Fire Insurance Bagic

8/8/2019 Fire Insurance Bagic

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Bajaj Allianz General Insurance Company Limited

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What is Insurance ?

Legal Definition :

Insurance is a contractual arrangement whereby one party agrees

to compensate another party for losses

Insurance is a branch of Contract LawInsurance is a branch of Contract Law.

Financial Definition :

Insurance is a financial arrangement that redistributes the costs of

unexpected losses.

Insurance PoolInsurance Pool


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Risk !

Risk is the exposure to the chance of loss or injury

Uncertainty about the outcome more than one outcome

If a loss is certain : there is no riskPossibility that the outcome may be unfavorable

At least one of the possible outcomes should be undesirable

Ex : Parachute

Investment in a capital assetPhysical depreciation is certain


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Peril and Hazard

Peril

Is cause of loss

Hazard

Is a condition that may create or increase the chance of a lossarising from a given peril

It increases the frequency and / or severity of the peril

Physical Hazard Moral Hazard

Morale Hazard


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Elements of a Valid Contract

Offer and

Acceptance Consideration

Capacity Legal Purpose

Unconditional

Meeting of Minds

Insurance Agents whilesoliciting new business legally

are not offering to sell

insurance. They are only

inviting the insured to make anoffer.

Invitation to Treat

The value

exchanged between

the parties to theContract

Insured :Premium

Promise to follow the

provisions and stipulations in

the insurance contract

Insurer :

Contingent Promise

Legal Capacity to

enter into a

Contract

An end or intention

permitted by law

Anti-social purposeare legally

unenforceable


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Insurance ContractsDistinguishing Characteristics

Principle of Indemnity

Insurable Interest

Actual Cash Value

Doctrine of Adhesion

Personal Contract

Utmost Goodfaith

Entire and Undivisible

Aleatory Concept

Policies are not

transferable automatically

to new owners

The Policy and Proposal

forms and otherdocuments filed at the

time of insurance forms

one single contractParties to the contract

know in advance that

the monies they will

exchange will be

unequal

Exception :

Life, PA

Reinstatement Policies

Valued PoliciesMore than one party may

have an insurable interest

in the same property

Actual Cash Value :Replacement value -

Depreciation

Contra proferentum


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Property Triangle Movable / ImmovableAnimals / Insects / Birds / Fish

Crop / Plantation

On Land Off Shore

In Space In Course of Construction / Installation

While kept / Installed / Stored

In Transit by Rail / Road / Water / Air

Mechanically propelled Land Vehicle not on Rail


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FLOP DSU

MLOPALOP

PROPERTY INSURAN E

FIRE MARINE

ENGINEERING

CAR EAR CPM MB EEI BPV

DOSCECR

Project Insurance

Project Insurance


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Fire Policy

Is Location Specific

Is a Named Perils Policy

Cause ofFire is immaterial

Covers certain Non-Fire Damages

Spirit is to indemnify Direct Loss / Damage


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WHO

WHAT

WHERE

WHEN

HOW

H

I

OVEREDI

INDEMNIFIED

FIRE I RANCE


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SUM INSURED

It is always fixed by the proposer

It is the limit of insurers liability under the policy

It is the amount on which the rate is applied to determine the

premium payable for the insuranceIt should represent Actual Value at Risk of the property to be

insured

Over insurance results in higher premium outgo with no

extra benefits

Under Insurance results in application of Condition ofAverage

Declaration of Block-wise / Item-wise Sum Insured offers best

results


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Book Value

Market Value

Replacement Value /

Reinstatement Value

How toFixS

um Insured ?Buildings, Plant & Machinery


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How to Fix Sum Insured ?Stocks

Raw Materials :

Net Cost at which the materials are available to the insured on the date of and at

the place of loss

Insureds own expenses of storage, interest and such other HOLDING

CHARGES NOT to be included

Finished Goods :

Net Manufacturing Cost including Factory Overheads

In other words, the Manufacturers Ex-Factory Price less Administrative / Sales

Overheads and Net Profit

Goods in Bonded Warehouse :

