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Tuesday, June 28, 2011

Demystifying Insurance – What is Winchester drive in Electronic Equipment Insurance

What has a .30-30 lever action rifle to do with Insurance terminology ?

The Insurance Policy in its simplest form is the contract between the Insurer and Insured which determines what is insured, what is indemnifiable and the insuring terms and conditions – the contract comes into play after offer, acceptance, payment of premium and formalising the document.  Mostly Insurance Policies are standard forms, prepared by the Insurers. 

Most policies do draw reference to the proposal form as forming the basis of the contract.  Obviously understanding the policy by reading the terms and conditions to which it is subjected to is the expected duty of the Insured.  Other than Marine Cargo Insurance written in MAR form – generally all policies have a similar flow.  There would be the Title, Recital clause, Operative clause, Schedule, Exclusions, conditions, endorsements and attestation clause.  Most insurance policies are either ‘specified peril’ coverage which lists out those perils covered against or ‘all risks’ – which are exclusion driven. 

The Operative clause often referred as ‘insuring clause’ or ‘insuring agreement’ defines the obligations of the Insurers and defines the extent of liability and circumstances of indemnification.  Life would be simple if the spirit of drafting is understood in the same league by the Policy holder – however real life does keep throwing out surprises.  There is the oft quoted ‘contra proferentem’ rule – a rule of contractual interpretation which provides that any ambiguous term will be construed against the party  that imposed its inclusion i.e., it will be taken against the interests of the Insurers who drafted the policy document.   But before going to that the general principles are that : 
-         words will be given their ordinary and natural meaning
-         the context in which the words appear in the Policy will be considered
-         the main object or the purpose of the policy will be taken into consideration
-         if words are ambiguous then contra proferentem rule shall apply.

However, each policy is to be judged on its own.  A certain phrase contained in one policy may not  be determinative of the meaning of the same phrase in a different policy.  In India we have two regulations of IRDA which have direct bearing :  protection of policy holder interest and File & Use requirements.  It is expected that policy contracts are in simple language comprehensible to common man…

There surely would have been times when upon reading a policy, you  felt that life would have been easier if only the terms had been direct, simple and easy  to comprehend !!!!  Here is a classic example of a Policy which I stumbled upon. 

Electronic Equipment Insurance Policy has been in vogue for decades.  This is a very comprehensive policy containing 3 sections and in Sec I which covers equipment – provides indemnity against sudden and unforeseen physical loss or damage from any cause, other than those specifically excluded.  Now this post is on insuring terms, conditions, coverage and what is excluded but more on the simplicity and how easy are the terms to understand !!!

The policy is intended to cover all equipments with ‘electronic components’ and not restricted to Computers alone – thus would encompass host equipments like bio-medical equipment, X-ray equipment, Audio/Video equipment, micro processor equipment and more.  There has to be a schedule which would describe the items covered i.e., the subject matter of insurance and the Excess is also specified. 

This was a Tariff product for long and most Insurers have similar wording.  The Policy Excess is defined under following criteria:-

a)     for equipments with value upto 1 lac / above 1 lac
b)    equipments other than Winchester drive / for winchester drive.

Looks pretty simple and straight forward – but what is this winchester drive and why a distinction based on that, when the Policy is not intended to cover Computers alone !! – may not have a straightforward answer even from those who have been underwriting and handling this insurance for ages.   Here is something on Computer hardware before we try and answer what is a ‘winchester drive’

A PC or a Desktop is made up of multiple physical components of computer hardware, upon which can be installed a system software called an operating system, and a multitude of software applications to perform the operator's desired functions.  The major components of a computer are :  Monitor, Mother board,  Central Processing Unit, RAM, Expansion cards, optical disc drive, hard disk drive, key board, mouse, speakers and more.   The motherboard is the main component inside the case. It is a large rectangular board with integrated circuitry that connects the other parts of the computer including the CPU, the RAM, the disk drives as well as any peripherals connected via the ports or the expansion slots.  RAM (random-access memory) stores resident part of the current running Operating system.     Still what is Winchester Drive ???????? 
There are several interface standards for passing data between a hard disk and a computer. The most common are IDE and SCSI. Winchester being the name of one of the first popular hard disk drive technologies developed by IBM in 1973.   It is  the computer hardware that holds and spins a magnetic or optical disk and reads and writes information on it.  It could be termed as the other name for the Hard disk drive.  HDD is a non-volatile, random access digital data storage device. It features rotating rigid platters on a motor-driven spindle within a protective enclosure. Data is magnetically read from and written to the platter by read/write heads that float on a film of air above the platters.  This was introduced by  IBM in 1956.  As is with the electronics and components its costs have fallen and size shrunk whilst its capacity increased dramatically.    The modern day  HDDs operate on high-speed serial interfaces; i.e., serial ATA (SATA) or serial attached SCSI (SAS).

