IMIA 9-27 (92) E Has the insurer anything to offer to his client t hat the Fire insurer cannot offer more cheaply and more efficiently?

This is a question t hat potential clien ts in and commerce - be they manufacturers or other operators of plant a nd equipment - have been asking themselves since the beginning of the industrial era.

Ev idently , t o date , they have gen e r a l l y a n s we red t h i s critic a l questi on in the affi r mative : otherwi se Engi neer ing i n s u r ance would not have acquired the i mportan ce i ~ h ~s not on l y in man y industria lized countr ies but also in t hreshol d coun t r i e s a n d even d e v eloping nation s . This importance is refle c t e d in I MIA sta tis­ t i cs, Which show r e a l g rowth r a tes in Engineer i n g insurance f o r the l a st 25 y ears .

Bu t t h e qu e s t ion is s till on e t h at we En gin ee r i n g insurer s should keep asking ourselves critic ally . We do not want t o be c ome in­ flex i b l e and set i n ou r ways , loth to dep a r t from traditional habits. Rather, we want to rec ogni ze changes i n the n eeds of our clients and take the i n i t i a t i v e i n s a t i s f y i n g them. In a rapidly changing e c onomi c en vironmen t, Engineeri n g i n s u r e r s should not only be l ookin g to maintain the i r p roven function as r isk car­ riers fo r demand i n g risk mana gers of f irms, agent s and b r o ke r s , but a l so t o expanding this role even further.

With this object i ve in mind, our self-que s tion i n g should thus l e a d to an ove r all stocktaking of the situation i n Enginee r i n g i nsurance and t o ideas f o r its f urther development.

Th ere are t wo main reasons fo r res t r icting ou r c on s iderat i on s t o a compa rison b etwe e n Machinery insurance an d classical I ndustrial Fi r e insurance :

-F o r s ome y ears now, a s a cons equ e n ce o f c l i ent-oriented restructur ing, d i r ect i nsurers in individua l ma rke t s h ave been off e r i n g comme r cial and industrial all-risks cove r s. These c ov­ ers abandon t h e proven principles of coverage on a named-p e rils - 2 -

basis f o r classical Pr opert y bus ines s, particularly for F ire insurance of and contents. In s ome c a s e s , although currently much more sel dom than o ften assumed, comme rcial and industri a l all-risks c over s may a lso i n clu d e the r isks t radi­ t ional ly c overe d by t he annually r enewa b l e En gineerin g c lasse s of bus i n e s s (Machine r y and Ele c t r on i c Eq u ipmen t i nsurance ) and someti mes CAR and EAR insurance as well .

-I n a few countr ies , particularl y the annuall y r e n e wa bl e En­ gine ering insuranc es a r e written b y t he Property de p a rtmen ts of compos ite i nsu r e r s as a s i del i ne to Fire insu r a n ce. At these compos i t e s, Machinery insura n c e l e a d s a s o r t of "wal lflower" e xistence, carrying n o weight i n a nd s a l es con ­ s i d e r a t ions. The business is consequen tly disappo inting as r egards the development of its premium volume and fre qu e n t l y as l regards c l a ims experi e nce as we ll. This phenomen on is to be found particularly in countries where, h isto r i c a l l y , s pecialist insurers provided Ma ch i n e r y insurance in c onnec t i on with leg a l ly compulsory inspections on a virtual mon op o l y basis or wh e r e one c ompo s i te insurer writing En g i n e e r i n g insurance on a n intensive bas i s dom i n a t e s the marke t with very l a r g e market s hares.

Both developments - the offering of all -risks cove r s and t h e han­ dling o f Engineering a s a side line to Fire bu sin e s s ­ compe l u s to take a critica l look at t h e quality o f t h e Eng i n e e r ­ i ng c l a s s e s of business, especia l l y i n r e lation to F ire in­ surance. They c ompe l us to e stablish more c l ear ly t h e parti cu l a r strengths of these products in order to sec ure our clients ' demand f or them and safeguard the independence of En g i n e e r i n g i n ­ s u r ance in an e c on omic environment characterized by h i gh ly spe­ c i aliz e d , c ost -intensiv e t echnology that i s giving r i s e to in­ crea singly expensive l osses.

