Summary of ChaptersSr 1 Chapter Introduction to Insurance Short
Summary Purpose & Need for Insurance Insurance Pooling of Risks
& Resources Insurance A Social Security Tool Role of Insurance
in Economic Development Commercial Contract Vs. Insurance Contract
Four (4) Fundamental Principles of Insurance o UG (Utmost
Goodfaith)
2 Fundamental Principles of Insurance
o o o
II (Insurable Interest) Indemnity Subrogation & Contribution
PC (Proximate Cause)
3
Insurance Documents
4
Theory of Rating
5
Legislative & Regulatory Matters
6
Fire Insurance
Underwriting Documents Proposal Form Cover Note Policy
Certificate of Insurance (Motor & Marine) Endorsement Renewal
Notice The Fundamentals behind Rate Making: o Degree of Hazard o
Classification of Risks o Past Loss Experience Withdrawal of Tariff
Motor TP Rates Filing of Products Insurance related Acts &
Agencies Acts: Insurance Act, 1938; GIBNA,2002; IRDA Act,1999;
Marine Insurance Act,1963 etc. Agencies: IRDA, Consumer Forum
(National / State / District commissions), Ombudsmen IRDA
Regulations relating to 1)Insurers; 2)Agents; 3)Corporate Agents;
4)Broker; 5)Surveyor; 6)TPA; 7)Policyholders Standard Fire Special
Perils Policy Perils covered Standard Fire Special Perils Policy
Add on Covers Standard Fire Special Perils Policy Exclusions
Standard Fire Special Perils Policy Conditions Special Policies: o
Floater o Declaration o Floater Declaration o Reinstatement Policy
o IAR (Industrial All Risks) Policy o FLOP (Fire Loss of Profits)
1) Introduction to Marine Insurance 2) Contract of Marine Insurance
= Policy + Clauses
3)7 Marine Insurance 4)
Various Marine Clauses : I. Institute Cargo Clauses (ICC) II.
Institute Cargo Clauses (Air) III. Inland Transit (Rail/Road)
Clauses Rating & Underwriting Various Marine Policies : a)
Specific Policy b) Open Policy c) Open Cover d) Special Declaration
Policy Claims Introduction to Motor Insurance MV (Motor Vehicles)
Act, 1988 IMT (India Motor Tariff) Various Sections GR (General
Rules & Regulations) Types of Policies Page 1 of 43
5)
8
Motor Insurance
6)
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Rating Claims o o o o o
9
PA & JPA
10
Health Insurance
11
Liability Insurance
12
Engineering Insurance
13
Miscellaneous Insurance
Mediclaim: Who can take the Policy? (Individual, Family, Group)
What are the requirements for taking the Policy? Basic Coverage
Additional Benefits Exclusions Premium Computation Claims Procedure
Types of Policies: Individual & Group Cancer Policy (CPAA):
Critical Illness: OMP: Introduction Eligibility Premium depends on
(Age, Duration of Stay, Plan) Period of Insurance Types of
Policies: (B&H, E&S, CFT) Scope of Coverage Claims
Introduction to Liability Insurance Various Liability Policies: o
PLI (Public Liability) Act Policy o PLI Policy
(Industrial/Non-Industrial Risks) o Products Liability o Lift Third
Party Insurance o Professional Indemnity o D&O (Directors &
Officers) Liability Policy o WC (Workmens Compensation) or
Employers Liability Policy Introduction to Engineering Insurance
Various Engineering Policies: o CAR Vs. EAR (Contractor All Risks
& Erection All Risks) o MCE Marine-cum-Erection o MB/MI
Machinery Breakdown/Machinery Insurance o CPM Contractors Plant
& Machinery o BPP Boiler & Pressure Plant Insurance o DOS
(Deterioration of Stocks (Other than Potatoes)) o DOS (P)
(Deterioration of Stocks (Potatoes)) o EEI (Electronic Equipment
Insurance) Burglary (All Property is covered against Theft by
actual, forcible & violent entry into the premises) All Risks
(Covers Jewellery, valuables & antiques) Baggage (Only
accompanied baggage covered) Money (Money moving between specified
places) Fidelity Guarantee (Loss caused by the acts of dishonesty
of employees against Employer) TV (TV apparatus & antenna)
Pedal Cycle (Loss of cycle) Plate Glass (Fixed Plain Glass against
breakage) Neon Sign (Neon sign boards) Householders (10 sections
provided for various coverages) Shopkeepers (10 sections provided
for various coverages) Bankers Blanket (Money & Securities of
Banks) Page 2 of 43
Object: Benefit Policy rather than a Reimbursement Policy Types
of Disablement: PTD; PPD; TTD Scope of Cover: Table of Benefits
Additional Benefits Extensions Exclusions Conditions Rating Types
of Policies: a) Individual and b) Group JPA (Janata Personal
Accident) Policy
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14
Rural Insurance
15
Claims
Jewelers Block (4 sections covering various risks) Blood Stock
(Covers Race Horses) Cattle Sheep & Goat Poultry Dog Silk Worm
Honey Bee Horticulture/Plantation Agricultural Pump Set Salt Works
Cycle Rickshaw Animal driven Cart Gobar Gas Hut Insurance JPA GPA
Farmers Package Tribal Package Introduction Claim settlement
requires (Knowledge of Law, Principles of Insurance etc) How much
is payable? (The DSUE Rule) Types of Claims: Standard,
Non-standard, Ex-gratia General Claims Procedure: Preliminary,
Investigation & Assessment & Settlement General Claims
Documents: Claim Form, Surveyor/Investigation Report, Arbitration
and Limitation Post Settlement action: Loss Minimization, Salvage,
Recoveries
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Page 3 of 43
INDEX Chapter No 1. 2. 3. 6. 7. 8. 9. 10. 11. 12. 13. 15.
Chapter Introduction to Insurance Fundamentals/Principles of
Insurance Insurance Documents Fire Insurance Marine Insurance Motor
Insurance Personal Accident Insurance Health Insurance Liability
Insurance Engineering Insurance Miscellaneous Insurance Claims Page
No. 5 7 9 10 15 19 24 26 31 35 39 40
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Page 4 of 43
Chapter Summary: 1 Purpose & Need of Insurance 2 Insurance
Pooling of Risks & Resources 3 Insurance A Social Security Tool
4 Role of Insurance in Economic Development
Chapter: 1
Introduction to Insurance
1. Purpose & Need of Insurance An Asset is a property which
has an intrinsic value. It can be sold or
bought in the Market. The Two important Features of an Asset
are
1. 2.
Monitory Value (Money) Expected Lifetime (Time)
Examples of Assets: 1. A House 2. House hold goods (like TVs,
Refrigerators & other electrical/electronic items) 3. A Motor
Vehicle (like Car, Two Wheeler, Bus etc.) 4. Jewellery 5. A
FactoryPurpose & Need of Insurance Asset Peril 1. Loss of
Monitary Value & 2.Reduction in Life Time Hence, Insurance is
required to protect the Assets. Peril: Peril is the Cause of Loss
Examples of Perils: Fire, lightening, explosion, storm, tempest,
hurricane, tornado, flood, inundation (water damage perils),
earthquake, subsidence, landslide, rockslide, burglary, theft etc.
Different Meanings of Risk: An accidental event which results in
financial loss. Exposure to danger Loss producing event (like fire,
explosion, flood etc)
Subject matter of Insurance or property covered by insurance
(eg. A timber construction is considered to be a bad risk for fire
insurancepurpose. Here, the term risk refers to the subject matter
of insurance)
How Insurance Works? People who are exposed to the same kind of
risk come together & agree that if one of the members suffers a
loss, the loss would be shared among the group members. Example: In
a village, there are 400 houses, each costing Rs. 20,000/-. Every
year 4 houses get burnt resulting in a total loss of Rs. 80,000 (4
x 20,000 = 80,000). Since there are 400 houses in the village, each
owner has to contribute Rs. 200/- to generate a common fund (ie.
400 x 200 = 80,000). From this fund, the 4 people who suffered
losses can be reimbursed. Insurance cannot protect the assets nor
can it prevent the losses due to perils. The peril cannot be
avoided through insurance. Insurance can compensate the financial
losses to the extent possible. 2. Insurance Pooling of Risks &
Resources o Insurer : The Company which offers insurance protection
to the public is known as Insurer or Insurance Company. The
business of insurance is done by these companies. They collect
small amounts (premium) from the public & make a Common Fund.
Insurer acts as a Trustee of this Common Fund. Whenever the insured
suffers a loss, the Insurer makes payments from this common fund.
That is how, Insurance company pools the risks & resources. o
Insured : The one who is offered insurance protection is known as
Insured. He is a customer to Insurer.
o Premium : Small amount of contribution paid by the Insured to
Insurer for insurance protection is known as Premium o Claims : The
amounts paid by the Insurer to Insured who suffered a financial
loss due to an accident is known as Claims.3. Insurance Social
Security Tool As per Article 41 of Directive Principles of State
Policy, it is the responsibility of the Govt. to provide for Social
Security through Insurance. Hence, Govt. passed many Acts like ESI
(Employee State Insurance) Act, WC (Workmen Compensation) Act to
provide insurance protection as a tool of social security.
Insurance Companies offer many policies as Social Security Schemes
like JPA (Janata Personal Accident) Jan Arogya Bhavishya Arogya
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Raja Rajeshwari Mahila Kalyan Yojna Crop Insurance Hut
Insurance. 4. Role of Insurance in Economic Development Insurance
provides numerous direct & indirect benefits to individuals,
families, companies, industries, commerce & economy of the
Nation. Insurance protects the capital of the industry against
accidents Insurance removes fear & anxiety & encourages
free investment of capital in business. Thus insurance encourages
commercial & industrial development Insurance Policies act as a
Collateral Security to Banks & Financial Institutions to
advance loans Insurance earns foreign exchange to the country by
assisting exports & imports Insurance provides support to rural
economy by protecting cattle, livestock, pump sets etc.
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Page 6 of 43
Chapter: 2
Fundamentals/Principles of Insurance
Chapter Summary: 1 Commercial Contract Vs. Insurance Contract 2
Four (4) Fundamental Principles of Insurance Definition of
Insurance: Insurance is a Contract between the Insurer and the
Insured whereby in consideration of payment of premium by the
Insured, the Insurer promises to indemnify any financial loss the
insured may suffer due to the operation of a peril insured.
Definition of a Contract: A contract is an agreement between two
parties binding at law. Conditions for a Contract: Sr Conditions 1
Two parties: Insurer & Insured. 2 Offer & Acceptance: Offer
by Proposer (Proposal Form). Acceptance by Insurer - (Cover
Note/Policy) 3 Consideration: Premium from Insured. Promise to
indemnify from Insurer. 4 Consensus ad idem: Same thing in the same
sense. 5 Capacity of the parties: Not eligible to enter into a
contract - a)minors; b)persons of unsound mind; c)persons
disqualified from contracting by any law. 6 Legality: a)subject
matter shouldnt be forbidden by law; b)subject matter shouldnt be
fraudulent; c)subject matter shouldnt cause injury-person/property;
d)subject matter shouldnt be immoral or against public policy.