The .30-30 cartridge was first marketed in early 1895 for the Winchester Model 1894 lever-action rifle.  The .30-30 (thirty-thirty), as it is most commonly known, was the USA's first small-bore, sporting rifle cartridge designed for smokeless powder.  Winchester Model 1894 is a lever-action rifle which became one of the most famous and popular hunting rifles. It was designed by John Browning in 1894 to chamber rounds loaded with smokeless powder, and was produced by Winchester Repeating Arms Company through 1980 and then by U.S. Repeating Arms under the Winchester brand until they ceased to manufacture rifles in 2006.

For computer hard drive, the name  winchester’ came from an early type of disk drive developed by IBM that had 30MB of fixed storage and 30MB of removable storage; so its inventors called it a Winchester in honor of its 30/30 rifle. Things have changed repeatedly  - the modern disk drives are faster and hold more data, the basic technology is the same, so Winchester has become synonymous with hard disk drive. 

In 1953, when developed by IBM it was Random Access file with high capacity, rapid random access at a relatively low cost.  Its commercial usage began in 1956  - those were HDD of large, sensitive, cumbersome devices.  Reportedly, drives with removable media resembled washing machines in size and often required high-current or a three-phase power supply due to the large motors they used.  Inb 1980,  Seagate Technology introduced the ST-506, the first 5.25-inch hard drives, with a formatted capacity of 5 megabytes.  During the mid-1990s the typical hard disk drive for a PC had a capacity of about 1 GB. As of  2010, desktop hard disk drives typically have a capacity of 500 to 1000 gigabytes, while the largest-capacity drives are 3 terabytes

The capacity of the HDD are generally represented in megabytes.  (1 MB = 1,000,000 bytes), gigabytes (1 GB = 1,000,000,000 bytes) or terabytes (1 TB = 1,000,000,000,000 bytes.  When the unit prefixes like kilo- denote powers of 1024 in the measure of memory capacities, the 1024n progression (for n = 1, 2, …) is as follows:
          kilo = 210 = 10241 = 1024,
          mega = 220 = 10242 = 1,048,576,
          giga = 230 = 10243 = 1,073,741,824,
          tera = 240 = 10244 = 1,099,511,627,776,

With all the changes,  should our Policies still fancy ‘winchester drive’ or should they have a direct reference to the hard disk drive  - One need not be any Expert to answer this !!!

With regards – S. Sampathkumar.


  1. good and informative date

  2. the words are that of insurer and lack of clarity also belongs to him - Sameer

  3. honest confession of the confusion by Insurer himself - Nagraju

  4. the confusion is confounded as most times, the Insurer would ask the hapless surveyor to interpret the terms and fight with the claimants on the interpretation that they feel and think - rather than puttings it in words in the manner that they want it to be represented - sort of why i should i bother till I am asked to explain seems to be the attitude - shah

  5. Sir, you have brought out the intricacies and avoidable complications in a nice manner. but do the Insurers really think or explain what could be the subject matter or what are the items that can be covered under EEI. They take in everything that is proposed and once claim is reported, the battle is fought elsewhere firing from someboyelse's shoulder - Janani

  6. Dear Mr.Sampath,

    It’s true that the insurers should remodel their policy wordings, conditions and warranties. I have some other experiences in the case of MBD insurance, where it is compulsory to insure it on reinstatement value and when a damage occurs for a particular machinery, depreciation will be applied even upto 75 percent for just 3 years old machinery for the movable parts. Then why do insurers insist the insured to insure those parts on reinstatement value basis? Heavy machinery like Gensets, Windmills etc. the main components such as Gear box, Hub, shafts break system etc involve heavy costs. So, why can’t the insurers apply depreciation for those movable parts while accepting the proposal and charge premium on that basis? I hope this should be the proper principle of insurance.

  7. I am in the survey field for more than 2 decades and have not met an Insurer who would bring out so much of clarity on Insurance Policies... Hats off - Gupta..

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