INTRODUCTION OF INSURANCE.

Insurance sector is divided in two parts as under:

Insurance

Life insurance Non-life or General insurance

A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. When shopping around for an insurance policy, look for the best priced package that is right for you - prices can vary from one insurance company to the next. And make sure you know what you want. Some individuals, for example, prefer 24-hour claims service or face-to-face contact with an insurance representative. Also consider the claims settlement process, the amount of the deductible and the extent of the replacement coverage. Insurance companies and the policies they offer are not all the same, so think about more than just the price.

In this module we will explain various insurance polices related to non-life /general insurance. Non-life /general insurance means the insurance of various tangible or non-tangible assets other than human life. Even loss of human life or damage to human body due to accidents are covered by general Insurance. Thus, human life relates to life insurance and the belongings i.e. properties of human beings fall under this category.

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Though there are various general insurance policies but we will discuss only the following important policies:

1. Fire Insurance

2. Marine Insurance (Transit)

3. Vehicle Insurance

4. Personal Accident Insurance

5. Health Insurance

6. Rural Insurance Policies

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FIRE INSURANCE

What is ‘Fire’?The term fire in a Fire Insurance Policy is interpreted in the literal and popular

sense. There is fire when something burns. In English cases it has been held that

there is no fire unless there is ignition. Stanley v. Western Insurance Co. Fire

produces heat and light but either o them alone is not fire. Lighting is not fire. But

if lighting ignites something, the damage may be covered by a fire-policy. The same

is the case with electricity.

INTRODUCTION OF FIRE INSURANCE

The above said policies are being sold only by general insurance

companies and cannot be sold by life insurance companies. This restriction is

imposed only in India but not in other parts of the world. In India also, prior to

nationalization, general insurance business was conducted by life insurance

companies also but after nationalization in 1972, consequent upon passing of the

General Insurance Business Nationalisation Act (GIBNA) General Insurance

Corporation of India was formed and was conferred the exclusive power to

regulate and conduct the business of General Insurance in India. Since 1973 the

GIC and its four subsidiary companies namely New India Assurance Co. Ltd.,

National Insurance Co. Ltd., Oriental Insurance Co. Ltd., and United India

Insurance Co. Ltd. had been the sole players in the field until the passing of the

IRDA Act 1999 which allowed the entry of private players. Over the past few

years a few private players have entered the arena. The new players have

entered the General Insurance field but are playing cautiously. These are still

early days but the field is wide open, the future is bright and the customer is

the one who will be benefited the most by the growing competition. We hope to

see international level of service and products in the country soon and a multiple

choice to select from. At the end of this lesson, you will be able to: Explain

the meaning of fire insurance Buy the fire insurance Settle the claim under fire

insurance Know the practice of fire insurance in India. Know what is not

covered under fire insurance In the following pages, we shall be discussing the

Fire insurance

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ORIGINS OF FIRE INSURANCE

The Great Fire of London (1666) destroyed more than 13,000 houses and displaced about 100,000 people but it took a couple of decades for its embers to spark the first blaze of the fire insurance business. Nicholas Barbon was probably the first to recognize the potential of a fire-threat protection business, establishing the first fire insurance office near the Royal Exchange in 1681. The imaginatively named ‘The Insurance Office for Houses on the Backside of the Royal Exchange’ was a mutual scheme for house insurance, guaranteed by a property investment fund. The trust deed allowed Barbon’s firm to insure up to 10,000 houses. However, despite its charming name, it went out of business in around 1710. ‘The Friendly Society for Securing Houses from Loss by Fire’ faired somewhat better, entering the scene in 1683 and issuing 23,000 policies before its demise in 1730. It wasn’t until the launch of the Hand-in-Hand in 1696 that a fire insurance business with longevity took a firm foothold. This was followed by the Sun Fire Office in 1710, the Union in 1714, the Westminster in 1717, the London in 1720, and the Royal Exchange in 1720. Business was booming.These early initiatives were of three types: mutual societies like the Hand-in-Hand and the Union; unincorporated companies like the Sun (effectively extended partnerships); and privileged chartered monopolies like the Royal Exchange. The latter two types were basically speculative enterprises, preserves of the wealthy and influential. According to insurance historian Trebilcock, they were motivated not by the fire-threat but rather by the potential for investment that they saw in the large capitals accruing from the fire premiums paid by customers. The mutuals on the other hand were humble cliques bent on risk-evasion - the classic associations of small traders and shopkeepers clubbing together for the defence of their property. Here, the customers for fire insurance were also the shareholders. However the chartered companies like the Royal Exchange were the only insurance ventures permitted to enjoy limited liability for shareholders under the terms of the Bubble Act of 1720: legislation designed to curb the speculation underlying the South Sea financial fiasco.

Insurance records survive in varying forms of completeness. Perhaps the best examples of continuous policy registers are for the Sun Fire Office, founded as the Exchange House Fire Office in 1708 by Charles Povey, and renamed in 1710. There were 24 members of the Sun Fire who paid £20 each for interest in the company. By 1720 they had issued over 17,000 policies and claimed to insure sums totalling £10 million. By this time the Sun Fire had moved from its first quarters in Causey’s Coffee House near St.Paul’s to two rooms in a house belonging to Mrs. Alice Garway next door to the Amsterdam Tavern in Sweeting’s Rents. It would remain there until the threat of demolition encouraged a move to the New South Sea House on Threadneedle Street in around 1727.

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Along with the other early fire offices, the Sun Fire was compelled to form its own fire brigade. The most suitable men for this work were the watermen from the Thames who were clad in the distinctive livery of their company. The following is an extract from the original proposal forms issued in 1710 and reprinted in a company pamphlet:

“For the farther encouragement of all persons there are actually employed in the service of the office thirty lusty able-body’d firemen who are cloath’d in blue liveries and having silver badges with the Sun mark upon their arms, and twenty able porters likewise, who are always ready to assist in quenching fires and removing goods having given bonds for their fidelity.”

It was the practice of each insurer to issue a badge or fire mark to be affixed to the building that was insured. The Sun Fire issued a mark with a rotund human face, surrounded by a halo of sixteen rays, 8 direct and 8 wavy. It was wrought in lead and painted a bright golden colour. The fire mark was to prevent fraud by obtaining an insurance policy by indirect means after a house had been burned. As the fire brigade would not service a house unless a mark was affixed, a property was not considered to be secure until the mark was in position. It also provided a handy bit of free advertising for the company.

The policy registers have proved to be valuable sources for economic, business and social historians. these records were the head office compilations of orders for insurance from all branches and agencies. The Sun Fire head-office registers form one un-indexed series up to the year 1793, containing 600,000 policies. From 1793 separate registers were maintained, again un-indexed, for London and the provinces. Over 1.3 million entries were made in these in the next 70 years. However, there are some missing volumes and a number of unreadable entries. They summarised relevant information about the building or contents underwritten on each policy. The information reproduced in the registers was geared to the rating of each risk and the control of the insurance premium. Consequently, most entries in the registers describe building materials, neighbouring properties, and occupational hazards associated with each insurance. The risks were classified according to the established formula of Common Insurance, Hazardous Insurance, and Doubly Hazardous Insurance. The first category covered brick and stone buildings not used for hazardous trades. The second covered timber and plaster buildings or brick and stone buildings housing hazardous trades. The final category covered timber and plaster buildings used for hazardous trades and all premises of sugar bakers, distillers, china and glass manufacturers and other dangerous trades. This classification system was generally followed until the late nineteenth century, although the Sun Fire added special categories for steam-powered mills and refineries after 1794. After 1825, a continuous stream of information about all classes of risk passed between the fire offices, ultimately culminating in the formation of a fire insurance tariff or cartel.

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Almost all types of property were covered by fire insurance, the only exceptions being a few classes of industrial property considered far too hazardous for any premiums to be set. The Sun Fire had considerable business in domestic property of all sizes, including many of the major country houses and town mansions. It insured agricultural property, including both buildings and livestock, and a wide variety of industrial and commercial businesses from small workshops to the largest of breweries, textile mills and dock warehouses. When it carried out a review of its industrial risks in the 1820s it found that it had on its books property relating to such diverse trades as ‘gingerbread bakers, bedstead upholders, oar makers, tallow melters and chandlers, lamp-black manufacturers and brushmakers’. Likewise it insured all types of shops and offices, theatres, churches, cloth halls, town halls, inns and brewhouses, schools and libraries.

The policy registers hold a vast amount of information about these different properties and their contents. Details of owners, tenants, partners, executors and occupations and places of residence are frequently recorded. Property contents, including livestock, libraries of books, clothing and wearing apparel, business and industrial stock, and machinery are specified. Many policies contain physical details of buildings insured, including numbers of storeys and rooms, and construction materials. Uses of property are also recorded, as well as details of heating and lighting methods and means of power. There are also of course the valuations of property and their contents for insurance purposes. The few surviving certificates suggest that claims were for estimated cost of replacement or for clearance and rebuilding already completed, rather than current or historic value. Some offices also considered it better for the proposer to under insure and assume some of the risk themselves.

