALLY FOR FIRE BRIGADES TO RE-CHARGE. 21. HIGH TEMPERATURE. 22. LOW MOISTURE CONTENTS IN THE COTTON.

23. BREAKAGE OF BALES TIES DURING FIRE, HANDLING, FIRE FIGHTING OR INTENTIONAL ACTS OF THE LABOR. 24. PRESENCE OF MULTIPLE LOOSE BALES LYING IN EACH LOT FOR SAMPLING. 25. MISMANAGEMENT AND MISHANDLING OF STOCKS DURING FIRE. 26. CARELESS ATTITUFDE BY ALL CONCERNS. 27. IMPROPER DISTANCES (FIRE BREAKS) BETWEEN VARIOUS STOCKS AND BUILDINGS. 28. PRE-HEAP FORMATION OF STACK OF UN-GINNED COTTON. 29. BULK STORAGE OF UN-GINNED COTTON IN BORAS ALL AROUND THE HEAPS. 30. HEAPS OF LOOSE UN-GINNED COTTON WITH LOW DENSITY. (HEAPS FORMED WITH DRYER/CLEANING MACHINE) POPULARLY KNOWN AS KHILARI MACHINE 31. CRIMINAL IGNORANCE ON PART OF ATTENDING SURVEYORS NOT TO ISOLATE THE AFFECTED/SMOLDRING STOCKS FROM THE SOUND STOCKS IN ORDER TO MINIMISE THE RISK OF FIRE SPREADING. 31. MALPRACTICE, DELEBRATE EXEGGERATION OF LOSS FOR MATERIAL GAIN.

1. MORAL HAZARD This factor has been merged badly in the society like a cancer; unfortunately a part of the Surveyors community is involved deeply in setting up negative trends in the market. Principals, ethics, morality, truth have been obscured and dreams to become multimillionaire by all humanly possible means have been overcastted in minds. Cheating, lies, fraud, drawing un-due and illegal benefits, have become the practice of the day. As per insurance Ordinance the function of a surveyor is not to settle any loss. They are supposed to examine any goods, property or interest insured under a contract of non-life insurance to express an independent opinion as to the cause, extent, location and amount of loss. So if the surveyors restrict themselves to act with in the terms of insurance Law this sort of malpractice and aggravation of losses would stop. Surveyors should visit to the site of loss, collect all necessary information of loss, assess the extent, cause and detail of loss and come back to their offices. A joint note of assessment may be circulated to the Underwriters on risk. Local branch offices may interact with their insured to discuss about the loss as assessed jointly by the surveyors. If necessary and so desired minor adjustment for human error or benefit of doubt may be made and a final letter of acceptance should be obtained to avoid any future complication. The moment this procedure would start to be implemented the due respect of the insurers and surveyors would be restored and insured will have to make requests to the underwriters for making necessary adjustments against benefits of doubts or certain errors pointed out logically. By doing so called misuse of authority by few surveyors to settle the loss with in the factory would be counter checked and the risk to exaggerate the loss and to mislead the insurers may also be controlled. Surveyors should form an opinion about the assessment of loss in the factory for normal losses and disclose the same to the insurers head offices the very next morning. In abnormal claims e.g. arson, surveyor should be given due time to form a conclusion on the basis of physical, documentary and circumstantial evidences followed by detailed enquiry.