Special Conditions of an Insurance Contract:
Principles of Insurance 1. Utmost Goodfaith 2. Insurable
Interest 3. Indemnity 4. Proximate Cause
3.a) Subrogation
3.b) Contribution
1. Utmost Good Faith: Good faith means absence of fraud or
deceit. Utmost Good faith is good faith in the highest degree.
Material Facts: Facts which help insurer to make an underwriting
decision like whether to accept the risk, if so at what rate of
premium. Examples of Material Facts: Fire: Construction, Occupancy
etc. Marine: Method of packing, nature of goods etc. Motor: CC,
year of manufacture, purpose of use etc. Excepted Material Facts: o
Facts which diminish risk o Facts which are known or presumed to be
known o Facts that could be ascertained from the proposal o Matters
of law Breaches of Utmost Goodfaith: 1. Non-disclosure: It may
arise out of silence on the part of the insured. Contract becomes
voidable (can be accepted or avoided at the option of the insurer)
2. Concealment: Intentional suppression of material facts. Contract
becomes void. 3. Mis-representation: Statements made by the
proposer at the time of negotiations. 3.1 Innocent
Misrepresentation: Contract becomes voidable 3.2 Fraudulent
Misrepresentation: Contract becomes void 2. Insurable Interest:
Legal right to Insure. Examples of Insurable Interest: Compiled by:
Kamalakar. T Page 7 of 43
Interest arising from Ownership Interest arising from Joint
ownership Interest arising from Mortgaging Interest arising from
Law Interest arising from contract Interest arising from Legal
Liability Interest in life Interest arising from Insurance
When Insurable Interest must Exist?
Marine Cargo: At the time of the loss All other Insurances:
Throughout the currency of the policy
Assignment: Transfer of rights & liabilities of an insured
to another person who has acquired insurable interest. Only Marine
Cargo Policies are freely assignable whereas other type of policies
are assigned with the consent of the insurer. 3. Indemnity: Make
good the loss/compensation for loss Objects: To place the insured
in the same financial position as he was before the loss To prevent
the insured from making a profit out of loss 3.1 Subrogation:
Transfer of rights & remedies of the Insured to the Insurer.
3.2 Contribution: The right of an insurer to recover a
proportionate amount from other insurers who are liable for the
loss. 4. Proximate Cause: (Nearest Cause) If the loss or damage is
brought about by a single event, there would be no problem in
deciding the liability. If there are more than one cause at the
time of the loss, then it becomes necessary to identify the most
powerful & effective cause. That cause is termed as Proximate
Cause & others are Remote Causes.
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Page 8 of 43
Chapter: 3Chapter Summary: 1) 2) Sr Document 3) 1 4) 1 Proposal
5) 6)
Insurance Documents
Proposal Policy Cover Note Description Certificate of designed
to Proposal Form is Insurance elicit all material information
pertaining to a risk. Endorsement Proposal Forms are used in all
classes of Insurance except Marine Cargo. Renewal Notice The
questions asked in one class of Insurance Proposal Form might be
different from another. Some of the Common Questions relate to
Customer Details, Details of the Subject Matter insured, Previous
Insurance History, etc.
2
Policy
Policy evidences Contract of Insurance . It has to be stamped
according to the provisions of Indian Stamp Act. The general format
of a Policy is given under Printed Section Blank Section Contains
Variable Data which changes Contains Standard Data which is common
to all clients from customer to customer It contains the following
Sections Contents: a) Heading: Name & Address of Insurer. a)
Name & Address of the b) Recital Clause (Preamble): Introduces
parties to the Contract Insured c) Operative or Insuring Clause:
Perils Covered, Exclusions & b) SI & Premium Conditions c)
Description of the Property d) Warranties Clause: Warranty is an
undertaking by the Insured to insured do a certain thing or not to
do a thing. d) Period of Insurance etc. e) Signature Clause:
Signature of the Authorized signatory.
3
Cover Note
4
Certificate of Insurance Endorsement Renewal Notice
5 6
A temporary Document issued pending the preparation of the
Policy. It is generally issued when negotiations for insurance are
in progress (eg. Premises are being inspected to arrive at a
Premium Rate) A Cover Note has a specific validity period (eg. 60
days) Ultimately it has to be replaced by a Policy before its
expiry. o Certificates of Insurance are generally issued in Motor
& Marine. o In Motor Insurance, a Certificate of Insurance is
issued in addition to a Policy Document as it is mandatory as per
the provisions of MV Act. It is evidence to the Police Authorities
(RTA) that the vehicle is properly insured. o In Marine Insurance,
a Certificate of Insurance is issued to cover the shipments under
Open Cover. Endorsement is a document issued to record an
alterations in the Policy like change of name, address,
increase/decrease of SI, Add/delete perils etc. Renewal Notice is a
reminder to the Insured that his insurance is due for Renewal.
Insurers issue a Renewal Notice one month before the expiry of the
Policy.
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Chapter: 6
Fire Insurance
Chapter Summary: 1 Standard Fire Special Perils Policy Perils
covered Standard Fire Special Perils Policy Add on Covers Standard
Fire Special Perils Policy Exclusions Standard Fire Special Perils
Policy Conditions Special Policies: Floater Declaration Floater
Declaration Reinstatement Policy IAR (Industrial All Risks) Policy
FLOP (Fire Loss of Profits)
2
I. Perils Covered: Sr PERIL Covered Fire Exclusions: Own
fermentation, natural heating or Spontaneous Combustion 1. Any
heating or drying process Burning of property by order of any
Public Authority Note: Spontaneous Combustion can be covered at
extra premium (Add on Cover) 2 Lightening - (with/without Fire)
(AOG Peril) Explosion/Implosion - (with/without Fire) (External
Explosion only covered) Exclusions: Boilers (other than domestic
boilers) etc. in which steam is generated (i.e. Internal Explosion)
3 Machinery or apparatus subject to centrifugal force. Note: Items
in which explosion occurred are excluded but the property in the
vicinity is covered. Boiler Explosion Policy can cover explosion of
Boilers. (Engineering Insurance). Aircraft Damage - (by all Aerial
Devices with/without Fire) Exclusions: 4 Damage caused by pressure
waves. RSMD (with/without Fire) Only direct physical visible damage
is covered. Consequential damage is excluded. Exclusions: Stoppage
of work due to strikers action Losses due to dispossession Losses
caused by action of Govt. authorities 5 Burglary, house-breaking,
larceny, theft etc. Terrorism Note: 1) Terrorism can be covered at
extra premium (Add on Cover) 2) If the Insured opts to delete RSMD
Cover from the inception of the Policy, a discount is given in the
Rate. Discounts vary from Section to Section. STFI (with/without
fire) (also known as Water Damage Perils) (AOG Peril) Note: 1) If
the Insured opts to delete STFI Cover from the inception of the
Policy, a discount is given in the Rate. 6 2) IF EQ is NOT Covered,
water damage caused by other convulsions of nature (like Tsunami )
are excluded. Impact Damage (by rail/road vehicles or animals)
Exclusions: 7 Impact caused by insured or any occupied of the
premises Impact by insureds employees during their employment Note:
Can be covered on payment of additional premium (Add on Cover)
Subsidence & Landslide including Rock slide - (AOG Peril)
Exclusions: Normal cracking, settlement or bedding down of new
structures The settlement or movement of made up ground 8 Coastal
or river erosion Defective design or workmanship or use of
defective material Demolition, construction, structural alterations
or repair of property or ground works or excavations STFI perils
caused by EQ, Volcanic eruption or other convulsions of nature 9
Bursting &/or overflowing of Water Tanks, Apparatus & Pipes
(with/without fire) 10 Missile Testing Operations (with/without
fire) 11 Leakage from Automatic Sprinkler Installations
(with/without fire) Exclusions: Compiled by: Kamalakar. T Page 10
of 43
12
Repairs or alterations to the buildings or premises Repairs,
Removal or Extension of Sprinkler Installations Defects in
construction known to the insured Bush Fire Exclusions: Forest Fire
Note: Forest Fire can be covered at extra premium (Add on
Cover)
Add on Covers: Sr Add on Cover Architects, Surveyors &
Consulting Engineers Fee: (in excess of 3% claim amount). Upto 3%
of claim are already covered as part of the policy 1. This
extension provides cover upto 7.5% of loss The SI is on Buildings
& Machinery should be increased to include such fee Removal of
Debris: (in excess of 1% claim amount) up to 1% already covered
under normal policy 2
3
4 5 6
SI for this Extension should NOT exceed 10% of the total SI
Deterioration of Stocks in cold storage: Damage to the Power
Station by an insured Peril Damage to the Cold Storage Unit by an
insured Peril Exclusions: Act of Govt. or Municipal Authorities 24
Hrs. Waiting Period Forest Fire Impact Damage - (Insureds own
vehicles) Spontaneous Combustion (ie. Burning which results from
internal heating & not from external causes. Eg: Groundnut,
dyes, chemicals, paints, varnish, hay, grass, copra etc)Loss by
Fire only is Covered Materials are classified into 4 Categories.
Category-I are lowest rates & Category-IV are the highest.
Omission to insure additions, alteration or extension: Applicable
to Bldg. & Mach. Only Max. up to 5% of SI of each Item Addl.
Premium on 5% of SI to collected in advance at the inception of the
Policy All new additions to be notified during the policy period or
at the end Earthquake (Fire & Shock): (AOG Peril) Excess: 5% of
each & every claim subject to a minimum of Rs. 10,000/ Entire
property in the complex to be insured, no selection available. If
STFI is NOT opted out, then only water damage perils caused by EQ
are covered else they are NOT covered. There are 4 EQ Zones
(Highest rate for Zone-I & lowest for Zone-IV) Spoilage
Material Damage: Covers loss of Stock-in-Process
7
8
9
10
11 12
13
14 15
Damage to Machinery & Equipment (including cost of removal
of debris & cleaning) Leakage & Contamination Cover: (for
Oils & Chemicals only). Two types of cover Leakage only (Rate
is less) Leakage & Contamination (Rate is more) Exclusions:
Indirect Losses like shrinkage, loss of weight, loss of use, market
loss etc. Improper handling, faulty workmanship, infidelity
Burglary or theft Legal or contractual liability Consequential
losses Special Conditions: Excess: 1% on each tank subject to
minimum of Rs. 60,000/ Pro-rata condition applies in the event of
under insurance Temporary Removal of Stocks: Up to 10% of SI of
stocks can be shifted for fabrication, processing etc. Loss of Rent
(for Owner) -- Separate SI should be specified for Rent Addl.