By the second half of the eighteenth century the major London companies increased the pace of their expansion into the provinces. Agents appointed by the companies were responsible for the ordering of new business, the collection of premiums, and the presentation of receipts to London. Agents came from many walks of life. The preference was for people with good local connections. They generally ran their agencies as a second line to their major occupation, usually some form of business activity. In the eighteenth century small traders and retailers, local clerks and other small local business people typically took on the role. In the nineteenth century a broader range of people became involved. Retailers, merchants, commission agents, teachers, surveyors of taxes, clerks in various professions including banks, estate agencies, railway and canal offices and so on were all recruited. Solicitors also took on agencies and constituted 25 per cent of all country agents for the Sun Fire Office in 1846. Women were occasionally recruited. In 1807 the Sun Fire grudgingly admitted that Mrs Buchanan, their Glasgow agent, was ‘very active and as attentive to the business as a female can possibly be expected to be’.

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HISTORY OF INSURANCE IN INDIA

During 1818 Europeans started the oriental life insurance company in Calcutta.

In 1870 the first Indian Insurance company Bombay Mutual Life Insurance was

started. In 1870 the British Government enacted the Insurance Act. In 1912, the

first Indian Insurance Act was passed with the enactment again in 1938. The

general insurance business in India, on the other hand can trace its roots to the

Triton Insurance Company Ltd. The first general insurance company established

in the year 1850 in Calcutta by the British. In 1907 the Indian Mercantile

Insurance Ltd setup the first company to transact all classes of general Insurance

business. During 1957, the General insurance council, a wing of the Insurance

association of India framed a code of conduct for ensuring fair conduct and

found business practices. The 1968 the Insurance act was amended to regulate

investments and set minimum solvency margins and the Tariff Advisory

committee setup. In 1972 the General insurance Business (Nationalization) Act

1972, nationalized the general insurance business in India with effect from 1st

January 1973. 276

In April 1993, Government setup a high powered committee headed by Mr

RN Malhotra to suggest reforms in the insurance sector and make it more

efficient and competitive. The committee recommended the establishment of a

strong and effective insurance regulatory authority in the form of a statutory

autonomous board on the lines of SEBI. In December 1999, the insurance sector

was thrown open to private sector, followed by the establishment of IRDA

(Insurance Regulatory and Development Authority) in April 2000. Realizing the

big potential in Indian market, companies all over the globe rushed to find a

foothold in the Lucrative Indian Market. Development of technology and

convergence of services witnessed the insuranceproducts being offered by banks

also. It is submitted that the potential for growth of the Indian Insurance

industry can be gauged by the fact that the Indian Insurance market registered

the highest growth in the Asian Region even though Indian's Share of the global

insurance premium is much less of compared to developed countries like US,

Japan England etc

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MEANING OF FIRE INSURANCE

The term fire in a fire insurance is interpreted in the literal and popular sense.

There is fire when something burns. In other words fire means visible flames or

actual ignition. Simmering/ smoldering is not considered fire in Fire Insurance.

Fire produces heat and light but either of them alone is not fire. Lightening is

not a fire but if it ignites something, the damage may be due to fire. Under

section 2(6A) Insurance Act 1938, the fire insurance business is defined as

follows: “Fire insurance business means the business of effecting, otherwise than

independently to some other class of business, contracts of insurance against loss

by or incidental to fire or other occurrence customarily included among the risks

insured against in fire insurance policies”.

Example: The following are the items which can be burnt/ damaged through fire:

‰ Buildings

‰ Electrical installation in buildings

‰ Contents of buildings such as machinery, plant and equipments, accessories,

etc.

‰ Goods (raw materials, in–process, semi–finished, finished, packing materials,

etc.) in factories, godowns etc..

‰ Goods in the open

‰ Furniture, fixture and fittings

‰ Pipelines (including contents) located inside or outside the compound, etc.

The owner of abovementioned properties can insure against fire damage through

fire insurance policy which provides financial protection for property against loss

or damage by fire.

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Definition of 'Fire Insurance'

Insurance that is used to cover damage to a property caused by fire. Fire

insurance is a specialized form of insurance beyond property insurance, and is

designed to cover the cost of replacement, reconstruction or repair beyond what

is covered by the property insurance policy. Policies cover damage to the

building itself, and may also cover damage to nearby structures, personal

property and expenses associated with not being able to live in or use the

property if it is damaged.

Investopedia explains 'Fire Insurance'

Homeowners and property owners may consider fire insurance in addition to a property insurance policy if the property contains valuable items. A best practice would be to document the property and its related contents, which makes identifying the value of items damaged or lost much easier after a fire has taken place. A fire insurance policy may contain exclusions based on the cause of the fire, such as not covering fires caused by wars.

ScopeProperties that are covered:All moveable/ immoveable properties of the proposer on land (excluding those in transit) broadly categorised as follows :

1. Building (including plinth and foundations, if required):o Whether completed or in course of construction (excluding the value of

land).

o Interiors, Partitions and Electricals.

2. Plant & Machinery, Equipments & Accessories (including foundations, if required)o Bought Second hand.

o Bought New

o Obsolete Machinery

3. Stocks:o Raw Material

o Finished Goods

o In process

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o In trade belonging to Wholesaler, Manufacturer and Retailer.

4. Other Contents such aso Furniture, Fixtures and Fittings

o Cables, Pipings

o Spares, Tools and Stores

o Household goods etc.

5. Specific Items such as bullion, unset precious stones, curios, work of arts, manuscripts, plans, drawings, securities, obligations or documents, stamps, coins or paper money, cheques, books of accounts, computer system records, explosives.

Special types of Policies available for Stocks:1. Declaration Policy :

o To care care of frequent fluctuations in Stocks/ Stock Values

o Minimum Sum Insured Rs. 1 crore per location.

o Monthly declaration on any one of the following basis to be submitted before the last day of the succeeding month

1. average of the highest values at risk on each day (or)

2. highest value on any day of the month.

o Refund of premium, on expiry of policy, based on the average declaration upto 50% of the provisional premium.

2. Floater Policy :o to take care of frequent changes in values at various locations.

o Single sum insured for all the stocks in all the locations.

o Nominal premium loading to cover all the stocks in all the locations.

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Characteristics of Fire Insurance

1. Fire insurance is a contract of indemnity. The insurer is liable only to the extent of the actual loss suffered. If there is no loss there is no liability even if there is a fire.

2. Fire insurance is a contract of good faith. The policy-holder and the insurer must disclose all the material facts known to them.

3. Fire insurance policy is usually made for one year only. The policy can be renewed according to the terms of the policy.

4. The contract of insurance is embodied in a policy called the fire policy. Such policies usually cover specific properties for a specified period.

5. Insurable Interest: A fire policy is valid only if the policy-holder has an insurable interest in the property covered. Such interest must exist at the time when the loss occurs. In English cases it has been held that the following persons have insurable interest for the purposes of fire insurance- owner; tenants, bailees, including carriers; mortgages and charge-holders.

6. In case of several policies for the same property, each insurer is entitled to contribution from the others. After a loss occurs and payment is made, the insurer is subrogated to the rights and interests of the policy-holder. An insurer can reinsure a part of the risk.

7. Fire policies cover losses caused proximately by fire. The term loss by fire is interpreted liberally. Example: A women hid her jewellery under the coal in her fireplace. Later on she forgot about the jewellery and lit the fire. The jewellery was damaged. Held, she could recover under the fire policy.

8. Nothing can be recovered under a fire policy if the fire is caused by a deliberate act of policy-holder. In such cases the policy-holder is liable to criminal prosecution.

9. Fire policies generally contain a condition that the insurer will not be liable if the fire is caused by riot, civil disturbances, war and explosions. In the

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absence of any specific expectation the insurer is liable for all losses caused by fire, whatever may be the causes of the fire.

10. Assignment: According to English law a policy of fire insurance can be assigned only with the consent of the insurer. In India such consent is not necessary and the policy can be assigned as a chose-in-action under the Transfer of Property Act. The insurer is bound when notice is given to him. But the assignee cannot be recovering damages unless he has an insurable interest in the property at the time when the loss occurs. A stranger cannot sue on a fire policy.

11. Payment of Claims: Fire policies generally contain a clause providing that upon the occurrence of fire the insurer shall be immediately notified so that the insurer can take steps to salvage the remainder of the property and can also determine the extent of the loss. Insurance companies keep experts on their staff of value the loss. If in a policy there is an international over valuation of the property by the policy-holder, the policy may be avoided on the ground of fraud.

The Nature of Fire Insurance

Fire insurance has not a long history. The real establishment of fire insurance

came only after the Great Fire of London in 1066. This fire lasted for four days

and nights burning over 436 acres of ground and destroying over 13,000

buildings was the most disastrous fire in history and forcibly awakened the

people to the necessity for a form of protection against such calamities.