Fire insurance is o f t e n r egarded - correctly - a s the indispen­ sable " Life i n s u r a n c e " n e eded by every busin e s s , a l ife insurance in the bes t s ense of the word , s i nce it ens ure s a firm ' s s urvival - 3 -

a f ter a d isastrous f i r e o r expl osion by providing s ubs tant i a l sums f or rebuilding.

In con t r a s t t o this , Machinery insurance is regarded as "", no t necessary fo r e ve r y bu s i n e s s , but highly r e c ommen d a ble fo r ma ny f irms to p rotect t echnical ly sophi sticated and exp ensive capital .

Like mo st comparisons, t hese a r e not perfe c t ; one shou ld not take them too far, but they can help us t o a certain exte n t in pinning down the essential d i fferenc e s b e t we e n Engin e e r i n g a n d F i r e i n - surance.

F irst of all there is the c laims i n c i de n c e . As in Healt h in­ s urance, c laims .i n c i d en c e in Machinery, insurance i s very h i gh . I n German y, fo r ins tance , the s t a t istics of the Ger ma n Assoc i at i on of Property I n s u r e rs f o r 1990 show a figure of 0 . 7 claims per policy per y ear, i n contras t t o only 0.1 in Indus t r i a l F ire ( I F) and a mere 0.05 in Fire Business Interruption (FBI ). A whole series o f theoretical conclus ions can be drawn f r om this. One i s t h a t Machinery insurance a pp ears i d e a l ly s uit e d t o t h e a pp l i ca­ t ion of so-called exp e rience r a ting systems, whi ch take more account of the e xperience o f individual policies , whereas IF , l ike , must r ely mor e on generalized observ a t i on s of collecti ve statistics f or calc ulat ing t he right risk pre mi um. It is pleasing to r e mark t h a t the a verage annual p remium o f the 70,059 Machinery pol icies that existed in Germany i n 19 9 0 was , at DM 10,840, lar g e enough fo r the h andling of ris k s on an in­ dividual basis to make commercial sense . By compari son, t h e ave r a ge premium in Fire is on l y DM 4 ,421 , in FBI DM 4 , 8 25 ( i n MBI it is DM 18, 3 51 !). I have a l r e a dy indica t ed t hat t h i n g s a r e t h e other way round as far as the average claims amo unt i s concerned : in I F it is DM 31,272 (in FBI e v en DM 101,767 ) compared with DM 13,103 in Machinery i n s u r a n c e (DM 4 5,572 in MBI ).

Th e c oncern with individu al r i sk c ircumstance s - wh i ch i s bo t h poss ible and neces s ary i n Machinery insurance - and the appli ca- - 4 -

tion o f exper ience rating as oppos ed t o statist ica l obs e rvations a la mortality table i ndica t e ve r y we l l t h e f u n damental ly dif­ feren t charac t eri stics o f Machinery a n d Fire insurance. In the f i rst case one n eeds an e ngi n e e r , in the sec ond a n a ctuary . Of c ours e, thi s is greatly simplified : the F ire i n s u r e r a l so uses engineers, a nd the Ma ch i n e ry ins u r er l oo ks at s t a t istics , bu t t h is ( exa gg e r a t e d ) s imp lifi c ation does make some things c l ear . Thus, g ranting d i scoun t s for good c lai ms e xperienc e f un damen t a l l y con f l ict s wi t h the character of Fi r e ins u r a n c e ; con v e r s e l y, serious adverse selection e nsues i f the Machinery i n s u r e r "stub­ bornly" a pplies tariff rates a n d do e s n ot take a ccoun t o f i n ­ d ivi du a l risk circumstances and l o s s experie n c e .

This situation is e ven more pronounced i n EI cove r. I n ME I , r i s k assessment and rat ing ( pa r t i cu La r l y in Europe ) i s so det a i led and l geared to the specific case t h at i n negative terms it is refer r e d to as an occult s cience and i n positive terms a s a c omplete r i sk management stu dy . A Swiss cedant on c e said tha t i n t he MEI analysis o f t he v a r i ou s l oss s equence and l o s s mi n i mi zat i on s c enarios he d r e w more on his general -staff trai n i n g i n the Swi s s a r my t h a n on his tra ining in i n s u r an c e .