Sum Insured to include Excise DutyImported Goods :

Contract Price

Stock-in-process :

Cost of Raw Materials + other inputs and processing costs at any given time


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Structure of a Fire Policy

Preamble orRecital Clause

Operative Clause12 Perils covered

13 General Exclusions

15 General Conditions

14 Add-on Covers


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FLEXA

FIRE

LIGHTNING

EXPLOSION

AIRCRAFT DAMAGE


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RSMTD

RIOT

STRIKE

MALICIOUS DAMAGE

TERRORISMDAMAGE


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STFI

STORM TEMPEST

FLOOD

INUDATION


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OTHERS

IMPACT DAMAGE

SUBSIDENCE, LANDSLIDE

BURSTING and/or overflowing ofwater tanks, apparatus & pipes

Missile testing operations

Leakage from automatic sprinkler

installations

Bush fire


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Meaning OfFIRE

To be understood in its ordinary popular sense

There should be actual ignition of insured propertyWhich ought not to have been on fire

Underaccidental circumstances as far as insured is

concerned


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The word Fire as used in the Fire Insurancepolicy covers the following contingencies:

Smoke, Scorching, Heat, Toxic Gases, Ash

Water or other fire extinguishing appliances used in

putting out fireActs ofFire brigade in execution of its duties

Falling of wall as a result of fire

During removal from a burning building, caused byexposure to weather, the removal being made to

mitigate the loss


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Other Limitations to FIRE

Its own

Fermentation

Natural Heating

Spontaneous Combustion

Its undergoing any Heating orDrying process

Burning of property insured by

order of any Public Authority

Excludes destruction or damage caused to theproperty insured by:


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Limitations to Explosion / Implosion

Excludes destruction or damage caused to

Boilers

Economizers orOther vessels in which steam is generated

by theirown explosion / implosion

Machinery or apparatus subject to centrifugal force

However, destruction or damage caused tothe domestic boilers by explosion / implosionis covered


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Exclusions :

Policy Excess

Rs. 10,000 for each and every loss

In case of AOG PERILS :

5% of each and every loss subject to a minimum of Rs. 10,000

The excess shall apply per event per insured

However, forDWELLINGS : NOEXCESS


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Exclusions :

War group of perils

Nuclear perils

Pollution or Contamination :

Excluding :

Resulting from insured peril

Insured peril resulting from

pollution or contamination


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Exclusions :

Stocks in Cold Storage premises caused by change in

temperature

Architects, surveyors fees exceeding 3% of claim

amount

Debris Removal expenses exceeding 1% of the claim

amount

Loss of earnings, loss by delay, loss of market andotherconsequential and indirect losses


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Spoilage of materials caused by insured perils

Loss by theft during or after operation of insured

perils

Earthquake, Volcanic eruption or any other

convulsions of nature

Insured property removed from the insured

premises

Equipment temporarily removed for repairs, cleaning,renovation or other similar purposes for a period of 60

days are covered

Exclusions :


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Electrical Exclusion

Loss or damage to any electrical machine, apparatus, arising from

or occasioned by :

over running excessive pressures,

arcing, short circuiting,

overloading,

electrical surge etc.

this exclusion applies to the particular machine, apparatus

but not to other machines which may be destroyed by fire soset up.


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Excluded Property

Unless specifically stated in the policy

Goods held in Trust,

Bullion, curios etc aboveR

s. 10,000Manuscripts etc.,

Securities, documents,

Money,

Explosives


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General Conditions

Policy voidable in case of mis-representation,

mis-description or non-disclosure

Policy will expire after7 days from the date of

fall of any building if not caused by

insured peril.

If the insurerexpressly agrees to cover :the cover continues


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3. Under the following circumstances the

insurance ceases :

Alteration of trade to increase the hazard Insured building unoccupiedby for more

than 30 days

Interest in the insured property passes

from the insuredother than by willoroperation of law

General Conditions.