The main cause of its late development was slow progress of trade and

commerce. After a certain period when the business and commerce ran high, fire

insurance received a real fillip. Previously there was no basis on which the

premium could be based.

There were a few concerns which made a remarkable progress. Gradually as they

gained experience the data went on accumulating and the premium rates became

more equitable and scientific.

The decisions of law court also brought the principles of fire insurance to a

standard form. With increasing competition and experience, the fire insurance is

evolved in its present scientific form. However, the progress in fire insurance

was not as tremendous and categorical as was in the case of life insurance.

Section 2 of the Insurance Act 1938 defines fire insurance as "the business of

effecting, otherwise than incidentally to some other class of insurance business,

contract of insurance against loss by or incidental to fire or other occurrence

customarily included among the risks insured against in fire insurance policies."

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The occurrence of a fire will result not only in loss of or damage to material

property but also other consequential losses such as loss of production causing

loss of profit.

The function of fire insurance is to make good the financial loss suffered as a

result of fire. It is not the function of fire insurance to replace the economic

loss termed the 'fire waste'. Such damage apart from causing financial loss to the

owners dislocates the economic activity of the community.

In spite of sustained efforts made by human ingenuity to achieve complete

mastery of fire, material property continue to be liable in varying degree to

destruction or damage by the escape of fire from its contract.

Some of the insurable properties are buildings, electrical installation, contents of

building such as machines plant and equipment accessories, etc. goods such as

raw materials, goods in process, finished goods, goods in the open or in the

premises, contents in dwellings, shops, hotels furniture, fixture and fitting and

other movable and immovable properties.

Fire insurance is a device to compensate for the loss consequent upon destruction

by fire. Thus the fire insurer shifts the burden of fire losses from their actual

victims over to all the members of the society.

It is a cooperative device to share the loss. It relieves the insured from the

horror of the fire losses to which he is exposed.

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Fire insurance contract

1. Disclosure of material facts

The insured must disclose all material facts in respect of the subject matter. The

contract shall be voidable in the event of misrepresentation or non disclosing of

an necessary facts.

2. Insurable interest

It is the essential for the insured to have insurable interest in the subject matter

of both when the policy is affected and when the loss takes place.

3. Contract of indemnity

The principle of the contract of indemnity is applicable to fire insurance. The

amount can be claimed only after the loss has taken place during the stated

period. If there is no loss no claim will be accepted.

4. Personal contract

Fire insurance is a personal contract between the insured and insurer. The

policyholder cannot assign or transfer it without the perior consent of the

insurance company.

5. Duration

A fire policy is issued for a period of 10 days to 12 months but it can be

renewed after the expiry of their period.

6. General conditions

There must be an agreement in the prescribed form. The concerned parties must

be competent to contract. The object must be legal and not against the public

interest.

7. Personal Right

The person whose name has been mentioned in the contract, is entitled to

receive the insured sum from the insurer at the event of loss by fir eon insured

property.

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8. Claim Limit

The actual market value of the goods or property destroyed by fire can be

claimed only by the insurer. In such type of contract there is no profit motive.

9. The premium and Consideration

The contract is based on the consideration which means the granting of

protection by the insurer in exchange for the payment of premium by the

insured. The policy must mention the sum of insurance and the rate of premium.

10. Description of the subject matter

It is essential part of the contract that the policy must describe the: location of

the property. It helps the insurer to determine the rate of premium.

11. Scope of protection

The insurance company may grant the protection against all direct loss by fire

lightning and other perils. The contract must specify the description of loss in

order to consider the approximate cause.

12. Termination of the contract

The contract of fire insurance may be terminated due to three events:

(i) Violations of the rules

(ii) Cancellation

(iii) Expiration of the term without renewal.

13. Subrogation

Under this principle the insurer after paying a loss has ful1 right and privileges

against third party in respect of loss so paid for. These rights may be justified,

The problem of subrogation arises when a fire is caused by the negligence of

the third party, for which negligence the party whose property is destroyed by

fire may recover under rules.

14. Suspension of the policy

The insurance company is empowered to suspend the insurance due to some

reasons. The insurer shall not be liable for loss happening if the chances of risk

increase by any means within the control of the policy holder.

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15. Notice of loss

The policy holder must serve immediate notice in writing to the concerned

insurance company of any loss. It enable him to take action to reduce the loss,

to investigate the reason of fire and to determine his liability.

16. Adjustment of loss

On receiving the notice; the insurer makes arrangement to adjust the loss. The

company or its representatives with considerable authority may enter and take

possession of the damaged property.

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The principal types of fire insurance policies are given. below:

1. Valued policy

When the agreed value of the subject matter is mentioned in the policy is

named as valued policy. This value may not necessarily be the actual value of

the property. In the event of toss by fire the insurer pays the admitted value of

the property.

2. Unvalued policy

An unvalued policy in one in which the value of the subject matter is not

declared at the time of policy taken. But in case of loss the value is computed

by assessment. This is also called an open policy.

3. Specific policy

In case of specific policy, the property is insured for a definite sum. If there is

loss, the stated amount will have to be paid to the policyholder. But the actual

value of the subject matter is not considered in this respect. For examples if a

policy is taken for Rupees 20,000 upon a building whose actual value is

Rs.1,00,000 and afire occurs causing the amount of loss Rs.20,000. The insurance

company will pay the whole amount of loss of Rs.20,000 irrespective of the fact

that the building was insured for one-fifth of its value.

4. Average policy

An average policy is one which contains the average clause. This clause required

the insurance company to pay only that portion of the loss which is borne by

the insured amount to the actual value of the subject matter of the insurance.

For example a value of the property is Rs.1,00,000. It is insured for Rs.60,000

(60% of the total value) and the amount of loss is Rs.60,000. The insurance

company will not pay Rs.60,000 to the policyholder but will pay Rs.36,000 (60%

of Rs.60,000).

5. Floating policy

A floating policy is that which covers the fluctuating risk of several goods lying

in different localities for supply to various markets. Such a policy is usually

taken out under one sum and one premium by the businessman whose goods are

lying at docks and warehouses.

6. Stock declaration policy

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This policy is taken for covering the stock where great fluctuations in the value

can happen throughout the contract period. On such policy 75% of the premium

has to be deposited in advance. The maximum liability of insurance company is

specified in the policy by the insured. At the end of year the average stock and

final premium is calculated.

7. Loss of profit policy

Such type of policy covers the loss of profit which sustains as a result of fire.

This policy is also known as consequential loss policy.

8. Standard fire policy

This policy is issued for compensation of all direct loss or damage caused by

lighting and burning. Such policy also covers damages by earthquake, hair flood,

explosion, cyclone and riot.

9. Reinstatement policy

Under this policy insurance company pays more than the actual value of the

property destroyed by fire in order to cover the cost of replacement of the said

property. It is also called as “Replacement Policy”. This type of policy is not

very common in these days.

10. Schedule Policy

A schedule policy is one which insures many properties under collective terms

and conditions, Details of the properties and their respective rates of premium

are listed in one policy only for the convenience of the insured.

11. Sprinkler leakage policy

This type of policy covers the loss of building as a result of the damage by he

leakage of liquid or water.

12. Excess policy

This policy is issued for the stock of merchandise whose value is constantly

fluctuating. In such case it is not suitable to take one policy for certain sum. So

the insured takes an ordinary policy for minimum value of the stock and excess

policy for excess value of the stock. The actual value of the stock will be

reported periodically

13. Maximum value with Discount policy

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Under this policy one third discount of the premium paid is refundable to the

insured at the maturity of the policy. This policy covers the risk for maximum

amount.

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CONDITIONS

1. If there be any material misdescription of any of the property hereby insured,

or of any building or place in which such property is contained, or any

misrepresentation as to any fact material to be known for estimating the risk, or

any omission to state such fact, the Company shall not be liable upon this

Policy so far as it relates to property affected by any such misdescription,

misrepresentation or omission.

2. No payment in respect of any premium shall be deemed to be payment to

the Company unless a printed form of receipt for the same signed by an

Official or duly appointed Agent of the Company shall have been given to the

Insured.

3. The Insured shall give notice to the Company of any Insurance or Insurances

already effected, or which may subsequently be effected, covering any of the

property hereby insured, and unless such notice be given and the particulars of

such insurance or insurances be stated in or endorsed on this Policy by or on

behalf of the Company before the occurrence of any loss or damage, all benefit

under this Policy shall be forfeited.

4. All Insurance under this Policy

(1) on any building or part of any building,

(2) on any property contained in any building,

(3) on rent or other subject matter of Insurance in respect of or in connection

with any building or any property contained in any building, shall cease

immediately upon any fall or displacement

(a) of such building or of any part thereof,

(b) of the whole or any part of any range of buildings or of any structure of

which such building forms part.

PROVIDED that such fall or displacement is of the whole or a substantial or

important part of such building or impairs the usefulness of such building or any

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part thereof or leave such building or any part thereof or any property contained

therein subject to increased risk of fire or is otherwise material. AND

PROVIDED that such fall or displacement is not caused by fire, loss or damage

by which is covered by this Policy or would be covered if such building,

range of buildings or structure were insured under this Policy. In any action,

suit or other proceeding, the burden of proving that any fall or displacement is

caused by fire as aforesaid shall be upon the Insured.