Conversely , i n FEI in s ome count rie s insure r s are sti l l emp l oy i n g such a g eneralized app roach that t h e p remium is c a l cu l a t e d using a s imple f a c t o r from t he Fire p remi um. I n the e v ent o f a l o s s , howe ver, things tend t o become more case-specifi c in FEI a s well - h ardly surprising with an average c laims amount o f over DM 1 00 ,000! Exp e r i e n ced los s adjus ters are e mpl oy e d to esta bl i s h t h e s ize of t h e indemnifiable l os s . I n MEI, on the o t h er han d , i t is frequ ently n ot onl y a case o f establishing the i nde mn i f i a b l e f inanc i a l loss but a lso - initi ally - of mi nimiz ing losses , s hortening downtimes, procuring r epl ace ment p a r t s and seeing what prov isional repairs can be done - in sho rt , emergency engineeri ng ser v i ce t o s ys tematically master the sit u a tion t h at has arisen.

This p r ovides u s with a good l ead - i n to the b a s ic qu e s t ion of why a cli e n t buys Machine r y insurance o r, to put it a no the r wa y , of - 5 -

wh a t Machinery insurance has t o o f fer.

Ma chinery i nsu r a n c e s ome times u s ed to be mo ckingly refe rred to a s "luxury c over" and it is true t h a t on ly i n special cas es can i t c l aim to o f f e r protection a gainst c ata strophe l o s s e s wh ich thr e a t e n a f i rm ' s existence . Su ch special c a s e s would be when t he bus iness on ly has one, o r a f ew, very expens i ve machi n es that are used fo r earning its e n tir e rev e nu e . Thus in t h e c a s e of the operator of a mobile crane , a chipboard pres s or a f ew nume r i ­ c a l l y controlled , highly specialized machine t ools s u c h as tho s e used by a supplier o f parts for t he mo tor indu s t ry , Ma ch inery i n­ surance can dra w on t h e conv i ncing a r gument that i t provide s catastrophe c over, l i ke Fire i n s u r a n c e .( Th e same a pp l i e s t o Electronic Equipmen t i n s uran ce for a l a r ge comp uter cen t r e ). In all other c ases t h e r easons fo~ buying Ma c h i n e r y i n s u r a n c e mu s t lie e lsewhe r e .

Both types o f annually r e newable Engine ering insu r a n c e are par­ ticularly successful in two completely different segments of the market: on the on e hand with l o c a lly based small t o medium-size d f i r ms; on the o t h e r with t arget r i s ks such as s tea m pow er sta­ t ions , paper-mills and opencast operations, wi th in­ dividual p i e ces of machiner y that cost hund r e d s of million s o f Deutschmarks.

Machinery and Electronic Equ i pmen t insurance have a longsta n d i n g , loyal and stable clientele of smal l family business e s, i n trade a nn d craft, medium-si zed comme rcia l undert akings o f all kin d s , c oope ratives, municipal utilities and medium-sized i ndus t r i a l firms. This En g i n e e r i ng bus i n e s s has produced sat isfac t o r y results and has grown over d e c a d e s i n step with e conomic devel op­ ment . Th e contact wi th these clients i s naturally established by s ole and multiple agents and by small, r egionally op e r a t i n g brokers. Bu t the longstanding nature of the association is achieved by intensive c lient- support from technical expe r ts emp loye d by t he i nsur e rs .I n p artic ular, t his support has t h e chance t o prove i ts v a l u e aft e r t h e o ccurr ence of l o s s event s , - 6 -

whose r r e qu e ncy, a s alre a dy mention ed , i s abou t 7 to 1 0 time s a s high as in Fire insurance .

Such expert support, based on knowledge which is c on t i nu a l l y up­ d ated as a result o r experience wi t h s im ilar losses at o the r firms, may b e prov i ded no t only by a n allround r egional engineer but , i f n ece s sary, also by speciali s t s in the line or busine s s conce r n e d, and is t h e most va luable s ervic e r ende r e d by the in­ surers to t h ese smal l a nd medium- s i z e d c lient s . On e or t h e most i mpo rtant tasks is determining c a u s es of l o s s e s inde p e n d e n t o r the manufacturers o r the machinery c oncer n e d and con s e qu e n tly giving speciric recommendations for l os s pre ven tion. The policyholde r thus rece ives from h is insurer the servi c e s o f a spec i alist which he c annot p rovide h i ms e lr r o r r e a sons or cost, a spe cialist who knows t he s treng,t h s and weaknes ses or v arious makes o r machine and a dv ise s his client objectively - in t he understanding that t h is i n the i n t erests or both parti es .