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4. If Insured property is insured by marine policy,

Fire Insurance will cover the excess claimed

amount, if any, after marine policy pays

5. Cancellation

6. Notice in writing to the Company reporting the

loss within 15 days

Law ofLimitation : 12 months

General Conditions.


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Companys right to enterthe premises, take

possession of the property

Fraud, willful act : policy void

Reinstatement option :

as circumstances permit

Reasonably sufficient manner

Sum Insured is the Limit Because of any law, if the Reinstatement could not

be done, payment in money

General Conditions


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Average Clause

Contribution

Subrogation Arbitration

All notices etc. in writing

Reinstatement of Sum Insured

after a loss

General Conditions


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Policies forParticular Considerations

Valued Policies

Floater PoliciesDeclaration Policies

Floater Declaration Policies


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3.Long-term Policies : for Dwellings only

4.Mid-term Cover : For STFI & RSMTD : Specific advice with payment of additionalpremium in Cash or by Draft only

Entire Property.No Selection Cover starts 15 days after receipt of Premium Premium on Short Period Scale

5.No Installment facility. Premium in full.

6.Minimum Premium : Rs. 100/-, Rs. 50/-

General Regulations:


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7.Partial Insurance :No policy for onlyonly certain portions of abuilding

( excluding plinth and foundationsexcluding plinth and foundations )No policy for onlyonly specified machinery, partsof machinery ( except Boilersexcept Boilers )

Note : In case of different interests : Full interest.Clearly defined in the policy.

8.Short Period ScaleExtension of short period policies not permitted.


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9. Loading for Kutcha Construction

Walls and / or Roofs of :

Wooden planks

Thatched leaves, Grass, Hay

Bamboo

Plastic cloth, Asphalt Cloth

Canvas, Tarpaulin

Loading : Additional rate of4.00%o4.00%o


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10. Cancellation

At the option of the Insured :

short period scaleshort period scale

If policy is replaced with same Insurersame Insurerby new annual one with identicalidenticalpropertyproperty :

Pro-rata on SI replaced

Short Period on SI not replaced

Short Period Policies : applicable short period scale

If policy is cancelled on account of Govt. order, Building-in-course of

construction, Buildings demolished : propro--ratarata

At the option of the Insurer: ProPro--ratarata


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11.Mid-term Increase in Sum Insured :

Increase in SI : Pro-rata

Decrease in SI : Short Period Scale

12.Escalation Clause :Max. 25%

Additional Prem. : @50% of Tariff Rate

ForB

uildings,P

&M

only.N

ot forS

tockF

orB

uildings,P

&M

only.N

ot forS

tock


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General Regulations:16. Claims Experience Discount /Loading

Min. SI : Rs. 50 Cr. ( Sec. IV,V,VI,VII )

All property in one compound, one complex, onelocation

Preceding 36 months excluding the expiring policy

period.

On renewal : either by existing or new insurer

When certified claims experience by respective insurers

is not available - Provisional loading of 15%.


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17. FEA Discount

For all detached or segregated blocks

Sections : III, IV, V, VI, VII

( except Floater / Floater Declaration policies )

19. Silent Risk : 30 days30 days or more

Storage rate or 1.00%o whichever is higher

No DiscountsNo Discounts for Silent risksNo Silent Rates if a risk goes silent following a loss

under the policy

20. Voluntary Deductible Scheme


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21. Computation ofRate

The following sequence shall be adopted for computation of rate :

Basic Rate

5% reduction for Sprinklered blocks if applicable (Sect. III, IV, V,

VI ). Reduction in rates for deletion of STFI & RSMTD if opted out

Extra for Kutcha construction ( on 1-2-3 )

Discount / Loading for Claims experience ( 1-2-3-/+4 )

FEA Discount on protected blocks (1-2-3-/+4 )

Discount for voluntary deductibles on the total premium calculated onthe basis of final rate worked out as above


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FuelCombustible Material

FIRE

TRIANGLE


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58Flixborough 1974


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