5(1) This Insurance does not cover:

(a) Loss by theft during or after the occurrence of a fire.

(b) Loss or damage to property occasioned by its own fermentation, natural

heating or spontaneous combustion except as may be provided in accordance

with condition 8(f) or by its undergoing any heating or drying process.

(c) Loss or damage occasioned by or through or in consequence of

(1) The burning of property by order of any public authority

(2) Subterranean Fire

(d) Loss or damage directly or indirectly caused by or arising from or in

consequence of or contributed to by nuclear weapons material.

5(2) This Insurance does not cover loss or damage directly or indirectly caused

by or arising from or in consequence of or contributed to by ionising radiations

or contamination by radioactivity from any nuclear fuel or from any nuclear

waste from the combustion of nuclear fuel. For the purposes of this condition

5(2) only combustion shall include any self-sustaining process of nuclear fission.

6. This Insurance does not cover any loss or damage occasioned by or through

or in consequence, directly or indirectly, of any of the following occurrences,

namely :-

(a) Earthquake, volcanic eruption or other convulsion of nature.

(b) Typhoon, hurricane, tornado, cyclone or other atmospheric disturbance.

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(c ) War, invasion, act of foreign enemy, hostilities or warlike operations

(whether war be declared or not) or civil war.

(d ) Mutiny, riot, military or popular rising, insurrection, rebellion, revolution,

military or usurped power, martial law or state of siege or any of the events or

causes which determine the proclamation or maintenance of martial law or state

of siege.

(e) Any act of terrorism. For this purpose an act of terrorism means an act

including but not limited to the use of force or violence and/ or threat thereof

of any person or group(s) of persons, whether acting alone or on behalf of or in

connection with any organisation(s) or government(s), committed for political,

religious, ideological or similar purposes including the intention to influence any

government and/ or to put the public or any section of the public in fear. Any

loss or damage happening during the existence of abnormal conditions (whether

physical or otherwise) which are occasioned by or through or in consequence,

directly or indirectly, of any of the said occurrences shall be deemed to be loss

or damage which is not covered by this insurance, except to the extent that the

Insured shall prove that such loss or damage happened independently of the

existence of such abnormal conditions.

In any action, suit or other proceeding where the Company alleges that by

reason of the provisions of this condition any loss or damage is not covered by

this insurance, the burden of proving that such loss or damage is covered shall

be upon the Insured.

7. This insurance does not cover any liability for: Loss or destruction or

damage caused by pollution or contamination except (unless otherwise excluded)

destruction of or damage to the property insured caused by

(i) pollution or contamination which itself results from a contingency hereby

insured against.

(ii) any contingency hereby insured against which itself results from pollution or

contamination.

8. Unless otherwise expressly stated in the Policy this Insurance does not cover:

(a) Goods held in trust or on commission.

(b) Bullion or unset precious stones.

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(c) Any curiosity or work of art for an amount exceeding RM500/-.

(d) Manuscripts, plans, drawings, or designs, patterns, models or moulds.

(e) Securities, obligations, or documents of any kind, stamps, coined or paper

money, cheques, books of account or other business books or computer systems

records.

(f) Coal, against loss or damage occasioned by its own spontaneous combustion.

(g) Explosives.

(h ) Any loss or damage occasioned by or through or in consequence of

explosion; but loss or damage by explosion of domestic boilers and gas used

for illuminating or domestic purposes in a building in which gas is not generated

and which does not form part of any gas works will be deemed to be loss by

fire within thE meaning of this Policy.

(i) Any loss or damage occasioned by or through or in consequence of the

burning, whether accidental or otherwise, of forests, bush, lalang, prairie,

pampas or jungle, and the clearing of lands by fire.

9. Under any of the following circumstances the Insurance ceases to attach as

regards the property affected unless the Insured, before the occurrence of any

loss or damage, obtains the sanction of the Company signified by endorsement

upon the Policy, by or on behalf of the Company.

(a) If the trade or manufacture carried on be altered, or if the nature of the

occupation of or other circumstances affecting the building insured or containing

the insured property be changed in such a way as to increase the risk of loss or

damage by fire.

(b) If the building insured or containing the insured property becomes unoccupied

and so remains for a period of more than thirty (30) days.

(c) If property insured be removed to any building or place other than that in

which it is herein stated to be insured.

(d) If the interest in the property insured pass from the Insured otherwise than

by will or operation of law.

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(e) If a notice to quit by any order by the local Authorities for the requisition

or acquisition of the land on which the Insured's property is situated has been

issued.

10. This insurance does not cover any loss or damage to property which, at the

time of the happening of such loss or damage, is insured by or would, but for

the existence of this Policy, be insured by any Marine Policy or Policies except

in respect of any excess beyond the amount which would have been payable

under the Marine Policy or Policies had this insurance not been effected.

11. This insurance may be terminated at any time at the request of the Insured,

in which case the Company will retain the customary short period rate for the

time the policy has been in force. This insurance may also be terminated at the

option of the Company by sending fourteen (14) days' notice by registered letter

to the Insured at his last known address, in which case the Company shall be

liable to repay on demand a rateable proportion of the premium for the

unexpired term from the date of cancelment. The amount to be refunded upon

termination of the policy shall be subject to the minimum premium to be

retained by the Company.

12. On the happening of any loss or damage the Insured shall forthwith give

notice thereof to the Company and shall within 15 days after the loss or

damage, or such further time as the Company may in writing allow in that

behalf, deliver to the Company

(a) A claim in writing for the loss and damage containing as particular an

account as may be reasonably practicable of all the several articles or items of

property damaged or destroyed, and of the amount of the loss or damage thereto

respectively, having regard to their value at the time of the loss or damage, not

including profit of any kind.

(b) Particulars of all other Insurances, if any. The Insured shall also at all

times at his own expense produce, procure and give to the Company all such

further particulars, plans, specifications, books, vouchers, invoices, duplicates or

copies thereof, documents, proofs and information with respect to the claim and

the origin and cause of the fire and the circumstances under which the loss or

damage occurred, and any matter touching the liability or the amount of the

liability of the Company as may be reasonably required by or on behalf of the

Company together with a declaration on oath or in other legal form of the truth

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of the claim and of any matters connected therewith. No claim under this

Policy shall be payable unless the terms of this Condition have been complied

with.

13. The insurance under this policy extends to include :-

(a) wages of the Insured's employees other than full-time members of a Works

Fire Brigade.

(b) the cost of replacement of fire fighting appliances and destruction of or

damage to materials (including employees'

clothing and personal effects) unless otherwise specifically insured.

(c) Fire Brigade charges. Provided always that the liability of the Company in

respect of such wages, costs and charges shall be limited to those necessarily

and reasonably incurred in extinguishing fires at or adjoining the situation of the

property insured by this policy or immediately threatening to involve such

property.

14. On the happening of any loss or damage to any of the property insured by

this Policy, the Company may :

(a) Enter and take and keep possession of the building or premises where the

loss or damage has happened.

(b) Take possession of or require to be delivered to it any property of the

Insured in the building or on the premises at the

time of the loss or damage.

(c) Keep possession of any such property and examine, sort, arrange, remove, or

otherwise deal with the same.

(d) Sell any such property or dispose of the same for account of whom it may

concern. The powers conferred by this Condition shall be exercisable by the

Company at any time until notice in writing is given by the Insured that he

makes no claim under the Policy or, if any claim is made, until such claim is

finally determined or withdrawn, and the Company shall not by any act done in

the exercise or purported exercise of its powerhereunder, incur any liability to

the Insured or diminish its right to rely upon any of the conditions of this

Policy in answer to any claim. If the Insured or any person on his behalf shall

25

not comply with the requirements of the Company or shall hinder or obstruct the

company in the exercise of its powers hereunder, all benefit under this Policy

shall be forfeited. The Insured shall not in any case be entitled to abandon any

property to the Company whether taken possession of by the Company or not.

15. If the claim be in any respect fraudulent, or if any false declaration be

made or used in support thereof, or if any fraudulent means or devices are

used by the Insured or any one acting on his behalf to obtain any benefit under

this Policy; or, if the loss or damage be occasioned by the willful act, or with

the connivance of the Insured, or, if the claim be made and rejected and an

action or suit be not commenced within three (3) months after such rejection, or

(in the case of an Arbitration taking place in pursuance of the Condition 22 of

this Policy) within three (3) months after the Arbitrator or Arbitrators or Umpire

shall have made their award, all benefit under this Policy shall be forfeited.

16. The Company may at its option reinstate or replace the property damaged

or destroyed, or any part thereof, instead of paying the amount of the loss or

damage, or may join with any other Company or Insurers in so doing; but the

Company shall not be bound to reinstate exactly or completely, but only as

circumstances permit and in reasonably sufficient manner, and in no case shall

the Company be bound to expend more in reinstatement than it would have cost

to reinstate such property as it was at the time of the occurrence of such loss

or damage, nor more than the sum insured by the Company thereon.