Expenses of Rent for Alternative accommodation: Cover for
Non-manufacturing premises only Difference between new &
original rent is payable Owner-Occupant has to insure both the
buildings & contents Occupant has to insure only the contents
The Maximum Period allowed for alternate accommodation is 3 years
Startup Expenses Terrorism:
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Terrorism Cover can be granted only in conjunction with RSMD
Cover (ie. If the Insured does not want RSMD Cover, we cannot give
Terrorism cover alone). All properties in the complex to be covered
without any selection Maximum Liability of Insurance Company is 200
crores per risk (MD + LOP) Excess: Industrial Risks: (Section 4 to
7) 0.5% of TSI (Total SI) subject to a minimum of Rs. 1 lakh
Non-Industrial Risks:(Section 3 of AIFT) 0.5% of TS subject to a
minimum of Rs. 25,000/Exclusions: Sr Excess 1. 2 3 4 5 6 7
Exclusion
8 9 10 11 12 13 14
Non-AOG Perils : Rs.10, 000/War Perils Nuclear Losses Pollution
or Contamination Excluded Property Certain property like bullion,
precious stones, curios, works of art etc whose value exceeds
Rs.10, 000/- are excluded unless otherwise expressly stated in the
policy. Stocks in Cold Storage Premises Can be covered as Add on
Cover Electrical Risks (Items in which electricity is originated.
Eg. Fans, Lights, machinery etc.) Note: Items in which electrical
fire originated are excluded but the property in the vicinity is
covered. Electrical Risk can be covered under Machinery Breakdown
(MB) Insurance. Expenses incurred on Architects, Surveyors &
Consulting Engineers fee exceeding 3% of claim amount Debris
expenses exceeding 1% of claim amount Spoilage Material Damage Can
be covered as Add on Cover Earthquake (EQ) Can be covered as Add on
Cover Property moved out of the insured premises Exception:
Machinery can be moved for repairs for a period not exceeding 60
days. Theft (during or after the occurrence of insured peril)
Terrorism Can be covered as Add on Cover Consequential Losses (Loss
of market, loss of delay etc.)
a) b)
AOG Perils : 5% of claim subject to a minimum of Rs.10,
000/-
Conditions: No CONDITION 1. Misrepresentation, Mis-description
or non-disclosure of material facts Fall or displacement: Insurance
ceases after 7 days of fall or displacement (as the risk increases)
2 If the fall is due to insured peril, cover continues If it is due
to uninsured peril & the insurers are informed & they
agree, the cover continues Alterations: The cover ceases in case of
Alteration of trade or manufacture 3 Building remains unoccupied
Property is sold off Marine Clause: If the same stock is insured
both under the Marine Policy & Fire, the claim is payable only
under Marine Policy. 4 However, if there is under-insurance under
Marine Policy, the balance can be covered under Fire Policy.
Cancellation: At the option of the Insured: Premium is retained on
Short Period Rates & the balance is refunded. 5 At the option
of the Insurer: Refund is on Pro-rata basis. (Insurer has to give
15 days Notice to the Insured) Example: SI is Rs. 10 lacs. Rate @
1.00%o. Premium Collected is = Rs. 1,000/-. Policy cancelled after
6 months. Duty of the Insured (at the time of the loss): A. a)
Notice of Loss immediately b) Submit all supporting documents
within 15 days 6 c) Particulars of other insurances B. If the
Company rejects the claim, the insured must approach the Court
within 12 months, otherwise the claim becomes timebarred
(abandoned) Rights of Insurer: (on happening of the loss) Enter
& take possession of building/premises 7 Take possession of
property Remove, sort, salvage the property Sell off the damaged
property Frauds: 8 If the claim is fraudulent or fraudulent means
are employed to recover the claim, the benefits under the policy
are forfeited. Reinstatement: 9 Insurers can reinstate the
property, if they wish, instead of giving monetary compensation. 10
Condition of Average: Compiled by: Kamalakar. T Page 12 of 43
11 12 13 14 15
At the time of the loss, if the SI is less than the Market Value
(i.e. Under-insurance), the claim will be proportionately reduced.
The condition applies to SI declared under each & every item.
Example: SI = Buildings Rs. 10,00,000 + Machinery Rs. 6,00,000 +
Stocks Rs. 4,00,000 = Total SI Rs. 20,00,000 . Loss on Machinery =
Rs. 8,000 MV at the time of Loss = Bldg. Rs. 10,00,000 + Machinery
Rs. 8,00,000 + Stocks Rs. 2,00,000 = Total MV Rs. 20,00,000 Though
the Total SI was equivalent to Total of MV, there is an under
insurance under Machinery. Therefore, Claim Payable = SI/MV x Loss
= 6,00,000/8,00,00 x 8,000 = Rs. 6,000/Contribution: In case of
more than one policy covering the same property, the claim will be
proportionately paid by all the policies. Subrogation: If the claim
is caused by a negligent 3rd party, the insureds right of recovery
against the 3rd party is subrogated to the Insurer. (Modification:
Subrogation takes place even before payment of claim). Arbitration:
Only disputes regarding quantum (amount) of claim are referred to
Arbitration but disputes regarding admissibility of claim can only
be settled in a Court. Notice: Every Notice or communication to the
company must be written or printed. Reinstatement of SI: The loss
will reduce the SI by the amount of loss. It can be reinstated to
the original position by payment proportionate premium which is
deducted from the claim amount.
Special Policies: Sr Special Policy with brief description
Floater Policy: (A Policy where SI keeps floating on various
locations. Insured can give a single SI for all locations) o Can be
issued only for Stocks. (Covers stocks-in-process also) 1. o
Insured should specify the locations. Unspecified locations are NOT
permitted. o Rate = Highest Rate applicable at any one location +
10% loading (called Floater Loading) Declaration Policy (For stocks
whose value frequently fluctuates). Declaration Policy is
adjustable policy as the premium is adjusted at the end of the
Policy The Minimum SI should be 1 crore in one or more locations
& Rs 25 lacs at least in one location 2 Methods of Declarations
are a) Average Value of each day of the month b) Highest value
during the month Reduction in SI is NOT allowed The Insured is
supposed to make the Declarations at least by the last day of the
succeeding month. If he fails to do so, the Total SI shall be
deemed to have been declared. 2. Minimum Retention = 50 % (ie.
Refund of Premium on adjustment shall NOT exceed 50% of Provisional
Premium) This policy cannot be issued to o Insurance required for
short period o Stocks at railway sidings o Stocks-in-process o
Retail stocks o Transport companies stocks Floater Declaration
Policy Combination of Floater & Declaration Policies The
Minimum SI should be 2 crores Rate: Highest Rate + 10% Loading
Minimum Retention = 80% (ie. Only 20% can be refunded on
adjustment) Reinstatement Value (RIV) Policy: Fire Policy with
Reinstatement Value Clause attached
3.
4.
Issued only for other than Stocks (ie. Buildings, Plant &
Machinery, FFF etc) The Claim settlement differs from Standard Fire
Policy as NO Depreciation is applied. Indemnity is the cost of
replacement of the damaged property by new property of the same
kind. But due to technical advancements, replaced machinery is
better than the damaged machinery (eg. Output increased with less
consumption of power), insured is obliged to bear a part of the
cost. Important Provisions of the RIV Clause o Reinstatement must
be completed by insured within 12 months from the date of loss o
Until Reinstatement, liability remains on the normal indemnity
basis ie. Market value basis o Pro-rata Average is applied by
comparing SI with cost of Reinstatement o The Reinstatement will
NOT apply a) if the insured fails to intimate within 6 months his
intention to replace; b) If insured is unable or unwilling to
replace
5.
Extension of RIV Policy Local Authority Clause: Addl. Costs
incurred for complying with Municipal or Local Authority
regulations are payable. Industrial All Risks (IAR) Policy: Package
Policy (with Fire & Special Perils, Burglary, MB, BPP, EEI
& Business Interruption) Page 13 of 43
Compiled by: Kamalakar. T
Policy designed for Industrial Risks (Manufacturing &
Storage facilities) with minimum SI of Rs 100 crores Under
Insurance of upto 15% is permitted Loss of Profits (LOP)
Policy:
Also known as Consequential Loss Policy or Business Interruption
Policy Fire Policy provides cover for Material Damage (ie. Physical
damage to property by insured perils). Because of the Material
Damage, Insureds business is stopped which results in Loss of
Profits which can be covered under this Policy. Fire Policy is
concerned with the Capital Loss where as LOP Policy is concerned
with Revenue Loss Basis of LOP: The profits of a business are
related to Total Income or Turnover. Turnover is defined as the
money payable to the insured for goods sold or services rendered.
Turnover has 3 basic parts a) Variable Charges; b) Standing
Charges; c) Net Profit A) Variable Charges: Expenses incurred in
producing goods (eg. Cost of raw materials, wages etc). They
increase/decrease with the increase or decrease in Turnover. B)
Standing Charges or Fixed Charges: Fixed expenses which do not vary
with change in business. Eg. Salaries to permanent staff, Taxes,
Bank Interest etc. The Standing Charges have to be specified by the
Insured to the Insurer at the time of taking the policy. C) Net
Profit: = Turnover (Variable Charges + Standing Charges) Gross
Profit: = Standing Charges + Net Profit. Indemnity Period:
6.
The LOP Policy indemnifies the loss of Gross Profits during the
Indemnity Period chosen by the Insured. This Period is different
from Period of Insurance which is 12 months. The Indemnity Period
may vary from 3 months to 3 years.
The Period starts from the Date of Loss and ends when the
business becomes normal or the Period stated in the Policy,
whichever is earlier. Sum Insured: SI should represent the Gross
Profits. If the Indemnity Period is 12 months, then SI = Gross
Profits for the No. of months chosen (eg. If Indemnity Period is 24
months, the SI should be twice the Annual Gross Profits)
Specification: A formula is incorporated in the Policy to calculate
the loss which is known as Specification. Material Damage Proviso:
Insured should have Material Damage Policy to get a LOP Policy
Claim under LOP is subject to claim admissible under Material
Damage Policy
Important Clauses Sr Clauses Agreed Bank Clause: Wherever a
financial institution has advanced a loan on the property insured,
a Policy is issued in the Joint names of the Bank & the Insured
with Agreed Bank Clause attached. 1 Any money payable under the
policy, can be paid to Bank Banks acceptance will be binding on all
parties concerned Contract Price Insurance Clause: Applicable only
to Imported Goods 2 If goods sold under a Contract are damaged
& the contract is cancelled, the Indemnity will be Contract
Price but not Market Value SI should represent the Contract Price,
otherwise under insurance will be applicable Designation of
Property Clause: 3 As per this Clause, Insurer accepts the
classification of property as per Insureds books. Eg. If Policy
shows an item as stock but Insureds books show them as Furniture,
then that item will be treated as Furniture for insurance purpose.
Escalation Clause: Applicable to Buildings, Machinery and FFF only
(on payment of additional premium) SI increases automatically day
by day till the last day of the Policy 4 Max. Escalation Limit is
25% of SI (which would be available only on the last day of the
Policy). Eg. SI is Rs. 1,00,000 & Escalation is 20% of 1 lac,
ie. Rs. 20,000/-. If the loss occurs on 180th day, the Escalation
Amount would be 20000/365 x 180 = Rs. 9,863/ On Date of Loss, the
SI would be = Original SI + Escalation amount upto the date of Loss
Pro-rata Condition of Average will apply as usual Local Authority
Clause attached to RIV policy.