The system of making surveyors approved panel is not being found successfully working so far either selected by the head offices or on the basis of recommendation by the local branches. I, on the basis of deep observation suggest that the NIC pattern of surveyors appointment should be followed. Which is being proved very successful for the last many decades. All the surveyors available in the market should be enlisted on approved panel and on the basis of their experience they should be categorized. Survey assignment should strictly be assigned turn-by-turn and a register should be maintained in every appointing office. Every surveyor should be given chance to prove his worth, professional competitiveness and ethical approach towards the survey proceedings and no surveyor should be removed out of panel until and unless he is proved guilty thrice with proof. He should be given at least 2 chances to come on right path. This very important matter should not be left over the personal liking or disliking of local Managers because the existing system has already failed to work by the alarming increasing in claims ratio and percentage of losses granted by so selected surveyors in stock of un-ginned cotton and cotton bales. Experience counts a lot in the matter of investigating the cause of loss, detail and extent of loss, observation of conditions and warranties, to convince the insured regarding the view point/findings of the surveyor and lastly the skill to put up these findings on paper for presentation to the underwriters for their consideration. His honesty, promptness, professional skill based on his field experience and general reputation in the market should be monitored. It should be kept in mind that the over ambitious experienced surveyors do not full fill the above requirements because they have no time to make justice with the profession and settle the claims haphazardly without going through the complete detail of loss assessment even if he is honest. He would cause to aggravate the loss just to settle it for the sake of his reputation with out creating any sense of obligation for the insurers by paying more than the actual loss and thus the moral hazard co-exist. Idea of utilizing the services of only few surveyors in last 6-7 years has been failed after closely watching the resultant factor and alarming increase in amount of settled losses. The cause of isolating many experienced surveyors from the main stream should be examined properly. Their experience as they have proved their worth in the past by controlling the percentage of loss in cotton claims by means of their professional experience should be utilized now. It should also be kept in mind that few complaints from insured side would come up in case of an honest surveyor taking part in survey proceedings because he would not be accommodating out of the way. Surveyors working with the bad reputed insurers should be avoided. It is very important to develop any fool-proof system to check and reputation of a surveyor because of the complexity of the issue like the reputation of front-wheel driven cars were generated by the unskilled car mechanics in 1982 against the facts and also the TTC engines. Similarly it is not always true that a Surveyor said to be a well reputed is really honest or professionally competent and a Surveyor who has been postured as bad reputed is really dishonest or professionally incompetent.

Pre-insurance inspection/evaluation of risk should be given due importance. After that the periodical inspections of the stock positions/risks. Office staff should visit the field to check the stock positions or risk inspection with the field staff periodically and send reports to the head office. Services of independent surveyors/inspectors may be utilized for this purpose. It would be of great help if the Bank stock report may be tallied with the Mortgagors stock registers and stock physically present in the premises periodically specially during the last days of season. There is no harm in putting few bales on weighing scale at random in order to check the average weight. A surveyor may be asked to accompany where any doubt as to the quantum of raw cotton is felt who would make an opinion regarding the quantum and quality. History sheet (statistical data) of each and every client must be maintained regarding their activity in terms of payment of premium, claims and the general attitude. One copy of this statistical report should be provided to the Surveyors at the time of survey assignment. Clever/prudent field staff may collect the necessary hidden information about the insured regarding the business activities, strength, liabilities, relationship with the financer and sellers and their claim history. Few Non-professional & non-serious parties should be avoided like few adventurers, gamblers, farmers who have merged in ginning business in last 10 years. They gamble on fluctuation of prices in the market and tend to hold the stock in wait of fetching maximum price level, the defaulters of taxes, fees, other Government dues, working with extra-high liabilities of the market, who could not pay back their loans and other liabilities, and those who are habitual claimants etc may easily be identified. Presence of sub-standard weight of cotton bales, inferior quality of cotton, long storage of raw cotton with out ginning, no movement of stock for a long time, no business activities in the premises, disturbance among the sellers, great difference in value of stock shown as pledged and value of stock physically existed are enough indications to avoid insurance at that particular premises. List of defaulted cotton Mills and recently a list of 103 cotton ginning/pressing factories has been announced by the Excise and Taxation department which may be obtained for reference. Strict command and control system should be evolved in terms of warranties and conditions to be implemented/observed strictly before during and after the underwriting/claim. Periodical visits of Field staff to the factories to observe the stock position comparison with the Bank record is an important factor. I offer my services for the same on the basis of my vast experience in this area. COMMENTS ON RECENT ALARMING INCREASING CLAIMS RATIO IN COTTON G & PRESSING FACTORIES -----------------------------------------------------------------------------------------------------------