If the Company so elect to reinstate or replace any property the Insured shall,

at his own expense, furnish the Company with such plans, specifications,

measurements, quantities, and such other particulars as the Company may require,

and no acts done, or caused to be done by the Company with a view to

reinstatement or replacement shall be deemed an election by the Company to

reinstate or replace.

If in any case the Company shall be unable to reinstate or repair the property

hereby insured, because of any municipal or other regulations in force affecting

the alignment of streets, or the construction of buildings, or otherwise, the

Company shall, in every such case, only be liable to pay such sum as would

be requisite to reinstate or repair such property if the same could lawfully be

reinstated to its former condition.

17. In the event of a loss to the property insured (other than stock and

building item) herein, the Company shall pay the insured value or the market

value of the insured property, whichever is the lower, subject to the deduction of

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any excess and amounts which the insured is required to bear under the policy.

For the purpose of this condition, the term market value shall mean the value

of the property insured herein at the time of damage or loss less due allowance

for wear and tear and/or depreciation. The Market Value of the insured property

shall for the purpose of this condition be determined by a valuation obtained by

the Company from the manufacturer, authorised sole agent or agent authorised

broker, authorised distributor or building contractor of the cost of replacement

or reinstatement, subject to the application of appropriate depreciation, of the

insured property damaged or lost as it was at the time of the occurrence of

such damage or loss.

In the event that there is, at the time of damage or loss no manufacturer,

authorised sole agent or agent, authorised broker, authorized distributor or

building contractor for the insured property, the valuation shall be obtained from

a Loss Adjuster licensed under the Insurance Act 1996 or Registered Valuer

under the Valuers and Appraisers Act 1981 and to be mutually appointed by

both parties. The valuation of the insured property by the manufacturer,

authorised sole agent or agent, authorised broker, authorised distributor, building

contractor. Loss Adjuster Iicensed under the Insurance Act 1996 or Registered

Valuer under the Valuers and Appraisers Act 1981 shall be conclusive evidence

in respect of the market value of the insured property in any legal proceedings

against the Company.

18. The Insured shall, at the expense of the Company, do, and concur in doing,

and permit to be done, all such acts and things as may be necessary or

reasonably required by the Company for the purpose of enforcing any rights and

remedies, or of obtaining relief or indemnity from other parties to which the

Company shall be or would become entitled or subrogated, upon its paying for

or making good any loss or damage under this Policy, whether such acts and

things shall be or become necessary or required before or after his

indemnification by the Company.

19. If at the time of any loss or damage happening to any property hereby

insured, there be any other subsisting Insurance or Insurances, whether effected

by the Insured or by any other person or persons, covering the same property,

this Company shall not be liable to pay or contribute more than its rateable

proportion of such loss or damage.

20. If the property hereby insured shall, at the breaking out of any fire, be

collectively of greater value than the sum insured thereon, then the Insured shall

be considered as being his own Insurer for the difference, and shall bear a

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rateable proportion of the loss accordingly. Every item, if more than one, of the

Policy shall be separately subject to this Condition.

21. In the event of a loss, the insurance hereunder shall be maintained in force

for the full sum insured and the insured shall be liable to pay an additional

premium at the rate stated on the policy calculated on the amount of loss on a

pro rata basis from the date of such loss to the expiry of the current period of

insurance.

22. If any difference arises as to the amount of any loss or damage such

difference shall independently of all other questions be referred to the decision

of an Arbitrator, to be appointed in writing by the parties in difference, or, if

they cannot agree upon a single Arbitrator, to the decision of two disinterested

persons as Arbitrators, of whom one shall be appointed in writing by each of

the parties within two (2) calendar months after having been required so to do

in writing by the other party. In case either party shall refuse or fail to appoint

an Arbitrator within two (2) calendar months after receipt of notice in writing

requiring an appointment, the other party shall be at liberty to appoint a sole

Arbitrator; and in case of disagreement between the Arbitrators, the difference

shall be referred to the decision of an Umpire who shall have been appointed by

them in writing before entering on the reference, and who shall sit with the

Arbitrators and preside at their meetings. The death of any party shall not revoke

or affect the authority or powers of the Arbitrator, Arbitrators or Umpire

respectively; and in the event of the death of an Arbitrator or Umpire, another

shall in each case be appointed in his stead by the party or Arbitrators (as the

case may be) by whom the Arbitrator or Umpire so dying was appointed. The

costs of the reference and of the award shall be in the discretion of the

Arbitrator, Arbitrators or Umpire making the award. And it is hereby expressly

stipulated and declared that it shall be a condition precedent to any right of

action or suit upon this policy that the award by such Arbitrator, Arbitrators, or

Umpire of the amount of the loss or damage if disputed shall be first obtained.

23. In no case whatever shall the Company be liable for any loss or damage

after the expiration of twelve (12) months from the happening of the loss or

damage unless the claim is the subject of pending action or arbitration.

24. Every notice and other communication to the Company required by these

Conditions must be written or printed.

25. This Policy and the Schedule herein shall be read together as one contract

and any word or expression to which a specific meaning has been attached in

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any part of this Policy or of the said Schedule shall bear such meaning

wherever it may appear.

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PROCEDURE TO INSURE THE PROPERTY UNDER

FIRE INSURANCE:

For insuring any property under the fire insurance policy, the following is the

procedure:

1) Filling of proposal form

2) Inspection of the property

3) Payment of premium

4) Issue of Cover note/ Policy document in lieu of acceptance of the proposal.

I) Filling of Proposal Form

The fire proposal includes the following information :Description of the

property. This would include:

(i) Construction of external walls and roof, number of storeys.

(ii) Occupation of each portion of the building.

(iii) Presence of hazardous goods.

(iv) Process of manufacture.

(v) The sums proposed for insurance.

(vi) The period of insurance.

(vii) History of previous losses.

(viii)Insurance history - whether previously other insurers

had declined the risk, etc.

II) Inspection of the property:

case of property of any business or ganization,

whether manufacturing Other type of organization, a risk inspection report is

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submitted by the insurer’s engineers. The engineers submit in their report the

nature of risk In involved in the factory/ manufacturing unit.

III) Payment of Premium:

Based on the proposal form and the inspection report of the engineers,

the insurance company will submit the premium rates to the property

owner and if these rates are acceptable to him then he should pay the

amount to the insurance company. It is also a legal requirement under

section 64VB of Act 1938 that the premium is paid in advance in

full to the insurance company.

IV) Issue of Cover note/ Policy document:

On receipt of a completed proposal form and / or inspection report,

the cover note is issued, pending preparation of the policy document.

The cover note is an unstamped document issued to provide evidence

of cover till the time the policy is issued. The cover note provides

insurance against specified perils on the usual terms and conditions of

the company’s policy.

The printed policy form provides for a schedule in which the individual details

of the contract are typed. The items are similar to those in the Cover Note but

with more detailed information. After issuing the policy document, it is likely

that there may be some changes in the nature of property or sum insured may

increase or decrease. In this case, these changes can be incorporated by way of

endorsements which are issued to record changes such as alteration in risk,

increase or decrease of sum insured, etc

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PROCEDURE TO SETTLE THE FIRE INSURANCE

CLAIM:

A) If there are any damage or loss arising due to fire then the policy holder

should immediately inform the insurance company in writing and with estimated

amount of loss.

B) Survey Report: If the amount of loss is small (i.e. up to Rs. 20,000/-), the

insurance company may depute an officer to survey the loss and decide on the

settlement of the loss on the basis of the claim form and the officer’s report.

However, in large losses, an independent surveyor duly licensed by the

Government is appointed to give a report on the loss.

The survey report would generally deal with the following matters:

(i) Cause of loss. (ii) Extent of loss.

(iii) Under-Insurance, if any.

(iv) Details and value of salvage, and how it has been disposed of or proposed

to be disposed of.

(v) Details of expenses (e.g. fire brigade expenses).

(vi) Compliance with policy conditions and warranties.

(vii) Details of other insurance policies on the same property, and the

apportionment of the loss and expenses among co-insurers.

C) Claim form: The policy holder will submit the claim form with the following

information :(i) Name and address of the Insured.

(ii) Date of loss, time and place from where the fire started.

(iii) Cause of fire.

(iv) Details of the property damaged such as description, etc.

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(v) Value at the time of fire, value of salvage and the amount of loss.

(vi) Details of other policies on the same property giving the name of the

insurer, policy number and sum insured.

(vii) Fire Brigade report details.

(viii)F.I.R. at the nearest police station regarding third party liability, if any.

D) Settlement of claim: On the basis of the claim form and the survey report,

decision is taken about the settlement or otherwise of the loss.

Highlights Fire Insurance is governed by All India Fire Tariff effective from 31.3.2001

issued by Tariff Advisory Committee, a Statutory Body.

