Reasons Why Organization's Should not Ignore DIC Insurance Policy
What is DIC Insurance ?
Sometimes the term DIC or DIL can be used interchangeably in Insurance parlance too.
It is a special type of insurance, which provides additional flexibility for coverage of exclusions, limits or excluded perils.
Let us understand this by this way. In this Insurance World, Insurance coverage is arranged to soften the effect of any Loss or Damage of Insured property.
Insurance acts as a Cushion against any Catastrophic Loss or Damage to insured property.
Presence of Insurance lessens affect of any loss/damage to Insured property in two ways:-
Firstly, by compensating in terms of money Value i.e compensate the value of Damage property by provide Claim value of property as per policy terms and conditions
Secondly, by reinstating or replacing the damage property to similar kind of property before loss equal to or superior before Damage
But in both above way, Insurance compensate within its pre written conditions as per Policy Document. These conditions are pre written and agreed by both parties i.e Insured and Insurer in form of Policy Document.
In both above ways of compensating i.e by Money or reinstatement there are some Exclusions and limits of compensation in providing coverage of Insurance.
In this type of situation Difference in Conditions Insurance plays an important role in providing near full coverage to the Insured property.
DIC Insurance provides extended coverage to perils which are not covered by standard Insurance policy or Master insurance policy of any Organization.
Standard policies protects only against Known perils which are predictable and well defined in terms of their aftermath effect.
Normally, it is taken by big Organization who seeks Insurance protection to their Assets against major Catastrophic losses.
The primary Insurer remain less willing to underwrite expanded policies due to high premiums, which may lead to reduce market share of that Insurance product in competition.
Insurers underwrite risks which are in nature of low severity and high frequency.
What is Foreign Difference in Condition (DIC) Policy
In case of Multinational Organizations, they have Master Insurance Policy to cover all their Assets located in different countries.
But all Countries have different laws and regulation for Insurance coverage according to their underwriting rules.
So a Difference in Condition or DIC Policy is taken additionally to supplement these International policies for cover those gaps in Master policy and required coverage in that Country.
This type of policy is called as “Foreign Difference in Condition or DIC policy”.
Underwriting of DIC Insurance policy
There is no standard set of DIC coverage form. The underwriters or carriers who draft this DIC policy have their own set of rules and guidelines.
So one should be very careful in reviewing the policy wordings for covering desired coverage of Perils or insurance Limits.
Benefit of Difference in Conditions (DIC) Insurance enables Insured to protect themselves against
- Coverage for Perils(usually Catastrophic in nature) which are excluded in standard Asset policy
- Provide additional limits of coverage for specific Peril
Excess or Deductibles in DIC Policies
Most of Difference in Conditions (DIC) policies have higher deductibles due to objective of covering Catastrophic Losses which are not in frequent in nature.
Along with fixed Deductibles, they have percentage deductibles too.
Settlement under DIC Insurance policies
The Claim under these Difference in Conditions (DIC) policies are settled both in either reinstatement value or Cash value as discussed above.
Side A DIC coverage sits on the top of the Directors & Officers(D&O) policy and provide broder coverage to traditional D&O policy.
Side A Cover of DIC policy coverage works on excess side of D&O policy, and comes into picture one the Sum insured is exhausted or primary insurer fail/refuse to pay under primary D&O Policy.
Side B Cover of DIC policy provide reimbursement coverage to Directors & Officers towards Defence, judgment or Settlement cases.
Side C Cover of DIC policy is used to protect Publicly listed companies from claims against them by entity itself. Say Shareholder class action suits.
From above all three that is Side A, Side B and Side C cover,Side A DIC cover is most popular and widely used un D&O Insurance.
Limits of Insurance under DIC Insurance
Both Occurrence limit and Aggregate limit are used under DIC policy. In some cases, DIC policies also have a separate limits for Business Income (BI) losses.
List of Insurers that Sell Difference in Conditions (DIC) Policies
The major Insurers who sells DIC Insurance policy are as below:-
- Farmers Insurance Exchange
- AIG Property Casualty Company
- Aegis Security Insurance Company
- General Insurance Company of America
- Kemper Independence Insurance Company