Discussions have been conducted on the issue of alarming increase in claims ratio of cotton claims in cotton ginning and pressing factories during the past few years creating a great hustle and bustle among the community and consequently some serious steps like cotton insurance avoidance for Cotton G & P factories or revision & implementation of warranties aggressively. Lot of other ideas is also coming in to force but yet the route cause of this huge problem has not been addressed. In our age, say in 70s, 80s, and 90s or the era excluding last 8-10 years there was no such fearful condition in the cotton market & cotton insurance underwriting. Each and every Insurer was earning profit out of cotton underwriting and enjoying the controlled claim ratio in this head. Claims involving cotton bales, raw un-ginned cotton or even loose ginned cotton (in absence of automatic baling press) which can be considered the most hazardous commodity, were being handled by myself and other seniors surveyors from Karachi, Lahore and Multan on a very controlled percentages of losses. In more than 99% claims where un-ginned cotton was involved, settled between 2.5% to 25% and same is the case with losses involving cotton bales. Stock of un-ginned cotton in Hessian cloth bags were also surveyed which also remained limited to the same percentage of loss. Even claims of loss to loose ginned cotton were never settled on total loss basis. What is happening in last few years? At one side the bales are declared as FPIB and on the other hands the losses are being settled on total losses frequently. On the other side a very heavy percentage of loss is being allowed in partial losses of cotton bales and unginned cotton. It has been observed surprisingly during the recent years that stock of unginned cotton has been declared as total loss which has never happened in the history of Pakistan before. Deep thoughts should be given to this aspect of the issue as to why the cotton bales, raw cotton in shape of heaps or in boras have started burning rapidly now as compared to last 3-4 decades. It is also observed that the claims are being settled with out going through the proper procedure of survey which takes time and few surveyors who are very busy these days have no time to stay and complete the procedure. So the claims are being settled on bargaining basis after just completing the formalities to fill the belly of papers for survey report. This criminal professional negligence on part of few surveyors, mis-handling the jobs in the manners as mentioned above leads to a great mess-up and causing an irreparable damage to the whole structure and it should be stopped with out any further delay. As suggested earlier the NIC pattern of Surveyors approval and appointment should be introduced.

PHYSICAL HAZARDS
1. Bad housekeeping. 2. Poor maintenance of machinery. 3. Sub-standard electric wiring, fitting and fixtures.

4. Improper storage of waste material. 5. Long running/use of machinery/electric motors etc. 6. Presence of hazardous material. 7. Not maintaining the proper distance between the stocks. 8. Not maintaining the proper distance between the stocks and buildings. 9. Improper electric wiring. 10. Huge storage of raw cotton, cotton bales and seed. 11. Exposure hazards. 12. Cooking in the premises. 13. Smoking. 14. Frequent movement of vehicles. 15. Non-availability of proper fire fighting facilities in the premises. 16. No control over smoking, cooking inside or outside the factory. 17. Un-covered stock of cotton bales. 18. Stacking of cotton bales and other stocks close to the boundary wall which attract the attention of malice etc. 19. Presence of sweepings, bushes, fire wood, raw cotton bushes, grass, animals dander, waste cotton sticking on pipes, machines, electrical wiring, switch boards, roof, floor etc. 20. Undersize/under rated electric conductors, wires, switches, starters, motors etc. 21. Over-running of machines motors. 22. Presence of pre-cleaners, condensers, drying machines in the open compound close to the stocks of cotton. 23. Non-removal of metallic waste from raw cotton before feeding for ginning. 24. Hanging electric wiring with walls, pneumatic pipes, frames, buildings etc. 25. Use of mobile electrical driven machinery. 26. Un-happy and un-satisfied factory workers. 27. Combination of illiterate factory owner and cunning/dishonest factory Manager.