The Standard Fire and Special Perils Policy covers all properties on land (excluding cost of land), moveable or immoveable, at various locations against named perils.

Special Types of Policies are designed for Stocks (declaration and floater), Building, Plant & Machinery keeping in mind the nature of property, proposers' requirements and basis of indemnification.

Long Term Policies available for Dwellings with suitable discounts in premium.

Policy can be extended to cover certain additional perils and expenses at additional premium.

Certain perils can be deleted with discount in premium rates.

Discount in premium available for good claims experience for sum insured more than Rs. 50 crores in one location and for installation of fire extinguishing appliances.

Concept of "one risk one rate" for all properties in an Industrial or Manufacturing Complex, for administrative convenience of the proposer.

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How to claim?If a misfortune befalls, leave the worry to us but please intimate such loss / damage immediately so that a Competent Surveyor may

be deputed to minimise the loss.

give an account of all properties damaged or destroyed with estimated amounts having regard to their values as on the date and place of loss.

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cooperate with surveyors by providing all the necessary documents for assessment of loss and establishing liability.

cooperate with the insurer in all their activities of entering the premises, taking possession of properties, their examining, sorting, removing or selling to your account, without prejudice.

inform particulars of all other insurances existing on the property at the time of loss.

Documents required by insurer for processing the claim :1. Common Documents for all claims under a Standard Fire and Special Perils

Policy:

1. Certified True copy of the policy along with schedule and Endorsements/clauses.

2. Claim Form.

3. Newspaper reports on the incident, if any.

4. Photographs.

5. Past claims experience.

2. Fire Claims (additional documents)

1. Report of the Internal Committee constituted for the purpose of investigating the cause of fire.

2. Fire Brigade Report.

3. First Information Report / Letter of intimation to the Police Station duly endorsed / Police Panchnama.

4. Forensic Laboratory Report on samples collected at affected site.

5. Drug Inspector's Report on destruction of Drugs/ Pharmaceutical items (for claim on pharma products only).

6. Final Investigation Report.

7. Action taken on the suggestion of TAC/ LPA on loss minimisation of prevention.

3. Flood Claims (additional documents):Meteorological Report

4. Explosion Claims (additional documents):Factory Inspector's Report or Report of Director of Industrial Safety and Welfare.

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Note: Policy details given are indicative, not exhaustive. Please contact your nearest NIA office for further details.

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Expenses Covered:The policy automatically covers the following expenses incurred following loss / damage / destruction of a covered property as a result of the operation of an insured peril.

1. Architects, Surveyors and Consulting Engineers' Fees upto 3 % of the claim amount.

2. Expenses incurred for removal of debris to clear the site upto 1 % of the claim amount.

Exclusions Applicable:1. Losses/ Expenses not covered:

1. 5% of each and every claim subject to minimum of Rs. 10,000 resulting from Lightning, STFI and Subsidence and Landslide including Rockslide and Rs. 10,000 in respect of all other perils.

2. Expenses incurred on Architects, Surveyors' Consultant Engineers fees and Debris Removal in excess of 3% and 1% of claim amount respectively.

3. Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or damage of any kind.

2. Perils not covered:

1. War and allied perils

2. Ionising radiations and contamination by radioactivity

3. Pollution or Contamination

3. Properties not covered:

1. Items like manuscripts etc. unless specifically declared.

2. Cold storage stocks due to change of temperature.

3. Loss / damage/ destruction of any electrical and/or electronic machine,apparatus, fixture or fitting arising from over running, excessive pressure, short circuiting, arcing, self heating or leakage of electricity, from whatever cause including lightning.

4. Loss / damage / destruction of Boilers, Economisers or other Vessels in which steam is generated machinery or apparatus subject to Centrifugal force, by its own explosion/ implosion.

Location of Risk:1. The proposer shall describe all locations where the properties are built or

installed or stored or kept at the inception

2. Any change of location of risk shall be covered on intimation of such change.

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3. Change of ownership in the insured property shall be intimated so that the new owner may be covered be means of suitable endorsement.

4. Any material change in the location of risk, trade or manufacturing activities shall be intimated to the insurer so that the changes are endorsed to offer continuous cover.

Period of Coverage:1. Fire Policy is an annual policy, generally, renewable each year.

2. Long Term policy (for a minimum period of three years) can be considered for

covering "dwellings" only with suitable discounts in premium.

3. Cover for STFI and RSMTD perils can be considered during currency (where they

are deleted at inception by choice) in special circumstances.

4. Policy can be cancelled at any time during the currency with suitable refund of

premium for the unexpired period.

Deletion of Perils at the inception:

STFI and RSMTD perils can be deleted at the inception of the policy for which suitable reduction in package premium rate is allowed.

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Add on coversIn addition to the perils/ expenses covered, the proposer can opt to seek cover in respect of the following perils/ expenses at inception or during currency of the policy on payment of additional premium :Perils:Loss/ damage/ destruction of the property caused by Deterioration of Stocks in Cold Storage premises due to power failure

following damage due to an insured peril

Forest Fire

Impact Damage due to Insured's own Vehicles, Fork lifts and the like and articles dropped therefrom

Spontaneous Combustion

Omission to insure additions, alterations or extensions

Earthquake (Fire and Shock).

Spoilage material damage cover.

Leakage and contamination cover.

Temporary removal of stocks.

Expenses: Architects , Surveyors and Consulting Engineer's Fees (in excess of 3%

claim amount)

Debris Removal (in excess of 1% of claim amount)

Loss of rent.

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Insurance of additional expenses of rent for alternative accommodation.

Start up Expenses.

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Who can take the policy?Any person / firm / organisation / institution who may suffer financial loss in the event of operation of insurable perils may insure such property under the fire policy. They may be broadly categorised as under :

1. Owners of Building and contents such as house hold articles, furniture etc.

2. Shop Keepers.

3. Educational/ Research Institutions.

4. Hotels, Boarding and Lodgings, Hospitals, Clinics or such service providers.

5. Industrial and Manufacturing Firms.

6. Godown Keepers.

7. Bailees, Lessor, Lessee, Banks, Financial Institutions, Mortgagors, Mortgagees.

8. Traders in stocks.

9. Trustees, Charitable Institutions.

10. Transporters and C & F Agents.

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THE FIRE INSURANCE DOES NOT COVER THE FOLLOWING RISKS KNOWN AS GENERAL EXCLUSIONS

(i) In every claim minimum deduction say Rs 5000/- or Rs 10000/- will be

made while settling the claim under this policy. It is to avoid small losses.

(ii) Loss, destruction or damage caused by war, and kindred perils.

(iii) Loss, destruction or damage directly or indirectly caused to the insured

property by nuclear peril.

(iv) Loss, destruction or damage caused to the insured property by pollution or

contamination.

(v) Loss, destruction or damage to any electrical and / or electronic machine,

apparatus, fixture or fitting (excluding fans and electrical wiring in dwellings)

arising from or occasioned by over-running, excessive pressure, short circuiting,

arcing, self-heating or leakage of electricity, from whatever cause (lightning

included).

(vi) Loss of earnings, loss by delay, loss of market or other consequential or

indirect loss or damage of any kind or disruption whatsoever.

(vii) Earthquake: It is not covered under the fire policy but by paying additional

premium, the earthquake can be covered

Fire insurance business is governed by the Fire Tariff that lays down the terms of coverage, the premium rates and the conditions of the Fire Policy. The fire insurance policy has been renamed as Standard Fire and Special Perils Policy. The risks covered are as follows:

Fire:Destruction or damage to the property insured by its own fermentation, natural heating or spontaneous combustion or its undergoing any heating or drying process cannot be treated as damage due to fire. For e.g., paints or chemicals in a factory undergoing heat treatment and consequently damaged by fire is not covered. Further, burning of property insured by order of any Public Authority is

38

excluded from the scope of cover

Lightning:Lightning may result in fire damage or other types of damage, such as a roof broken by a falling chimney struck by lightning or cracks in a building due to a lightning strike. Both fire and other types of damages caused by lightning are covered by the policy.

Explosion/ Implosion:Explosion is defined as a sudden, violent burst with a loud report. An explosion is caused inside a vessel when the pressure within the vessel exceeds the atmospheric pressure acting externally on its surface. An explosion may cause fire damage or concussion damage.

Implosion means bursting inward or collapse. This takes place when the external pressure exceeds the internal pressure. This policy, however, does not cover destruction or damage caused to the boilers (other than domestic boilers), economisers or other vessels in which steam is generated and machinery or apparatus subject to centrifugal force by its own explosion/ implosion. These risks can be covered in a Boiler & Pressure Plant Insurance Policy, which is specially designed to handle these risks.

Aircraft Damage: The loss or damage to the property (by fire or otherwise) directly caused by aircraft and other aerial devices and/ or articles dropped there from is covered. However, destruction or damage resulting from pressure waves caused by aircraft travelling at supersonic speed is excluded from the scope of the policy.