5
Compiled by: Kamalakar. T
Page 14 of 43
Chapter: 7Chapter Summary: 1 Introduction to Marine Insurance
2
Marine Insurance
Overseas Insurance
Exports & Imports
Transit within the country
Marine Cargo Insurance
Insurance of goods in transit by various modes of Transit.
Hence, it is termed as Transit Insurance Modes of Transit are Road,
Rail, Sea and Air
Who affects Insurance? It depends on the Contract of Sale. Some
of the types of Contracts are Sr Type of Contract Insurance is
effected by 1. FOB (Free On Board) Buyer 2. FOR (Free On Rail)
Buyer 3. 4. C&F (Cost & Freight) CIF (Cost, Insurance &
Freight)
Buyer Seller
3. Various Clauses Sr Clauses I. Institute Cargo Clauses II
Institute Cargo (Air) Clauses III Inland Transit (Rail/Road)
Clauses
Drafted by ILU (Institute of London Underwriters) ILU (Institute
of London Underwriters) TAC (Tariff Advisory Committee)
Compiled by: Kamalakar. T
Inland Insurance
Contract of Marine Insurance = Policy + Clauses Various Marine
Clauses: I. Institute Cargo Clauses (ICC) 3 II. Institute Cargo
Clauses (Air) III. Inland Transit (Rail/Road) Clauses 4 Rating
& Underwriting Various Marine Policies: Specific Policy 5 Open
Policy Open Cover Special Declaration Policy 6 Claims
1. Introduction:
Marine InsuranceA. Hull Insurance B. Cargo Insurance (Hull =
Body of = Goods) (Cargo the Ship)
Used in Sea Transit Air Transit Rail/Road Transit
Page 15 of 43
I. Institute Cargo Clauses: There are 3 types of Clauses ICC
(C), ICC (B) and ICC (A). ICC (C) provides the Minimum Cover &
ICC (A) is the maximum Cover. ICC (A) is considered as All Risks
Cover A. Risks Covered: Sr 1 2 3 4 5 6 7 8 9 10 11 12 Perils
Covered Fire or Explosion Stranding, grounding, sinking, capsizing
Overturning or derailment of land conveyance Collision or contact
with any external object (other than water) Discharge of cargo at a
port of distress GA Sacrifice Jettison Earthquake, Volcanic
eruption or lightning Washing overboard Entry of sea, lake or river
water Sling loss (lost during loading & unloading) Any other
risk not specifically excluded
B. Extraneous Risks: Risks covered on payment of additional
premium. Sr Extraneous Risks 1 TPND (Theft, Pilferage &
Non-Delivery) 2 Fresh Water & Rain water damage 3 Hook/oil
damage 4 Heating & sweating 5 Damage by mud, acid & other
extraneous substances 6 Breakage 7 Leakage 8 Country damage 9
Bursting / tearing of bags War 10 NOTE: War risk is restricted to
the time when goods are water borne. 11 SRCC (Strike, Riot &
Civil Commotion) C. Exclusions: Sr Exclusions 1 Willful misconduct
of the assured 2 Trade Losses (Ordinary leakage, loss in weight or
wear & tear. Eg. Oils, Chemicals & other liquids) 3
Inherent vice (nature of subject matter. Eg. Fruits, Vegetables
etc. deteriorate without any accidental cause) 4 Delay, even if
caused by an insured peril Malicious Damage (Deliberate damage by
the wrongful act of any person) 5 NOTE: It can be covered as
extraneous peril under B & C. Under A it is automatically
covered. 6 Insolvency 7 Inadequate packing 8 War & kindred
perils (Note: Can be covered as extraneous peril) 9 SRCC (Strike,
Riot & Civil Commotion) (Note: Can be covered as extraneous
peril) D. Duration of the Cover: as defined in the Transit Clause
or Warehouse to Warehouse Clause . Risk commences from the time the
goods leave the warehouse {place mentioned in the policy},
continues during the transit & terminates a) At final
warehouse{mentioned in the policy} b) At any intermediate warehouse
c) On expiry of 60 days from the date of discharge from the vessel,
whichever shall first occur. II. Institute Cargo Clauses (Air):
A. B. C.
Risks Covered : Similar to the above mentioned Exclusions :
Similar to the above mentioned Duration of the Cover : Similar to
the above mentioned (except the Time Limit is 30 days)
Compiled by: Kamalakar. T
Page 16 of 43
III. Inland Transit (Rail/Road) Clauses: A. Risks Covered: Sr 1
2
Perils Covered Fire Lightening
3 4 5 6 7
Breakage of bridges Collision with or by the carrying vehicle
Overturning of the carrying vehicle Derailment Any other risk not
specifically excluded
B. Exclusions: Similar to the above mentioned. C. Duration of
the Cover: Risk commences from the time the goods leave the
warehouse {place mentioned in the policy}, continues during the
transit & terminates a) At final warehouse or destination
{mentioned in the policy} b) On expiry of 7 days from the date of
arrival at the final railway station or town, whichever shall first
occur.
The Summary of Time Limits for various modes of transit are 1.
Water Transit 60 days 2. Air Transit 30 days 3. Rail/Road Transit 7
days4. Rating & Underwriting Proposal forms are NOT used
Declaration Form is used Contents of Declaration Form: Sr
Description 1 2 3 4 5 6 Name of the Insured (Shipper or Consignor)
Full description of goods Method of Packing Voyage & Mode of
Transit Cover required Name of Steamer
The Rates of Premium depend upon 1. Nature of commodity 2.
Method of Packing 3. The Vessel 4. Type of Insurance Cover5. Marine
Policies Sr Policy 1 Specific Policy Description A policy issued
for a single shipment or consignment
2
Also known as Floating Policy Issued to cover Inland
Consignments Issued for a period of 12 months It is a Stamped
Document Declarations are made as & when consignments take
place When a Declaration is made, a Certificate of Insurance is
issued. There is SI under Open Policy SI will gradually be reduced
by the amount of each declaration Policy gets expired either on
completion of 12 months or exhaustion of SI, which ever occurs
first. If the SI is exhausted before 12 months, it can be enhanced
by paying additional premium Issued to cover Overseas Transit (ie.
Exports & Imports) Issued for a period of 12 months It is NOT a
Stamped Document Declarations are made as & when shipments take
place When a Declaration is made, a Specific Policy or Certificate
of Insurance is issued & is stamped. Page 17 of 43
Open Policy
3
Open Cover
Compiled by: Kamalakar. T
There is NO SI under Open Cover but there are 2 limits Limit per
bottom or Limit per Conveyance Limit per location It is a Floating
Policy Issued to clients who have large turnover with many
dispatches of goods within the country Eligibility Minimum Turnover
of Rs. 2 crores NOT assignable or transferable Based on duly
completed Proposal Form SI is based on previous years Turnover In
case of fresh proposals, the SI shall represent a fair estimate of
annual dispatches TOD (Turn Over Discounts): Certain % discounts
allowed on premiums
4
Special Declaration Policy
7. Claims The marine perils give rise to many types of losses.
Claims are settled depending upon the type of loss. Types of
Losses: Sr Type of Loss Sub-classification Meaning
1.1 Actual Total Loss1) Total Loss
1.2 Constructive Total Loss
2.1 Particular Average2) Partial Loss
2.2 General Average
Loss where the subject matter is entirely destroyed. Eg. Ship
sunk in the ocean. Loss where the subject matter is NOT completely
destroyed but cost of repair/recovery would be higher than the
value of the subject matter. (Eg. A ship costing 100 crores was
severely damaged in a storm. For bring the ship to a nearest port
would cost 40 crores & the repairs would cost another 80
crores. So the total cost would be 120 crores which is in excess of
the value of the ship. Therefore, ship has to be abandoned as Total
Loss) Accidental Partial Loss caused by an insured peril. Only a
particular party bears the loss. (Eg: if the cargo is damaged, only
the cargo owners had to bear the loss) Deliberate Partial Loss
incurred to save the whole venture. It is distributed over all the
interests (like Ship, Cargo & Freight). General Average is a
loss caused by General Average act. o Expenses incurred to avert or
minimize the loss (eg. Cost of reconditioning) o An insured peril
must occur & then only the charges are payable
3)
Expenses
Sue & Labour Charges
o
The charges must be incurred short of destination i.e. at an
intermediate port o They are independent of the contract, ie. Even
if the amount exceeds the SI under the Policy, they become payable.
No Excess or Franchise is applicable.
Extra Expenses incurred in addition to the claim amount. Eg:
Survey fee, Sale charges etc. Charges Note: In Marine Insurance,
Average means Partial Loss . 4) Claims Documents: Claims Documents
vary depending upon the type of loss, mode of travel, circumstances
of claim etc. Some of the documents required for Particular Average
claims are as under Sr Document Meaning 1) 2) 3) 4) 5) 6) 7) Policy
Bill of Lading Invoice Survey Report Debit Note Copy of Protest
Letter of Subrogation Document which evidences that the subject
matter is insured Document which evidences that the goods are
shipped. It contains terms of contract of carriage as well as
particulars of cargo. Document with details of the goods & its
prices. It evidences the terms of sale. Document which shows the
cause & extent of loss given by a Surveyor. It is a Claim Bill.
The claimant gives the Debit Note showing the amount he is
claiming. Protest made by the Master of the Ship before a Notary
Public that he is NOT responsible for the damage to cargo. Document
which transfers the rights of the Claimant against third parties to
the Insurers.
Some of the documents required for Inland Transit claims are as
under a) Policy b) Invoice c) Certificate of Loss issued by
Carriers d) Non-delivery Certificate e) Letter of Subrogation f)
Special Power of Attorney
Compiled by: Kamalakar. T
Page 18 of 43
Chapter: 8Chapter Summary: 1 Introduction to Motor Insurance 2 3
MV (Motor Vehicles) Act Types of Policies & their Coverage 2)
Two Wheelers (Motor Cycles/Scooters)
Motor Insurance
4 Rating 1) Private Cars 5 Claims
a) Goods Carrying Vehicles
1. Introduction: For the purpose of Motor Insurance, Motor
Vehicles are classified into 3 broad categories 3) Commercial
Vehicles b) Passenger Carrying c) Miscellaneous Vehicles Vehicles
Ambulances, Cinema Film Autos, Taxis, Buses recording vans
Types of Losses: a) Loss/Damage to the Vehicle & b) TP
Liability2. MV Act, 1988: Motor Insurance is governed by MV Act,
1939 & its various amendments. Some of the important provisions
are
Compulsory Insurance Insurance of Motor Vehicle is NOT
CompulsoryAny Vehicle plying in a Public Place has to be
compulsorily insured. Compulsory Insurance should cover the
following Liability Covered Compensation Payable Unlimited (There
is NO fixed limit. Whatever the Court decides, the amount is
payable as a) Death or Bodily Injury compensation) b) TPPD (Third
Party 2 Wheelers = Rs.1 lakh & for Others = Rs.7.5 Lakhs (OR)
Property Damage) 6,000/- (Statutory Limit). (Rs. 100/- is deducted
from TP Premium, if Rs.6000/- is chosen)
Insurance of 3 rd Party Liability arising out of use of Motor
Vehicle is Compulsory.