COTTON POLICY While making cotton policy the above factors should be kept in mind. Moral hazards are not infrequent and so as the physical hazards are. For a newly launched insurance company aggressive cotton policy particularly for cotton ginning and pressing factories, keeping in view the above facts would not be feasible. Focus should be made to establish a good infrastructure by appointing loyal and sincere workers establishing the branches in key areas. Gradual start in this respect would be advisable and in the meantime market study, behavior of other insurers and their policies, behavior of insured community and surveyors working in the region, data collection regarding claims history and bad reputed parties, should be gone through. After establishing a compatible infrastructure and practical study of the market in first 23 years the cotton policy should be modified/up-dated accordingly.

To take control over claims the choice of surveyors should be given prime importance. Pet Surveyors working with leaders (big insurers) would always be loyal to the leaders even if they are not appointed by them to survey few claims. It has been the practice of the market that the Managers of big insurance companies get all the surveyors loyal to them appointed on a claim and then achieve the results of their choices. Further more the Surveyors who are working with the Banks by fetching valuation business always take influence of the Banks while settling the losses because of the business interest of surveyors with the Banks. So the surveyors enlisted on the panels of Banks for valuation business should be avoided. Prompt intimation of claims to the head office should be assured and in return prompt appointment of surveyors in order to secure the prima facie evidence of loss. A fool proof system of appointment of honest, professionally competent, un-prejudiced surveyors should be evolved. What I strongly suggest is to enlist all the available lot of Insurance Surveyors and system of turn-by-turn appointment should be introduced. Categories according to the experience should be made prior to evolve this system. I assure that lot of malpractice would be mitigated by initiating this step. Keeping in view the above data more suitable warranties should be drafted in English as well as in urdu. A set of warranties already in use should also be attached with the policy in urdu language. We may provide the same if so required. Heavy risks should be inspected specially at the end of season by a competent and honest surveyor. We had undertaken the job of risk inspection including the quality/quantity of stocks in relation to stock reports/DP on behalf of National Bank of Pakistan and as a result of that inspection in whole of Bahawalpur Circle some surprising results had come in to light so it is always helpful for the underwriters to go for risk inspection periodically. TERM OF FPIBB (FULLY PRESSED IRON BOUND BALE) The undersigned has discussed the interpretation of above term with many underwriters and pressed upon to define the term in the policy. Fully Pressed Iron bound cotton bale means a solid bale of ginned staple cotton of standard MNV and quality duly tied with 8 turns of standard quality of iron hoops or steel wire rings weighing 170 kilograms net with 5% variation in weight at 8.5% moisture contents and for average weight of 17000 kg net weight of a lot of 100 bales with variation up to 3% plus minus. Density of 17kg/cft is sufficient to define a cotton bale as fully pressed. Warranty for providing a minimum level of local fire fighting facilities should be designed and inserted in all the policies. Note: - List of defaulter cotton Mills is being attached as a PDF file.

Any other information if required may be notified please as the information regarding cotton underwriting and claims is an endless subject. Branch Managers may however be advised to consult before underwriting any risk and they would be properly guided on the basis of information present in our office. In case the IAP or any member of IAP individually requires a Survey of the market in any particular context, this office may be contacted for provision of professional services for that matter. Other reports on the topics of inflammability of FPIB cotton bales and key hints to control malpractice in motor claims have already been issued and circulated to all concerns. Another brief noting is being circulated on the topic of identification& key hints to control malpractice in cotton fire claims. KEYNOTE: - From the above opinion it should not be misunderstood that the insurance industry, insureds/Surveyors/Bankers community lack honest, competent and trustworthy people. We should be proud of the presence of good people every where who are contributing to mitigate the corruption day-n-night at their individual and collective capacity. For further enquiry please contact: -

letme_winyou@yahoo.com