Riot, Strike, Malicious and Terrorism Damage:

The act of any person taking part along with others in any disturbance of public peace (other than war, invasion, mutiny, civil commotion etc.) is construed to be a riot, strike or a terrorist activity.

Any loss or physical damage to the property insured directly caused by such activity or by the action of any lawful authorities in suppressing such disturbance or minimising its consequences is covered. Further the wilful act of any striker or locked out worker, in connection with a strike or a lock out, or the action of any lawful authority in suppressing such act, resulting in visible physical damage by external means, is also covered. Malicious act would mean an act with malicious intent but excluding omission of any kind by any person, resulting in visible physical damage to the insured property, whether or not the act is

39

committed in the course of disturbance of public peace or not. Burglary, housebreaking, theft or larceny does not constitute a malicious act for the purpose of this cover.

Total or partial cessation of work or the retarding or interruption or cessation of any process or operations; or, permanent dispossession resulting from confiscation, commandeering, requisition or destruction by order of the Government or any lawfully constituted authority; or permanent or temporary dispossession of any building or plant or unit or machinery resulting from the unlawful occupation by any person of the same or prevention of access to the same, are not covered.

Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation:

Storm, Cyclone, Typhoon, Tempest, Tornado and Hurricane are all various types of violent natural disturbances that are accompanied by thunder or strong winds or heavy rainfall. Flood or Inundation occurs when the water rises to an abnormal level. Flood or inundation should not only be understood in the common sense of the terms, i.e., flood in river or lakes, but also accumulation of water due to choked drains would be deemed to be flood.

Impact Damage:

Impact by any Rail/ Road vehicle or animal by direct contact with the insured property is covered. However, such vehicles or animals should not belong to or owned by the insured or any occupier of the premises or their employees while acting in the course of their employment.

Subsidence and Landslide including Rockslide:

Destruction or damage caused by Subsidence of part of the site on which the property stands or Landslide/ Rockslide is covered. While Subsidence means sinking of land or building to a lower level, Landslide means sliding down of land usually on a hill.

However, normal cracking, settlement or bedding down of new structures; settlement or movement of made up ground; coastal or river erosion; defective design or workmanship or use of defective materials; and demolition, construction, structural alterations or repair of any property or ground-works or excavations, are not covered.

Bursting and/ or overflowing of Water Tanks, Apparatus and Pipes:

Loss or damage to property by water or otherwise on account of bursting or accidental overflowing of water tanks, apparatus and pipes is covered.

Missile Testing operations:

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Destruction or damage due to impact or otherwise from trajectory/ projectiles in connection with missile testing operations by the Insured or anyone else, is covered.

Leakage from Automatic Sprinkler Installations:

Damage caused by water accidentally discharged or leaked out from automatic sprinkler installations in the insured's premises is covered. However, such destruction or damage caused by repairs or alterations to the buildings or premises; repairs removal or extension of the sprinkler installation; and defects in construction known to the insured, are not covered.

Bush Fire:

This covers damage caused by burning, whether accidental or otherwise, of bush and jungles and the clearing of lands by fire, but excluding destruction or damage caused by Forest Fire.

How to file for claims under fire insuranceIn the event of a fire loss covered under the fire insurance policy, the Insured shall immediately give notice there of to the insurance company. Within 15 days of the occurrence of such loss the Insured should submit a claim in writing giving the details of damages and their estimated values. Details of other insurances on the same property should also be declared.

The Insured should procure and produce, at his own expense, any document like plans, account books, investigation reports etc. on demand by the insurance company.

Pro-rata Average Condition

If at the time of a loss, it is observed that the insured property is of higher value than the Sum Insured, the Insured has to bear the rateable proportion of the loss. Every item, if more than one, covered by the policy is separately subject to this condition.

For instance, a firm insures its building for Rs.10 lakhs and plant and machinery for Rs.20 lakhs. A fire occurs causing loss to plant and machinery and the damage is assessed at Rs.10 lakhs. The market value of the building at the time of occurrence of fire is assessed at Rs.5 lakhs and that of plant and machinery at Rs.25 lakhs.

The building is therefore over-insured, but the plant and machinery is under-insured if considered separately, as per the policy condition. Collectively, however, the market values of the assets are same as the value insured for. This does not give any advantage to the Insured.

Since plant and machinery is affected by the loss and its Sum Insured is under-insured by 20 percent in relation to the market value, the insurance company

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pays Rs.8 lakhs (i.e.80%) of the actual loss. The Insured has to bear a loss of Rs.2 lakhs for the under-insurance.

On the contrary if there was a loss to the building of say, Rs.2.5 lakhs, the insurance company would pay the full amount. Nothing extra is payable for over-insurance.

Contribution Clause

If at the time of loss or damage happening to any property hereby insured there be any other subsisting insurance or insurances, whether effected by the Insured or by any other person or persons covering the same property, the insurance company shall not be liable to pay or contribute more than its rateable proportion of such loss or damage.

For instance, a firm insures its finished goods stored in a warehouse for Rs.50 lakhs with X Insurance Company. Since the stocks are hypothecated to a Bank, they also insure the same property for Rs.30 lakhs with Y Insurance Company, thinking that the Insured has not insured them. There is a fire in the warehouse and the loss is assessed at Rs.10 lakhs.

In such a situation, X Insurance Co. pays 5/8th of Rs.10 lakhs that is Rs.6.25 lakhs and Y Insurance Co. pays 3/8th that amount to Rs.3.75 lakhs.Classification of InsuranceLife is full of uncertainty. Trials and tribulations abound in each and every aspect of life. No one can truly predict or even estimate what the future has in store for him. Life offers no guarantees by itself, except the incidences of death and taxation.

This lack of security present throughout life can be overcome partially through insurance. Insurance can never replace or repair a loss. But the monetary value offered by insurance helps in adjusting to the new circumstances.

Despite offering innumerable options and immense scope, insurance can be classified into four main categories.

Insurance of Person

Insurance of Property

Insurance of Interest

Insurance of Liability

Insurance of Person:

Under the purview of this class of insurance, the risks associated with human life in general can be covered up to the limit specified. A person can insure his or her life and his health against any unplanned contingencies.

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In event of his death, his dependants will be reimbursed to the full amount that he was insured for. Or if the insured person meets with an accident or suffers from an illness that cripples him forever, he will be compensated with the complete sum assured anyway since he may not be able to lead a normal life again.

In case, the accident is not that severe, he should be able to recover after medical treatment and rehabilitation. If he has opted for medical cover, then his medical expenses, treatment and medication will be paid for by his insurance policy.

Insurance of Property:

Everyone possesses material value in the form of tangible assets. Assets can be in the form of a landed estate or a vehicle, share holdings or plain old paper money.

Since tangible property has a physical shape and consistency, it is subject to many risks ranging from fire, allied perils to theft and robbery. An individual's lifetime of hard work can be wiped out in a blink of an eye.

But if a person judiciously invests in insurance for his property prior to any unexpected contingency then he will be suitably compensated for his loss as soon as the extent of damage is ascertained.

Insurance of Interest:

Every individual has to discharge certain specific duties. Everyone is expected to maintain a standard of conduct. But then, it is an intrinsic part of human nature to err. No one is infallible and no one will ever be.

Owing to an occasional error or omission committed by us, our clients or customers might suffer a loss. In turn we might have to pay them damages or compensation out of our own personal resources.

However, if our chosen profession qualifies for insurance of interest, then our insurance policy will more than suffice in arranging for the funds and court formalities that might ensue in the aftermath of legal libel.

Insurance of Liability:

Every person has to regulate his actions and behaviour so as not to cause injury or damage to other people and their property. Everyone is personally responsible and liable for his actions.

If due to lack of control over his actions or prejudiced behaviour, a person incurs any liability then he has to provide compensation out of his personal

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resources. Liabilities: legal, civil or criminal can have severe repercussions on social standing and prestige besides the financial status.

By investing in liability insurance, an individual can ward off any liabilities he might incur due to his actions and behaviour. Besides, the premiums payable on liability insurance are fairly minimal when compared to the damages that have to be compensated in the long run.Need for house insuranceHome is where the heart is sums up in short how attached one would be to his humble abode, be it a pigeonhole or a palatial residence. Whether it is a rented one or your own personal property insurance is a must to take care of the unpredictable risks to your house such as fire, natural calamities, burglary, short-circuits etc.

Such incidents would not only cause severe mental agony but the losses you may suffer under such circumstances can be unimaginably high. And setting up your house all over again can be quite expensive. But if your house is adequately insured such botherations need not be a cause for worry.

Insurance bought for your house will not only cover the structure of the house but will also cover the belongings. All those expensive items or consumer durables you bought over a period of time may have been damaged in the fire. But your insurance company will take care of the losses and indemnify you for it.

Similarly if your house is burgled and your valuables have disappeared your insurance company will bear your loss. Or for instance, your domestic help, is electrocuted in your house and dies. The insurance company can pay off the losses and liabilities that may otherwise be a concern for you, under the Workmen’s Compensation Act.