Exemptions (subject to maintenance of Self Insurance Fund, the
following are exempted from compulsory insurance) Vehicles owned by
Central & State Governments (if the vehicle is NOT used for any
commercial purpose) Any Local Authority State Transport Undertaking
NFL(No Fault Liability) Section 140 of the Act deals with NFL
The principle of NO Fault means, the Claimant need NOT prove the
negligence on the part of the Insured. The claim under these
provisions is NOT defeated in any way, by any wrongful act, neglect
or default on the part of the Claimant. The claim cannot be reduced
on the basis Claimants share of responsibility for the accident. In
other words, the legal defense of Contributory Negligence is NOT
available to the Insured.
Compensation payable A) Death = Rs. 50,000/- and B) Permanent
Disablement = Rs. 25,000/-
MACT(Motor Accidents Claims Tribunal) MACT are constituted by
State Governments They are presided over by District or High Court
Judge When a Tribunal has been set up for an area, NO Civil Court
has any jurisdiction to entertain any claim
Purpose = Speedy disposal of 3 rd Party Claims at a minimum cost
Only a nominal fee has to be paid for instituting a case Tribunals
deal with Death, Personal Injury & 3rd Party Property While
making an award, the Tribunal specifies the amount payable by the
Insurer
Lok Adalat or Lok Nyayalaya is a subset of Tribunal which are
set up for Compromise SettlementsWhen there is a clear liability
under the policy, claims are negotiated with the 3rd party with the
help of Lok Adalats for an amicable settlement.
Hit & Run Accident Section 161 of the Act deals with Hit
& Run Accidents
The Act defines it as an accident arising out of use of motor
vehicle, the identity whereof cannot be ascertained in spite of
reasonable efforts The compensation payable under this section is
known as Solatium The compensation is payable from fund known as
Solatium Fund established by Central Govt. Page 19 of 43
Compiled by: Kamalakar. T
Compensation payable A) Death = Rs. 25,000/- and B) Grievous
Hurt = Rs. 12,500/-
Section 1 GR (General Rules & Regulations): GR Description
Insureds Declared Value (IDV): IDV is the SI which is fixed at the
commencement of each policy period. It is to be fixed on the basis
of Manufacturers listed selling price Depreciation as per Schedule.
IDV shall be treated as the Market Value throughout the Policy
Period without any further Depreciation for the purpose of Total
Loss/Constructive Total Loss Claims (CTL). The Insured Vehicle is
deemed to be a CTL, if the cost of repair/retrieval exceeds 75% of
IDV. Depreciation on Parts for Partial Loss Claims: Sr Parts
Depreciation % age 1) Rubber, Nylon, Plastic, tyres, tubes &
batteries 50 2) Fiber 30 3) Glass NIL 4) All Other Parts (Depends
on the Age of the Vehicle) Various Geographical Zones: Type of
Vehicles a) Private Cars b) Motorized Two Wheelers c) Commercial
Vehicles ratable under Section 4.C.1 and C.4. Commercial Vehicles
(Excluding vehicles ratable under Section 4. C.1 and C.4.) Zone A B
A B C Cities Ahmedabad, Bangalore, Chennai, Hyderabad , Kolkata,
Mumbai, New Delhi and Pune Rest of India Chennai, Delhi / New
Delhi, Kolkata, Mumbai All other State Capitals Rest of India
8
9
10
27
40
No Claim Bonus (NCB): a) NCB is only on OD Premium b) NO NCB on
Motor Trade Policies c) For Fire/Theft risks, NCB is applicable
only on Fire/Theft components of premium. d) NCB is as per the
Table. %age depends on the years completed. Year %age of Bonus 1 20
2 25 3 35 4 45 5 50 e) On transfer of vehicle, the entitlement of
NCB depends on the Insured (NOT on the Vehicle). Only in case of
the death, the NCB is transferred to the legal custodians of the
vehicle. f) If Insurance is transferred from one Co. to another,
the new insurer can give the same NCB with the confirmation from
the previous insurer. g) NO NCB is allowed when a policy is NOT
renewed within 90 days of its expiry Compulsory Deductibles: Claims
under OD Section only are subject to Excess or Compulsory
Deductible. The Excess depends on the Type of Vehicle &
Capacity of the Vehicle (ie. CC or GVW or Passengers) Type of
Vehicle Capacity (CC/GVW/PCC) Compulsory Deductible (Rs) 2 Wheelers
All CC types 50.00 1500 cc 1,000.00 7500 Kg GVW 500.00 Goods
Carrying Vehicles > 7500 GVW & 16,500 GVW 1,500.00 36
Passengers 1,000.00 1,500.00
3. Types of Policies: (1. Liability Only & 2) Package
Policy) 1) Liability Only Policy
Compiled by: Kamalakar. T
Page 20 of 43
Cove r
1)
Indemnifies the Insured in respect of the following Compensation
awarded (against the Death/Bodily Injury/TPPD) Legal Expenses
incurred by the Claimant Legal Expenses incurred by the Insured
with the written consent of the Insurer Indemnifies any Driver who
is driving the vehicle with Insureds permission Indemnifies the
Personal Representative PA cover for Owner-Driver : Owner-Driver
must be the Registered owner of the Vehicle The Owner-Driver must
be the Insured named in the Policy The Owner-Driver must be holding
an effective driving license Compensation is provided as per the
Table Vehicle 2 Wheelers Other Vehicles
2) 3) 4)
CSI Rs. 1 Lakh Rs. 2 Lakhs
Premium Rs. 50/Rs. 100/-
Exclusions
NO Compensation is payable, if the death or disablement is
caused by a) suicide b) intoxication of liquor Vehicle being used
other than in accordance with the Limitations as to Use Vehicle
being driven by other than a Driver as per the Drivers Clause Claim
arising out of Contractual Liability Death arising out of & in
course of employment War & Nuclear Risks
Notice of Loss, Cancellation of Policy, Arbitration etc
Conditions in the event of the death of the Insured, the Policy
will remain valid for 3 months or Date of Expiry, whichever is
earlier The Legal Heirs to whom the custody of the Policy passes,
may apply for transfer of this Policy or obtain a new policy by
making an application to the Company along with a) Death
Certificate b) Proof of Title & c) Original Policy. Package
Policy (Common to all types of Vehicles) Own Damage: Perils
Covered: 1) Fire 2) Burglary 3) *Riot & Strike 4) *EQ 5) Water
Damage Perils 6) Accidental External Means 7) Malicious Act 8)
Terrorist Activity 9) While in transit by road, rail,
inland-waterway, lift, elevator or air
Transfer of Policy to Legal Heirs:
2) Sec-1
10) Landslide & Rockslide *Note: If EQ and Riot & Strike
are deleted, a discount is allowed. This feature is common to all
types of vehicles.Addl. Benefits Protection & Removal Costs
(Towing Charges) Authorization for RepairsExclusions: Commercial
Vehicle Private Car Private Car Rs. 1,500/Rs. 500/2 Wheeler Rs.
300/Rs. 150/Commercial Vehicle Rs. 1,500/- (4 Wheelers) Rs. 750/-
(3 Wheelers) Rs. 500/-
2 Wheeler
a) Consequential Loss, Depreciation, Wear & Tear, Mechanical
Breakdown, failures or breakages, claim arising out of contractual
liability, War & Nuclear Risks b) Any Loss caused outside the
Geographical Area c) if the vehicle is used against the Limitations
as to Use or driven by a person other than a Driver as stated in
the Drivers Clause
Sec-2 Sec-3
d) Damage to Tyres & Tubes unless the Vehicle is damaged at
the same time e) When the Insured or any person driving with his
consent is under the influence of intoxicating liquor or drugs f)
Loss of Accessories by Burglary, housebreaking or theft unless the
vehicles is stolen at the same time g) Damage caused by Overloading
or strain of the Vehicle Liability to 3 rd Parties: Similar to
Cover mentioned under Liability Only Policy (except PA Cover.) PA
Cover for Owner-Driver: As per the PA cover mentioned under
Liability Only Policy. Page 21 of 43
Compiled by: Kamalakar. T
Sec-4
Towing disabled Vehicles: Applicable only to Commercial
Vehicles. But the towed vehicle should not be towed for hire or
reward.
Deductible: All types of vehicles are subject to Compulsory
Deductibles under Section I. Ref. to GR. 40.
Compiled by: Kamalakar. T
Page 22 of 43
Rating: The premium rating depends upon the following factors
Rating Factor 1) Private Cars 2) Two Wheelers 3) Commercial
Vehicles Goods Carrying Passenger GVW (Gross Vehicle Weight) Rates
are provided for a) GVW upto 12,000 Kgs. b) Above 12,000 Kgs. addl.
Premium for each 100 kgs. is charged Zone A, B & C a) 5 Yrs 10
Yrs Ref. to Tariff LCC (Licensed Carrying Capacity) or PCC
(Passenger Carrying Capacity) a) 18 & 36 & 60 Zones depend
upon the type of the Vehicle a) 5 Yrs 10 Yrs Ref. to Tariff
1) IDV
IDV Rules are Common to all types of Vehicles. (Ref. GR. 8) CC
(Cubic Capacity) a) 1000 1500 cc Zone P1 to P4 (Ref. to GR 10) a) 5
Yrs & 10 Yrs a) Rs. 15,000 b) Rs. 20,000 c) Rs. 30,000 CC a)
150 350 cc
2) Capacity
3) Geographical Zones 4) Age of the Vehicle 5) Minimum IDV
Depends on the Capacity (CC or GVW) of the Vehicle NOTE
Zone A & B a) 5 Yrs 10 Yrs a) Rs. 5,000 b) Rs. 6,000 c) Rs.
7,000 Ref. to above CC rules.