This type o r l on g-t erm coope r ati on be t we e n policyho l d e r s and i n ­ surers is n aturally e n gender e d most where, as in the UK and Nor t h America, legally required i n s pec t i on s ror certain t e chn ical facil ities ( l irts, pressure ve s s e l s, s team generators, e t c . ) a r e c arried ou t i n conn ec t i on with Boiler and Ma ch inery insura n c e . But s uch l ongs t a n d ing prove n cooperation a lso e x i sts in other countries without the se legal requirements . I n Germa ny a n d Austria, s emigov e rnme ntal ins pection s o r t ests are carried out by technical inspection a g e n cies; but chi pboa rd presses , r or ex­ ample, are only i nsur ed fo r brea kd own and business int e r rup t i on i n conj unction with regular i n s p ection s by the Machi n e ry i n s u r e r .

I f the Mach ine ry i nsurer can prov e h is wor th i n the e v en t or a loss - through promp t, t r ansparent c l aims s ettl ement, help in ex­ pediting r epairs, and p r a ctica l s uggestion s r egarding ruture l oss prevention - this can also provide a b ridge f or con ­ solidating and exp anding t h e relati onship with the client be yond Mach i n ery i nsur anc e , in othe r classes or business as we l l . Th i s i s p a r t icu l a r ly t r u e if t h e s e other c lasses canno t provide t he - 7 -

s pecial t ype o f client-cont a ct that exis ts in Machinery insurance because of their l ower loss incidenc e .

The profits recorded by Ma chinery insurance over many y e a r s ul­ timately confirm t h a t , as a result o f t his f r e qu e n t c ontact, the insurer's knowledge of t h e individual r isk - f r om the t e ch nol ogy u s ed , its maintainance and condition to the expecta t ion s o f t h e p o licyholde r - is much be t ter than in class e s o f bu s i n e s s wh ere comput e r - written stan dard let t ers a re the chief fo r m of com­ mun ica t ion .

These f a c t s also explain the hesitation o f poli cyhol de r s and suc­ cessful i n s urer s i n Mach inery business about p res s i n g f or rapid a nd sUbstantial i n creases i n dedu c t i b les . When small and medium­ sized c l a ims are paid, this no t, only g ives the recipien t the suc- c ess f ul f e e l i ng of getting something back f rom his insurer once in a while. The occa s ion also provides u s eful i n f o r ma t i on : for examp le, i n f ormat i on on experience wi t h comparable hea v y con ­ struction e quipmen t , a tip about t h e lates t ove rloa d prevention measur es for tower crane s, the a ddress of an i nexp e n s i v e a nd reliable r epair firm for rewind i ng a lon g - s ervin g e lec t r i c motor. I f the insurer ' s s p e c ial ist who adv ises the c lient on thes e tech n i c a l matter s a l s o possesses i n s u r a n c e skill s , a newly ac­ quired machine will not only be adm i r e d bu t also i n clu de d in t he insurance policy wit h the cor r ect sum i nsured.

And , if ther e is a Business Int e rruption p ol i c y , t here are als o recurrent opportunities to t a lk abou t t h e commerc ial side of the risk as we l l as t h e technical side . Thes e oppo r t un i t i e s requi r e a s pec i a l i s t in the line of business c on c e r n e d if the ins u r e r r eal ly wants to be wh at h e so o f ten p r omi s e s in modern PR cam­ paigns : a n u n derstan d i n g partner fo r h i s c l ient. On l y someone wi th a s pecia list kn owl e dg e of b r ewing t e chnology and the curr en t economi c sit u a tion of the br ewing indu s try can properly attend t o the MBI insurance o f a medium- size d brewery and f u r nish i t wi t h a dde d v a l u e . Mo r e over, he c a n do this in such a n e xp e r t manner t hat he will no t be easily ousted from his pos ition as trusted - 8 -

r isk a dv isor by a c ompetitor who o ffers a s p e cif i c insuranc e produc t a f ew percen t cheaper .

Th e proof o f t he v alu e o f the insurer's services after the rela­ t i vely f requ ent l o s s e v ents , t he joi nt efforts to get product ion going again within the t ime excess if possible, con s ol i da t e a nd strengthen this r elat ionship of t rust.

If a firm does not want this direct s ervice f rom a p r a c t ically experienced , spe c ial i st engineer - i n regu lar inspe c t i on v isits and after t he occurr ence of loss e ve n t s - i t should p robably not bu y any Machinery insurance a nd pe r ha p s s hould not eve n be o f ­ f e red a policy eit her.