In other words buying an insurance policy for your house will buy you peace of mind as such risks are unpredictable but not impossible.

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FIRE INSURANCE CLAIMS GUIDE

INITIAL STEPS

The first step with any potential claim under a policy of insurance is to notify

the insurance company of the claim. Normally people do this by contacting their

broker, but in some circumstances, an insurance company is set up to receive

claims directly. You are obliged under the terms of your policy to give notice

forthwith to your insurance company of your claim, in writing. Your insurance

company will appoint an adjuster to handle your claim. The adjuster’s role is to

explain the claims process to you and to adjust your claim. It is important to

keep in mind that the adjuster is hired by the insurance company and takes

instructions from your insurance company.

thare various components to your house insurance, and it is important to be

familiar with the types of coverage and the limits which are applicable. Some of

the types of coverage are discussed below. THE BUILDING

In circumstances of a total loss, your insurance company will be obliged to pay

for your home to be rebuilt. Your insurance company will first determine the

replacement value of your home (ie. the cost to rebuild it).

In some circumstances, it can be difficult to determine the appropriate

replacement value. The replacement value will be based on the square footage of

the home, the quality of the finishings, quality of construction and other factors.

If you have photographs or videos of your home, these can be very helpful.

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In the majority of cases where there is a total loss, your insurance company

may not insist that the house be built exactly the same as the one that was

destroyed. In a total loss, the insurance company will have to assess whether

the foundation is salvageable or not, and will normally retain an engineer to do

an assessment of the property. Once the replacement value has been determined,

you will then be in a position to hire a contractor to rebuild your home, with

the insurance company paying the lesser of the following towards the cost of

construction:

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Statistics

The ABI collects extensive data from across the insurance industry covering everything from motor and property insurance to life assurance and pensions. The data is available to membersfor free as a benefit of their membership while non-members can access data upon payment of a subscription fee.

Sign up to our Statistics Subscription Service and buy up to date information on the UK insurance market.

The UK insurance industry:

Is the largest in Europe, and third largest in the world, accounting for

7% of total worldwide premium income in 2011.

Is a major exporter, with 26% of net premium income coming from

overseas business in 2012.

Employs around 320,000 people – more people than are employed in the

electricity, gas and water sectors combined.

New single premium long-term business

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Total new premium income increased by 2.5% in nominal terms between

2011 and 2012 (which represents a fall of 0.7% in real terms)

.FREQUENCY OF FIRE ACCIDENTS

A study of statistical data regarding fire mishaps in Delhi, total India and abroad will show, that although our fire prevention, security and fighting methods are getting refined day by day, the number of fire accidents is also increasing day by day.

In Delhi, a total of 6,518 fire happenings were reported in year 1985-86 and 6,751 in year 1986-87. This number has certainly increased in the year 1987-88. In terms of India as a whole month, Table 1.1 shows the number of fire and other calls received by the various fire brigades in India and number of lives lost in fire. This table shows the number of lives saved by the fire services, value of property lost in fires and probable amount of property saved by fire services during the period 1980-85.

Table 1.1 Annual Statistical Data on Important Activities of Fire Services in India for 1981

Year Number of Number of Number of Number of Value of Value of

fire calls other calls lives lost lives saved property lost in property saved

received (rescue etc.) in fires by fire fires (crores) from fire by

attended (human services

fire services

lives only)

(crores)

1980 36,294 8,765 1,164 2,325 124.50 545.09

1981 36,705 11,475 953 1,902 70.84 523.54

1982 38,741 11,456 1,117 4,795 68.97 575.99

1983 44,403 12,988 2,817 1,505 107.92 857.85

1984 55,521 13,060 4,246 4,442 196.25 1799.78

1985 50,904 13,690 4,152 6,901 148.66 811.39

This table indicates that within five years there is an increase of nearly 50 per cent in the total number of fire incidence in India.

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The number of fires and death and their rates per thousand of population of various EECcoun- tries are shown in Table 1.2.

Table 1.2 Fires and Deaths in (European Economic Community)Countries in Year 1979–80 (Source NFPA)

Country No. of fires

No. of deaths

in thousands per thousand total per per thousand

persons

million fires

Belgium 16.7 1.7 122 12.5 7.3

Denmark 15.8 3.1 68 13.4 4.6

France 91.1 1.7 772 14.5 8.6

Germany — — 528 8.6 —

Ireland 25.8 7.6 — — —

Netherlands 12.7 0.9 96 6.8 7.5

UK 117.4 2.1 816 14.6 7.0

4 FIRE SAFETY IN BUILDINGS

This table shows that UK had the maximum number of fires casualties but when these are taken on per capita basis, then Ireland has the lion’s share. France, Denmark and Belgium are not significantly different from each other in the number of deaths. On both counts Netherlands seems to be the safest country.

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Table 1.3 shows the variation of fire death rate indices during a series of years in some important countries round the universal globe.

Table 1.3 Variation in Fire Death Rates of Various Countries in the World, fromYear to Year (Death Per Million Population)

Country 1965–67 1972–74 1975–78 1979–80 1983

Canada 36 34 32 — 28.9

USA 37.5 30 29 — 25.7

Ireland — 26.5 25 — 33

Finland — 20 18 — 20

Norway 15 14 15.5 — —

Sweden — 14 15 — 15.9

UK 13.5 16.5 15 14.6 16.5

France — 15 15.5 14.5 5.5

Japan 20 16.5 15 — —

Belgium — 13.5 13 12.5 —

New Zealand — 12 12 — —

Denmark 10 12.5 12.5 13.4 —

Australia 26 15.5 13 — —

Austria 10 10 9 — 8.5

Germany — 10 10 8.6 —

Switzerland — 6 6.5 — —

Netherlands — 6.5 5.5 6.8 6.1

Italy — 4 — — —

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India — — 1.5 1.5 3.8

Umberto of Flisi, Italy in his essay on “Fire in Buildings : The Behaviour of Rigid Plastic Products” stated that although in USA the use of plastic materials has increased by more than 900 per cent sincemid-1950s, the fire death rate has dropped from 63.5 per million population in 1960 to 25.9 in 1981. From above table it is also clear that death rate has constantly decreased. This trend of decrease in death rate is common in all industrialized countries and is due to 20 years of research and fire safety improvements by use of plastic goods. It is also a fact that only a few of all fires are reported to fire brigades and in most of the cases in small towns, the fire brigade is not available. The following statistical data regarding number of claims met by insurance and number of calls served by fire brigade in case of domestic, industrial and agricultural fires in France including motor vehicles, forest and brush (electrical) fires, indicates that only a fraction of fire complaints are met by fire brigades.

FIRE, THE SOCIAL ASPECT

5

YearNumber of claims Number of calls-out Percentage of claims

met by insurers made by fire dealt with by fire

brigade brigades

1982 1,959,353 192,815 9.84%

1981 1,809,039 169,486 9.36%

1980 1,679,916 123,861 7.37%

It will be noted that less than 10 per cent of fires for which claims were met needed the interven- tion of the fire brigade. For other categories we obtain the following figures:

YearNumber of claims Number of calls-out Percentage of claimsmet by insurers made by fire dealt with by fire

brigade brigades

Individuals

1982 1,314,603 63,016 4.79%

1981 1,231,363 53,0244.30%

1980 1,157,689 8,650 3.30%

i.e., less than 5 per cent.

Businesses

1982 314,964 13,781 4.37%

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1981 351,990 13,861 3.93%

1980 332,845 10,329 3.10%

likewise under 5 per cent.

Regular Premium pensions business in 2012 was £4.3bn, down 1.4% from

£4.4bn in 2011

CONCLUSION.

Over time, an increased understanding of the many factors that contribute to the risk of fire has led to positive developments in the fire protection of commercial structures. Improvements in public fire protection systems and services, as well as increased use of private active or passive systems through fire-protection and loss-control engineering, has meant an overall decrease in the cost of fire A discussion of the factors affecting insurance premium rate demonstrates that, although building construction type is one factor used, there are many other equally important considerations when determining a property's level, fire risk, and hence its insurance premium. A similar level of fire safety can be achieved by various means. The sum effect of all fire safety factors should be weighed, and a variety of active and passive fire-protection measures can be assessed and market factors considered, optimizing both fire safety and overall cost for a commercial building

Preventing fire losses has always been more important to the insured than to the insurer. Although a particular fire loss may not be statistically significant to an insurance company, to the owner involved such a loss is not only a direct financial issue but it also impacts many other important business aspects, such as employee m oral,access to suppliers and the economic health of the community.

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BIBLOGRAPHY

WEBSITE;

1. WWW.GOOGLE.COM

2. WWW.YAHOO.COM

3. WWW.TIMESMONEY.COM

4. WWW.MSN.COM

REFRENCE BOOKS;

1. INSURANCE AND RISK MANAGEMENT Himalaya publishing

house.

2. RECKONER p.v prakashan

3. INSURANCE LAW AND REGULATION. The icfai university pg no

208-213

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