Extra Benefits (@ Addl. Premium)(Common to all types of
Vehicles)
Ref. to above CC rules. The rates are in %age (not per mille)
& they are applied on IDV The rates are higher for Higher Age
& CC & use in Zone A The above rating pattern is for the OD
Section only. The Rate for TP Section depends on CC which is
slightly different from OD Section OD Section TP Section 1)
Electric/Electronic Fittings (Cost of Fittings x 4%) CNG/LPG
Bi-Fuel Kit (Rs. 60/-) 2) CNG/LPG Bi-Fuel Kit (Cost of Kit x 4%)
Trailer (Fixed Amount = Rs.125) 3) Trailer (50+(IDVx0.5%))
Compulsory PA for Owner/Driver 4) Geographical Extn. (Fixed Premium
= Rs.500) (Rs.50 or Rs. 100) 5) Imported Vehicles (OD Premium x
30%) PA Cover for Others 6) Fiber Glass Tanks (Fixed Amount =
Rs.50) (Rs. 5 x CSI/10000 x No. of persons) 7) Driving Tuitions (OD
Premium x 60%) LL paid Drivers/Cleaners (Rs.25 x Persons) 8)
Rallies held in India LL to Employees of the Insured (Rs.60 x
Persons) a) Anti-Theft Devices
b)Discounts (Common to all types of Vehicles)c) d) e)
Side Car attached (Only for 2 Wheelers ) Specially designed
vehicles for handicapped Voluntary Deductible NCB AAI Discount
(Only for 2 Wheelers & Private Cars) Deletion of EQ Deletion of
Riot & Strike
f)g) h)
5. Claims:
Motor Claims
(A) OD Claims a) Partial Loss Claims b) Total Loss Claims c)
Theft Claims
(B) TP Claims a) MACT Claims b) Compromise c) Lok Adalat
Compiled by: Kamalakar. T
Page 23 of 43
o o o o
(A) O D Claims Notice of Loss from Insured Claim Assessment:
Settlement Claim Documents If the vehicle is beyond repair, it is
settled on TL (Total Loss) or CTL (Constructive Total Loss) basis.
Insured will be paid the IDV As the Salvage belongs to the Insurer,
he will dispose off the salvage Insured has to submit RC, Taxation
Books, Ignition keys etc to Insurer The RC Book & keys to be
returned to RTA If the whole vehicle is stolen, then it is
considered as TL. Insured has to report to Police & obtain FIR
Police will issue a non-traceable certificate after 3/4 months, if
it is not traced.
(B) T P Claims On Notice of Loss, Advocate is appointed
Panchanama & Policy Report are obtained Claim is decided upon
by the MACT The amount awarded is deposited with MACT
a)Partial
b)Compromise
a) MACT
b)Total
Claims are negotiated with 3rd Party where there is a clear
liability If the Claimant agrees, the amount is deposited with MACT
for disbursement.
c)Theft
c)Lok Adalat
Pending cases with MACT where there is a clear liability are
placed before Lok Adalat. This is also a compromise settlement
Compiled by: Kamalakar. T
Page 24 of 43
Chapter: 9Chapter Summary: 1 Introduction to PA 2 Individual
Policy:
Personal Accident (PA) Insurance
a)b)
Table of Benefits Types of Diablement Additional Benefits &
Extensions Family Package Cover Rating & SI
c) d)3 e) Group Policy
1. Intro to PA PA Policy provides indemnity against Death or
Disablement caused due to accidental external means. An accident
can happen in the residence, in an office, on the road or in any
place in the world. Any death or disablement caused due to such
accidents is covered by PA. PA Policy provides coverage for 24
Hours & World-wide. PA Policy is Benefit Policy rather than a
Reimbursement Policy as fixed benefits are paid on the happening of
an event. There is a Table of Benefits which shows the fixed
amounts payable on the happening of an event. Age Group: 5 Years to
70 Years. No Medical Examination is required for New or Renewal
Policies. 2. Individual Policy a) Table of Benefits: Table of
Benefits I IA Benefit No 1 2 3 4 5 6 Benefit Death Loss of 2 limbs
or 2 eyes or 1 eye and 1 limb Loss of one limb or one eye Permanent
Total Disablement (PTD) Permanent Partial Disablement (PPD)
Temporary Total Disablement (TTD) (Weekly Benefits) % of CSI
Payable 100 100 50 100 Various 1% or 3,000 whichever is less per
week (Max. is 100 weeks)
II III
Capital Benefits : Benefit No. 1 to 5 are known as Capital
Benefits Weekly Benefits : Benefit No. 6 is known as Weekly
Benefitsb) Types of Disablement: Sr Disablement Explanation
Disablement is permanent in nature (ie. Throughout the life) &
also total. One cannot go to work & earn livelihood. Eg. 1 PTD
Paralysis. 2 PPD Disablement is permanent in nature (ie. Throughout
the life) but not total. Eg. Loss of a Finger Disablement is
temporary in nature (ie. For a specified period only) Afterwards
insured can go to work. Eg. Fracture of 3 TTD thigh bone. c)
Additional Benefits & Extensions: Additional Benefits (at NO
Extra Premium)
Extensions (at Extra Premium)
1)
Cumulative Bonus : CSI would be increased by 5% for each claim
free year, subject to a max. of 50% (Note: The policy has to be
renewed within 30 days of expiry)
1) 2)
2) 3)
Carriage of Dead Body & Funeral Expenses : Fixed amounts are
paid. Education Fund : In the event of Death or PTD to the Insured,
the Policy provides for Education Fund of the dependent children.d)
Family Package Cover: (5% discount) a) Insured & Spouse (Both
are earning) b) Spouse (if not earning) c) Children (5 to 25 Yrs)
Compiled by: Kamalakar. T
Medical Expenses: Both Individual & Group Policies can be
extended to include Medical Expenses incurred due to accident. War
Risk Cover: War risk cover is granted to Indian Personnel working
in foreign countries (Both Individual & Group)
100% of CSI 50% of CSI 25% of CSI or Rs. 50,000/- which ever is
lower per child. Page 25 of 43
e) Rating & SI : Rating Rating depends on the Occupation of
the Insured. Occupations are classified into 3 Groups. SI (Sum
Insured) SI is chosen by the Insured SI is limited to Average
Monthly Income x (60 or 72) The Multiplier (ie 60 months or 72
months) vary from Insurer to Insurer
1)
Risk Group I (Normal Risks) Administrative duties like Teachers,
Accountants, Doctors etc.
2) 3)
Risk Group II (Medium Risks) Manual Labour & out door duties
like Builders, drivers, labourers etc. Risk Group III (Heavy Risks)
Hazardous occupations like mining, explosives etc. 3. Group Policy
Introduction: A Group Policy can be issued where o there is a
common relationship among the persons to be insured
oo o
there is a central point of administration of insurance scheme
Insured (Company) is required to furnish a complete list of Insured
Persons Additions/deletions during the currency of the Policy to be
informed to Insurer
Categories of Groups: o Employer Employee o State/Central Govt.
organizations o Co-operative Societies o Registered Service Clubs o
Credit Card holders o Deposit Certificate holders of Banks etc. o
Shareholders of Public Limited Companies etc. Differences between
Individual & Group Policies: Sr Features 1 Cumulative Bonus 2
Education Grant for Children 3 Medical Expenses Extension 4 War
Risks Extension 5 Family Discount 6 7 8 9 10 Group Discount Bonus
(Low Claim Ratio Discount): Discount is allowed on the Renewal
Premium depending on the Incurred Claims Ratio Malus (High Claim
Ratio Loading): Loading is applied on the Renewal Premium depending
on the Incurred Claims Ratio for adverse claims experience On Duty
Cover: Cover is operative for Restricted hours of duty. Premium
charged: 75% of appropriate premium. Off Duty Cover: Cover is
operative for Restricted hours when the employee is out of duty.
Premium charged: 50% of appropriate premium. Individual Policy Yes
Yes Yes Yes Yes No No No No No Group Policy No No Yes Yes No Yes
(depending on the size of the Group) Yes Yes Yes Yes
Compiled by: Kamalakar. T
Page 26 of 43
Chapter: 10
Subject: Health Insurance
Chapter Summary: 1 Health Insurance Policies: A) Medi-claim B)
Cancer Policy C) Critical Illness D) OMP (Overseas Medi-claim
Policy) 2 Sub Classification of Medi-Claim & OMP 3 Features
(like Coverage, Conditions, Exclusions etc.)
Health Insurance (A) Medi-Claim OMPPolicy (C) Critical Illness
(B) Cancer (D)
Mediclaim Individual Mediclaim - Group
B&H E&S CFT
(A) Medi-Claim
a) Medi-claim Individual :Introduction: This is a Health
Insurance Policy given to an Individual or a Family. Family means
Insured, Spouse, 2 Dependent Children & 2 Dependent Parents of
the Insured. Requirements:
a)b)
Proposal Form: has to be filled up & the Declaration has to
be signed. Age Limit: For children 3 months to 5 Years (provided
one of the Parents are covered) For others 5 Years to 80 Years
Medical Questionnaire: Required only in case of adverse medical
history in respect of Diabetes, Hypertension, Chest pain or
Coronary insufficiency or Myocardial infarction.
c)
Sum Insured (SI): Minimum Maximum Premium:
Rs. 15,000/Rs. 5,00,000/-
Premium depends on 2 factors SI & Age . Family Discount: 10
% discount on the Premium is given, if more than 1 member is
covered.
Coverage: Basic Coverage Hospitalization Expenses: incurred due
to illness or accident are payable as per the following heads:
Room/Boarding Exp. Nursing Exp. c Fees of Doctors, Surgeons etc.
Diagnostic Tests like Anesthesia, Blood etc. 1 Additional Coverage
1 2 3 Pre-Hospitalization: 30 days Post-Hospitalization: 60 days
Tax Benefit: under Sec. 80 D of Income Tax Act Cumulative Bonus
(CB): 5% increase of SI in every claim free year subject to max.
accumulation of 10 claim free years. If there is a claim, the
increased %age will be reduced by 10% of SI. However, the Basic SI
will not be reduced. If the Policy is NOT renewed on the date of
expiry, the Bonus will be lost. allows the Bonus, if the policy is
renewed within 7 days from the date of expiry. Cost of Health
Checkup: 1% on Avg. SI can be availed once Page 27 of 43
Hospital: is required to satisfy the criteria like registration
with local authorities, Op. theater, qualified doctors &
nursing staff round the clock, required No. of beds etc. 24 Hrs.
Hospitalization : is required except in case of Dialysis,
Chemotherapy, Radiotherapy, Eye/Dental Surgery etc.
4
2
Any one illness : means illness relapsed within 45 days from the
day of last consultation. Domiciliary Hospitalization Expenses:
Treatment taken at
7 days Grace Period: In exceptional cases, the Company5
Compiled by: Kamalakar. T
home for a period exceeding 3 days due to a) the critical
condition of the patient b) no accommodation at the hospital
Exclusions: Pre-existing diseases/injuries
in 4 years, if there are NO claims.
Waiting Period (first 30 days). This exclusion do not apply in
case of accidents. Diseases excluded during the 1st Year
Circumcision Cost of spectacles, contact lenses & hearing aids
Dental treatment (unless hospitalized) Intentional self injury, use
of intoxicating drugs etc. AIDS & related diseases Charges
incurred for diagnostic, X-ray or laboratory examination Expenses
on Vitamins & Tonics (Unless part of treatment) Pregnancy or
child birth Naturopathy Treatment
Conditions:
Notice of Claim within 24 hours of hospitalization Claim
documents to be submitted within 7 days Medical Practitioner
authorized by Company shall be allowed to examine the insured
person Treatment allowed only in India & all claims are payable
in Indian Currency only Rule of Abandonment
Claims: Claims are serviced by TPA (Third Party
Administrator).
b) Medi-claim Group :Introduction: A Group Policy can be issued
where o there is a common relationship among the persons to be
insured
oo o
there is a central point of administration of insurance scheme
Insured (Company) is required to furnish a complete list of Insured
Persons Additions/deletions during the currency of the Policy to be
informed to Insurer
Categories of Groups: o Employer Employee o State/Central Govt.
organizations o Co-operative Societies o Registered Service Clubs o
Credit Card holders o Deposit Certificate holders of Banks etc. o
Shareholders of Public Limited Companies etc. Differences between
Individual & Group Policies: Benefits NOT available: 1)
Cumulative Bonus
2)
Cost of Health Check-up
Additional Benefits available: 1) Group Discount: Depending upon
the group size various discounts are offered.