I n the current debate a bout assessing the c onsequ ences of modern f a n d the ecological e f fe c ts o f i n du s t r i a l p roduction, the word "sustainability" is frequ en t ly used . Th e demand is for s ustainability e verywhere: on ly those processes should be per­ mit ted which a re "sustainable" i n this f orm fo r a long period, c an b e kept go i n g wi thou t r isk and are transpare n t . This nat urally rules ou t the destruction or overexplo i t a t i on of nat ural resources and p oints i n the d irect ion of r ecyclin g .

I n ou r c on t e x t one could - in modern parlance - say : on ly within the framework o f the just described are Machine r y and ~. ME I insurance " sus tainable", are they acceptable for the i n s u r e r and an interest i n g p ropos i t ion f or the insured.

Na t u r a l ly a Fire i n s u r e r can try to s e ll Machinery i n suran c e t o a smal l or medium-sized busine s s wi t h its Fire cover, more cheaply than t h e specialist En ginee r i n g insu rer .

He c a n do s o more c h e a ply , it is argued, because h e do es n o t p r ovide a ny engine ering s upp ort serv ice f or t he c lie nt ' s machinery. Howev er, at t h e l a t e s t when a loss e v ent o ccu r s (a n d , as p r eviously stressed, this h appens much mor e frequently than i n Fire ins u r ance ) , the lack of famili a rity with the ris k becomes - 9 -

p a i n rul ly o bvious, ror bo t h pa r t i e s .

On the othe r hand, ir t i me a nd expense is invested in pro v iding engineering services - t o the benerit or both the insured and the insurer - then high Machinery premiums, h igh premium rates on the sums insured of the machines covered, just cannot be dis­ p e n s e d with. The a l l oca t i on o r premi um to insured object in this approach i s a bsolutely clear . Inde e d , it is syste ma t i c a l l y wrong to apply low premium rates to high sums ins u r e d , includ ing build­ ings, supplies, etc ., and i r this is done, transpare n c y s u r r e r s as a r esult . Particularly the "solid" owners or sm a l l and med ium­ sized businesses - the ideal candidates ror insurance - ort e n do not appreciate such u nclear a rrangements .

Especially ir ris k managment ph, i l osophy spreads rurther among the se c t or o r small a n d medium-sized c ommercial a nd industr i a l c l ien t s , we see goo d ruture opportunities r o r Machi ner y insurance as specializ e d cover i n this ma r ke t segmen t . I n many countries the same applies to Ele c tronic Equipmen t i n sur a n c e .

Let us now l o o k at a s econd traditiona l ly very signiric a n t ma rket s egment ror Machinery insurance: comme rcial ly operated p owe r supply installat ions , r rom hyd roe l ec t ric power stations, g a s com­ p ress ion stat ions, c onvention a l steam and gas-turbi n e powe r sta­ t ions t o the l a r g e s t nuclear pow e r p l a n t s .

I n thi s ma rke t segment it is becoming increasin g ly dirricu l t ror t he i n surance industry t o wo r k at a prorit . Th i s applies e s p e c ­ ially to Machinery insurance. I t applies t o a l ess e r ext e n t to Fire ins u rance, since mos t or these risks are gene r ally we l l protect ed agai n s t rire and c onstitute d e s i rab le F ire bus iness as rar the ir loss experi e n ce is conce r n ed.

Th e temp tation has thus be en very g reat ror Fire insurers t o convert these large policie s , wi t h Fire s ums insured or man y bil­ lions or Deutschmarks, to. all-risks covers including Machinery i n o r der to secure bu siness ror themselves . Despite herty loadings - l a -

on the Fire rates, such conversions have mostly brought the in­ s urers substantial l osses and ma ny headaches; t yp ical examples a re t he power compa n i e s in Israel, Belgium and t h e UK .

Where the value of machine ry represent s 80 % o f the Fir e sum in­ sur e d and Ma chine ry loss e s average mor e t han ten times t he amo unt of F ire l o s s e s in the long term, even a loading o f 100 % on t h e Fire rate cannot cover the Machine r y risk .