2) 3) 4)
Bonus (Low Claim Ratio Discount): Discount is allowed on the
Renewal Premium depending on the Incurred Claims Ratio. Malus (High
Claim Ratio Loading): Loading is applied on the Renewal Premium
depending on the Incurred Claims Ratio for adverse claims
experience. Maternity Benefit: The Insured has to opt for this
Benefit at the inception of the Policy Additional Premium has to be
paid for opting this Benefit NO Refund is allowed if this benefit
is cancelled during the currency of the policy Page 28 of 43
Compiled by: Kamalakar. T
The Maximum Benefit allowed is Rs. 50,000/These Benefits are
admissible only if the expenses are incurred in a Hospital Waiting
Period: 9 Months. (Not applicable in case of accidents) Benefit
allowed only for the first 2 children. Those already having 2 or
more children are NOT allowed for the benefit. Expenses incurred
for Voluntary Medical termination of Pregnancy during the first 12
weeks from the date of conception are NOT covered Pre-natal &
Post-natal expenses are NOT covered, unless admitted in a
hospital.
(B) Cancer PolicyIntroduction: Policy granted to members of the
Cancer Patients Aid Association (CPAA) A Proposal Form with a
Declaration has to be submitted by the member The member has to
undergo a Medical Check-up & attach the Report to the Proposal
Form. The Premium is to be paid by the Insured to CPAA as part of
the membership fee. Coverage: o If the insured contracts cancer
during the currency of the policy, the Hospitalization Expenses are
paid to the tune of SI. Only Allopathic mode of treatment is
covered. o The concept of CB is similar to Medi-claim Exclusions:
No Claim is payable
During Waiting Period (first 30 days) Unless investigation
reveals positive presence of Cancer Contact with radiation or
radioactivity Insured ceases to be a member of CPAA
Claims Procedure: o Notice of Claim within 30 days o Claim to be
substantiated with supporting documents duly certified by CPAA o
Claim reimbursement of medical expenses may be submitted on
quarterly basis o Differences as to the claim are to be referred to
the Committee set up by CPAA
(C) Critical IllnessIntroduction: o A Critical Illness means one
of the diseases mentioned in the Policy
oo
It is a Benefit Policy rather than a Reimbursement Policy Since
it is a Benefit Policy, the full SI is payable on diagnosis of
Critical Illness subject to Policy conditions.
Special Conditions: o Waiting Period : 90 days from the
inception of the Policy.
o
Survival Period : The insured has to survive for a minimum
period of 30 days from the date of diagnosis of Critical
Illness.
(D) OMPIntroduction: Policy given to Indian Residents going
abroad for medical expenses incurred due to accidents or illness.
Eligibility: Indian Residents (Purposes: Business, Holiday,
Employment & Studies) Accompanying spouse & children of the
Insured Foreign Nationals working for Indian Employers whose salary
is paid in Indian Currency & they should go abroad on official
visits only. Premium: The premium depends on Age of the Insured
Duration of Stay Type of Plan
Compiled by: Kamalakar. T
Page 29 of 43
Period of Insurance: Commencement First Day of Insurance (OR)
Date of Departure, whichever is later Expiry Last Day of Insurance
(OR) Return to India, whichever is earlier
Types of Policies: (Refer to Chart for comparative study) A) B
& H (Business & Holiday) B) E & S (Employment &
Study) C) CFT (Corporate Frequent Traveler) A) B & H (Business
& Holiday) Medical expenses incurred outside India are payable
Death or permanent disablement is directly caused by the bodily
injury. Such death or permanent disablement should be caused within
12 months from the date of injury. Only the following are covered
a) Death; b) Permanent Total Disablement; c) Loss of eyes/limbs.
Loss of total Baggage checked in by an International Airline.
Exclusions: Photographic, electrical equipment, computers etc Delay
of more than 12 hours from the schedule arrival time at the
destination for an International outbound flight from India.
Documents required are a) Non-delivery Certificate by Airlines
& b) Proof of Purchase. Actual expenses incurred for obtaining
emergency travel documents in place of lost passport outside India
Exclusions: * Loss due to confiscation by Customs or Police
authorities * Theft which is not reported to police
Section A Medical Expenses & Repatriation Section B Personal
Accident Section C Loss of Checked in Baggage Section D Delay of
Checked in Baggage
Section E Loss of Passport
Section F Personal Liability
Accidental damage to 3rd party Property Exclusions: a) Less than
deductible b) Arising out of animals belonging to Insured
Accidental bodily injury to 3rd parties
B)
E & S (Employment & Study)
1)
Section 1 Medical Sub Section A Medical expenses incurred abroad
in respect of disease or injury, subject to maximum liability under
the policy 52 weeks after the injury/sickness 12 weeks after the
expiration of insurance Medical Expenses incurred in India, if the
Insured is evacuated to India Max. Limit = US $ 500,000
Repatriation & Alternative Expenses: The expenses incurred for
transportation to India the remains of the insured person Funeral
expenses in the country of posting Max. Limit = US $ 8,000 Medical
Emergency Reunion Expenses: Travel expenses to mother, father,
spouse etc. for Cost of Economy Air Ticket Travel &
Accommodation expenses Max. Limit = US $ 500,000 Applicable to
Sponsored students only Claim is payable to the person who sponsors
the Student, if the student is unable to continue due to death or
disablement caused by sickness or injury Amount Payable = US $ 750
per month x No. of completed months of study
Sub Section B
Sub Section C
Sub Section D
2)Insurance C)
Section 2 Contingency
CFT (Corporate Frequent Traveler) This Policy is granted to
officials of Companies who frequently go abroad It is an Annual
Policy, issued for 12 months, subject to a trip not exceeding 60
days Maximum Age Limit is 70 years In this case, B & H Policy
is issued with CFT Endorsements attached
Compiled by: Kamalakar. T
Page 30 of 43
Heads Age Grp.
B & H 6 months to 70 years o o o o o Section Section Section
Section Section Section A-1 A-2 B-1 B-2 K
A Comparative Statement of OMP Policies E & S 1month to 60
years C (Excluding USA/Canada) D (Including USA/Canada) D-1
(Including USA/Canada)
CFT 18 to 70 years
Plans
(Excluding USA/Canada) (Excluding USA/Canada) (Including
USA/Canada) (Including USA/Canada) (Asian Countries excl. Japan)
A-1 A-2 B-1 B-2 K = US $ 50,000 = US $ 250,000 = US $ 100,000 = US
$ 500,000 = US $ 15,000
E-1 (World wide) E-2 (World wide)
SI
o C = US $ 150,000 o D = US $ 150,000 o D-1 = US $ 500,000
o o
E-1 = US $ 100,000 E-2 = US $ 500,000
3)Sec A Medical Expenses & Repatriation B Personal Accident
C Loss of Checked in Baggage D Delay of Checked in Baggage E Loss
of Passport F Personal Liability
Section 1 Medical Sub Section A Sub Section B Sub Section C Sub
Section D
As per B & H Policy
4)
Section 2 Contingency Insurance Annual Policy
Max. Policy Period
180 days
180 days
Compiled by: Kamalakar. T
Page 31 of 43
Chapter: 11 Chapter Summary: 1 Introduction to Liability
Insurance 2
Liability Insurance
3
Legal aspects Various Liability Policies: PLI (Public Liability)
Act Policy PLI Policy (Industrial/Non-Industrial Risks) Products
Liability Lift Third Party Insurance Professional Indemnity D&O
(Directors & Officers) Liability Policy WC (Workmens
Compensation) or Employers Liability Policy
INTRODUCTION: Classification of Insurance on the basis of
Subject matter of insurance:
Insurance
Insurance of Person of Property Insurance Insurance of
Liability
Meaning of Liability: Liability means Responsibility. Liable
means bound to do a certain thing or under an obligation. (e.g.
every citizen is liable to pay tax else have to pay penalty). Legal
Liability means specific responsibilities, which can be enforceable
at Law. Policies available under Liability Insurance: Sr Policy
Public Liability (PLI Policy) a) Act Policy 1. b) Industrial Risks
Policy c) Non-Industrial Risks Policy Products Liability 2.
Domestic Sales Exports Professional Indemnity Doctors Indemnity
Medical Establishments 3. Engineers etc CA & FC Lawyers 4. Lift
(TP) Insurance 5. 6. Employers Liability or Workmens Compensation
(W.C. Policy) Directors & Officers Liability (D&O
Policy)
Insured Vs. Claimant The Company Vs. General Public
Governed by Market Agreement
Manufacturer Vs. Consumer
Market Agreement
Professional Person Vs. Client
Market Agreement
Building Owner Vs. user of the Lift Employer Vs. Employee
Director/Officer Vs. Victim
Market Agreement Tariff Non-Tariff
Differences between Liability Policies & Other Policies: Sr
Liability Insurance 1. 3 Parties a) Insurer; b) Insured; c)
Claimant or Victim 2. Claim money goes to Claimant 3. Insured is
NOT the sufferer 4. NO Sum Insured concept but Limit of Indemnity
is introduced.
Other Insurances (Insurance of Person & Property) 2 Parties
a) Insurer & b) Insured Claim money goes to Insured Insured is
the sufferer Sum Insured concept is available
What is covered in Liability Insurance? A) Compensation awarded
at Law B) Legal Costs incurred by the Claimant C) Legal Costs
incurred by the Insured (in defense of the claim with the written
consent of the Company) Common Terminology in Liability Insurance:
Limit of Indemnity AOA, AOY, AOP Policy Period Effective Date &
Expiry Date Period of Insurance Retroactive Date & Expiry Date
Limits of Indemnity: Insured has to choose AOA & Ratio. AOA
(Any One Accident) 10 Lakhs Ratio 1:1 1:2 1:3 1:4 AOY (Any One
Year) 10 Lakhs 20 Lakhs 30 Lakhs 40 Lakhs
Period of Insurance: Insured has to choose AOA & Ratio. Year
of Insurance Policy Period Compiled by: Kamalakar. T
Period of Insurance Page 32 of 43
1st year 2 nd year 3 rd year LIABILITY POLICIES:
Effective Date 01/01/2000 01/01/2001 01/01/2002
Expiry Date 31/12/2000 31/12/2001 31/12/2002
Retroactive Date 01/01/2000 01/01/2000 01/01/2000
Expiry Date 31/12/2000 31/12/2001 31/12/2002
Public Liability Act Policy (PLI Act, 1991): Features PLI Act
Policy The Claimant need not prove that the death, injury or damage
was due to any wrongful act, neglect or default of 1. No Fault
Liability any person a) Fatal Accident (Death) Rs. 25,000/b) PTD
(Permanent Total Disability) Rs. 25,000/c) PPD (Permanent Partial
Disability) Amount depends on % of disability (as certified by an
authorized 2. Relief payable physician) under Section III d) TPD
(Temporary Partial Disability) Rs. 1,000/- pm up to a maximum of 3
months (provided the victim i) has (of PLI Act) been hospitalized
for a period exceeding 3 days & ii) above 16 years of age) e)
Actual Medical Expenses Max. of Rs. 12,500/f) Property Damage up to
Rs. 6,000/Compulsory insurance only for those companies handling
hazardous substances under the Act. If it is a Company, Policy to
be taken for an amount not less than the Paid-up capital If it is
not a Company, Paid up capital = Market Value of Assets + Stocks 3.
Compulsory Insurers Liability in a single accident = 5 crores
Insurance Insurers Liability in more than 1 accident or in a year =
15 crores
e) Insured has to pay towards Environment4. Exemptions
Relief Fund (ERF), an amount equivalent to total premium If the
loss exceeds the amount payable under the policy, it will be paid
from the ERF All Central/State Govt. bodies or Local Authorities
provided they maintain a Public Liability Insurance Fund of Rs. 5
crores or amount equivalent to their paid up capital. A. Indemnity
Premium = Limit of Indemnity (AOA) x Rate/1000 = XXX B. Turnover
Premium = Annual Turnover x Rate/1000 = XXX ----------C. Total
Premium = = XXX D. ERF (Environment Relief Fund) Premium = XXX
(Note: ERF Premium should be equal to Total Premium under C
-----------E. Grand Total = XXXX Statutory Liability arising out of
accidents due to handling of hazardous substances a) willful or
intentional non-compliances of statutory provisions b) fines,
penalties, punitive or exemplary damages c) Liability arising under
any other Legislation d) Property owned, leased by the Insured
(Insured can have a separate material damage policy) e) War &
Nuclear Risks NO liability under the policy, if the claim is made
after 5 yrs of accident Keep a record of Annual Turnover &
declare it at the time of renewal The Co. is NOT going to pay any
claim if the claim is fraudulent or there has been nondisclosure of
material facts a) Application for claim must be made within 5 years
of occurrence of accident b) Collector is the authority to hold an
enquiry & give the award c) The Insurer is required to deposit
the award money with the Collector within 30 days of the
announcement of award.
5. Premium
6. Coverage 7. Exclusions
8. Conditions (Special)
5. Claims Procedure
Public Industrial & Non-Industrial Risks Policy: Features
PLI Industrial & Non-Industrial Risks Policy 1. Industrial
Risks? All manufacturing units (including godowns & warehouses)
2. Non-Industrial Non-manufacturing Units (like Cinema Halls,
Auditoriums, Houses, Offices etc.) Risks? 3. Cover Legal Liability
arising out of accidents during the Policy Period Products
Pollution 4. Exclusions Transportation of hazardous substances (Add
on cover) Injury to Employees (can be covered under WC Policy) 5.
Premium Rates depend upon a) Risk Group; b) Limit of Indemnity; c)
Ratio; d) Turnover Risks are categorized into 4 groups. A.
Indemnity Premium = Limit of Indemnity (AOA) x Rate/1000 = XXX B.
Turnover Premium = Annual Turnover x Rate/1000 = XXX Compiled by:
Kamalakar. T Page 33 of 43
C. Total Premium
=
-----------= XXX
6. ExcessProducts Liability: Features
Industrial Risks: .50% of AOA (Minimum Rs 2000/- & Maximum
Rs. 3 Lacs) Non-Industrial Risks: .25% of AOA (Minimum Rs 1000/-
& Maximum Rs. 1 Lac)
1. Cover
2. Exclusions
3. Premium 4. ExcessProfessional Indemnity: Features
Products Liability Policy Legal Liability arising out of use of
defective product. For instance, if a defective product (eg.
Medicine) causes death, illness or bodily injury to a person, the
manufacturer is legally liable to pay compensation. Such
compensation amount can be recoverable under the policy. o Cost of
repair, reconditioning etc. o Product guarantee o Efficacy risk o
Recall of product Rates depend upon a) Class of Risk; b) Limit of
Indemnity; c) Ratio; d) Turnover Products are categorized into 7
groups. Rates are higher for Exports compared to Domestic Sales.
Domestic Sales: .50% of AOA Exports: 1% (with a minimum of Rs.
4000/-)
1. Cover
2. Exclusions
Professional Indemnity Policy Legal Liability arising out of
negligence in performance of professional duties. Eg: Doctors,
Medical Establishments, Engineers, Architects, CA, Lawyers,
Advocates etc. o Violation of Law o Services rendered under the
influence of intoxicants o TP Liability o AIDS o Cosmetic Surgery,
Plastic Surgery etc. Rates of Premium are charged as a Rate per
Mille (%o) on AOY. For Medical establishments premium for per
in-patient/out-patient is charged. Doctors Policy: NIL Others: As
applicable.
3. Premium 4. ExcessD&O Policy: Features
1. Cover
D& O Policy Personal Civil Liability of Directors &
Officers. They are responsible for shareholders, employees,
creditors etc. They may have to pay compensation for wrongful acts
committed by them in the supervision & management of Co.
affairs. NOTE: The Policy indemnifies them only if the claim is
against the officers but not against the Company.
Employers Liability (WC) Policy: Features Employers Liability or
Workmens Compensation 2 Covers Table A and Table B Cover. 1. Cover
Table A Only those employees who come within the definition of
workmen Table B employees who are NOT workmen under the Act There
is NO Sum insured or Limit of Indemnity under the Policy as the
limit is based on the courts verdict as per 2. SI the WC Act. WC
Tariff groups various trades according to the hazard involved.
Premium depends on the earnings of employees. Since the total
earnings cannot be computed at the commencement of the policy,
premium is charged 3. Premium on estimated total earnings. At the
end of the policy, again the premium is computed basing on the
actual earnings and the premium adjustment is made. Occupational
Diseases (mentioned in the WC Act) 4. Extensions Medical Expenses
Liability for Contractors workmen
Compiled by: Kamalakar. T
Page 34 of 43
A Comparative study of Liability Insurance Policies:Sr
Policy
Insured Vs. Claimant The Company Vs. General Public
Governed by Market Agreement
Limit of Indemni ty 1) 2) 3) 4) Yes Yes
Exclusions Products Pollution Transportation Injuries to
Employees
Extensions (extra premium) a) Pollution b) Transportation
Excess (Y/N)
1.
PLI Policy Act Policy Ind.Risks Policy NonInd.Risks Policy Prod.
Liab. Domestic Sales Exports
1a) 1b)
-- NO -.50% of AOA (Min.2,000 Max 3 lacs) .25% of AOA (Min.1,000
Max. 1 lac) 1) Repair/recondi tioning 2) Guarantee/War ranty 3)
Efficacy risk 4) Recall .50% of AOA 1% of AOA (Min.4,000) (for USA
& Canada Only)
1c)
Yes
2.
Manufacturer Vs. Consumer
Market Agreement
Yes
3. 3a)
Prof. Indem. Doctors Indemnity Medical Establishmen ts Engineers
etc CA,FC etc. Lawers etc. Lift Insurance W.C. Policy D&O
Policy
Professional Vs. Client
Market Agreement
Yes
As in PLI Industrial Risks Pol 1) AIDS 2) Cosmetic surgery -- NO
--
3b)
-- NO --
3c) 3d) 3e) 4.
-- Yes --- Yes --- Yes -Building Owner Vs. user of the Lift
Employer Vs. Employee Director/Office r Vs. Victim Market Agreement
Yes ---a) Occupational diseases b) Medical exp c) Contractors
workmen -- NO --
5.
Tariff
NO
-- NO --
6.
Non-Tariff
Yes
-- NO --
Compiled by: Kamalakar. T
Page 35 of 43
Chapter: 12 Subject: Engineering Insurance Chapter Summary: 1
Introduction to Engineering Insurance Various Engineering Policies:
CAR Vs. EAR (Contractor All Risks & Erection All Risks) MCE
Marine-cum-Erection MB/MI Machinery Breakdown/Machinery Insurance
23 CPM Contractors Plant & Machinery BPP Boiler & Pressure
Plant Insurance DOS (Deterioration of Stocks (Other than Potatoes))
DOS (P) (Deterioration of Stocks (Potatoes)) EEI (Electronic
Equipment Insurance) 3. Sub-contractor
Introduction: Engineering & its branches (e.g. Civil,
Mechanical etc.) Evolution of Engineering Insurance: Boiler
explosions in UK Parties involved: 1. Principal/Owner; 2.
Contractor;
Features Common to all Engineering Policies:I. Construction
Phase Phases/Policies 1) General Exclusions 2) General Conditions
3) Basis of Fixing SI 4) Basis of Indemnification 5) Excess Clause
6) Claims Procedure CAR EAR/ SCE MCE II. Operation Phase MB/ MI CPM
BPP III. Miscellaneous DOS DOS (P) EEI
7) Period
8) Renewal
Project Period (Time required for completion of the project as
specified by the Insured). Extn. Of period possible on payment of
addl. Prem. One Time Policies
Annual Policies
Annual Policies. (Short period policies can be issued in respect
of DOS & DOS (P)). Can be Renewed
Can be Renewed
I. Construction Phase Policies (CAR, EAR & MCE):CAR &
EAR Policies: Features CAR Policy Civil Engineering projects
(Buildings, bridges etc. in course of construction ) Buildings,
bridges, roads, dams, tunnels, irrigation, drainage, sewer systems,
railways, runways of airports, harbours etc. A) Basic Coverage:
Property described in the schedule. Cover is on All Risks basis
(i.e. Covers all perils other than those specifically excluded). B)
Supplementary Coverage: 1) Debris removal 2) Construction Plant
& Mach 3) Surrounding Property 4) TP Liability 5) Addl. Exp
(OT, work on public holidays, express freight etc) 6) Increased
replacement value 7) Addl. Exp for Air freight 8) Addl. Customs
Duty Section I : (Material Damage Section ) EAR Policy Plant,
Machinery & equipment in course of erection All Plant &
Machinery like Boilers, Transformers, switchgears, compressors,
machinery for manufacturing purpose, tanks, oil refinery plants,
blast furnaces etc.
1. Issued to 2. Insurable Property
A) Basic Coverage: Property described in the schedule. Cover is
on All Risks basis (i.e. Covers all perils other than those
specifically excluded). B) Supplementary Coverage: 1) Debris
removal 2) Construction Plant & Mach 3) Surrounding Property 4)
TP Liability 5