But if the Machinery risk is rated separately and appropriately, the combined a l l-r i s k s premium r eaches a l e vel that is r eally n o longer attracti ve for v ery large clients . In a d dition , there is a g r owi n g number o f cases in which the r isk managers of such clients prefer to obtain services f or a f e e from independent e x­ perts, services t h a t are separate, from i nsur a n ce cover and whose costs are clear . Accordi ng to a McKinsey survey in the USA, 70 % of ris k managers wish for "unbundled" servic e s from ins u r an c e c ompani e s , i.e . s pecialized services such as ris k- s pe c i f i c los s prev e n t ion, loss assessment and loss settlement . Access to the exper t s' own loss experi e nce re c ords and l oss stati s t i c s is valued p a r t i cularly highly . This trend h as r eportedly already made sUbs tantial progress i n t he USA . Competition forces the in­ sur er t o reduc e cos t s . He thus gradually loses the expert i s e for t h is marke t segment and ultimatel y degenerates int o a chea p provider o f financ ial services, wh o like a p r ov i de s mon e y

~ . when needed, but wi t h ou t any obligation for it t o be r e p a i d .

He re n e ith e r Fire nor Ma ch i n e r y insurers, and to an even l e s ser e x t e nt c l i e n t -oriente d all-risks insurers , will have a l on g - t e r m chance of achiev i ng pos i t ive results with t h e ir s e rvices i f the r e quisite insurance p r e mi um for the s till interesting c overage of very large losses i s not implemen ted in t h e ma rke t with all the n e cessary saftey l oadings and a sUbs tant ial r isk l oadin g .

For Mach i n e ry i nsurance, we may sum up as f o llows :

The r i s k-s p e c i f ic expert per s on a l service in dealing wi th claims - 1 1 -

and providing on-the-spo t l o s s prevention advice at the i n s u r e d compan y will continue to ensure stable client relat ionships in the sector of small and medium-sized commercial and industrial risks. On the o t h e r hand, t he absorption of Machinery and Electronic insurance in a more s t andardized, purely c ommercially f unc tioning all-risks insurance wi l l reduce such service and c on s e qu e ntly lead to e ven mor e price competition a mon g insurers . I n con n ection with t h e o ther p itfall s of these n e w t yp e s of c ov­ erag e, such as i n s urance c over for hitherto uninsur e d and hence unknown risks, this will lead to the unsati s f a c t o r y r e sul t s situation i n all-risks i n s u r a n c e already f amiliar f r om s e v e r a l insurance markets.

I n t h e marke t s egment " heav y indus t r y a n d p ower supply" t h e service provided by the Machiner, y and Fire insurers b e c ome s in- s ign i f ica n t for the Client in comparison with t he c os t advantages achie v a b l e from t he competition , s i n ce fo r a fee he can purchase t h e serv i ce from " ind epe n d ent" e xper ts mo re cheap l y i n h is opinion and without a n y o bligation o r l ong-ter m commitment , a l ­ though he usually h a s to do without t he e xtensiv e los s know-how which only insurers can provide.

If on e turns again to the que stion Which forms t he t i t l e of this p a per: "Has the En gineerin g i nsurer anything t o o f fe r to h i s c l i ent that the Fire i nsu r e r c an not o ffe r more cheap l y and more - efficiently?", one c a n g ive the fol lowi n g resume : fo r the c l i e nt wh o is seeking the necess ary t echn ical expertise fo r h i s machine ry - a r i s k man a g e ment partner - the Machine ry ins u r e r h a s somethi n g un i qu e and all his own t o o f f e r , somethi n g Whi ch a F i r e insure r c an n o t off e r . If a c l i e n t does not want this , the F ire insurer can natural ly sell h i m "cheap" Machinery c ov era g e wit h i n a n a l l -ri s ks p olicy (wh o s e r e s ults , howe ver, wi l l provide the Fire i nsurer with no j oy ) .

Wh eth e r t h e r e wi l l conti nue to be l a s tin g demand for the special ­ i z e d c l a s s es Ma c hin e ry , MBI a n d Ele ctronic Equipmen t ins u r a n c e i n f u t u r e i s not l east dependent on the quality of the a c c ompanyi ng - 12 -

service, the importance o f wh i ch I have repeatedly s tressed. I t i s c l ear t hat t he con tinua l and disproportionate rise in person­ nel costs c omp a r ed wi t h the price of machinery constitutes a big problem in this c onnection .

Many aspects of what has been said above apply analogously to CAR and EAR insurance .

Conrad Kellenber ge r

June 1992