Professional Documents
Culture Documents
INSURANCE
BY
R.R.JOSHI
PRICE
GOVERNED BY TARIFF TILL 31/12/2006,
PRESENTLY DE-TARIFFED ONLY AS FAR AS
RATING
a) BUILDING –
INCLUDING
ELECTRICAL INSTALLATION, PIPELINES ETC.
b) CONTENTS
i) PLANT & MACHINERY,
EQUIPMENTS, ACCESSORIES
ii) FURNITURE ,FIXTURES AND
FITTINGS
iii)STOCK
•RAW MATERIAL
•STOCK IN PROCESS
•SEMI FINISHED GOODS
•FINISHED GOODS
October 14, 2008
VALUATION ASPECTS IN
FIRE
CURRENT NEW REINSTATEMENT/
REPLACEMENT VALUE—CNRV
MARKET VALUE=CNRV--
DEPRECIATION
PURCHASE VALUE
WRITTEN DOWN VALUE=PURCHASE
VALUE-DEPRECIATION
1. FIRE
-EXCLUDING SPONTANEOUS COMBUSITON
/BURNING BY PUBLIC AUTHORITY…
(S/COMBUSTION CAN BE COVERED AT
EXTRA PREMIUM)
2. LIGHTNING
3. EXPLOSION/IMPLOSION
- EXCLUDING DAMAGE TO BOILERS etc. OR
THEIR CONTENTS DUE TO
CENTRIFUGAL FORCES
4. AIRCRAFT DAMAGE
October 14, 2008
PERILS COVERED contd...
BI
(Fire) Machinery
Fire BI (MB)
Insurance
Insurance
Salient Features –
Comprehensive, convenient and cost effective policy
Package policy of All Risk Nature.
Not a named peril policy
All perils covered except certain specific exclusions.
Presently wording is governed by Tariff
Eligibility – Industrial Risks having overall Sum
Insured in excess of of Rs. 100 Cr. at one or more
locations.
October 14, 2008
Salient Features of IAR Cont….
Single Document Policy
Losses (MD as well as BI) due to Burglary covered.
Transit Risk inside industrial compound covered
Considerable premium saving possible due to lower
rates (especially for MB cover) .
Underinsurance up to 15 % is ignored
No depreciation deducted from MB loss (Total or
Partial) for Limited Life Equipments.
Handsome discount available for opting higher
deductibles as well as good claims experience
Larceny
Acts of fraud or dishonesty
Inventory shortage, misplacement, unexplained
disappearance.
Coastal or River erosion
Normal Settlement of new structures
Willful act or negligence on part of insured
Cessation of work
October 14, 2008
Excluded Causes in Section I (MD) Cont..
Delay or loss of market and other indirect losses
War, Invasion act of foreign enemy, Civil war.
Permanent or temporary dispossession
resulting from nationalization commandeering
or unlawful occupation
Destruction of property by order of public
authority
Nuclear weapons
Ionizing radiations, contamination by
radioactivity from nuclear fuel.
Impact due to floating / waterborne objects
Act of Terrorism
October 14, 2008
Excluded Property under IAR
Unless specifically mentioned as insured -
Money, Cheques, Stamps, Bonds, Credit Cards,
Jewellery, Precious Stones, Precious Metals,
Curios, Works of Art
Goods held in trust, Documents/Manuscripts/Business Books
Computer Systems Records
Patterns / Models / Moulds
Plans, designs, explosives
Land, Road, Rail Lines
Dams, Reservoir, Canals, rigs, wells, tunnels, pipelines
Bridges, Docks, Jetties, Offshore Property etc.
Gross Profit
Turn Over
Rate of G.P.
Working Expenses
Time Exclusion
Indemnity Period
Standing Charges
Standard Turnover
Annual Turnover
or
Turnover
Working Gross
Expenses Profit
Standing Net
Charges Profit
October 14, 2008
COMPONENTS OF COVER
0,0 A B C D TIME
A - B TIME EXCLUSION
A - D INDEMNITY PERIOD (I.P)
A - C ACTUAL I.P.
F - G L.O.P (ACTUAL)
A OCCURANCE OF ACCIDENT
October 14, 2008
1990
JAN
APR
FINANCIAL YEAR
JULY
OCT
1991 JAN
APR STANDARD TURNOVER
JULY
OCT
1992 JAN ANNUAL TURNOVER
APR
JULY
OCT INTERUPTION PERIOD
1993 JAN
October 14, 2008
TYPICAL LIST OF STANDING CHARGES
1. Employee Cost
2. Interest & Finance Charges
3. Depreciation
4. Repairs & Maintenance including Stores & Spare parts utilised.
5. Minimum demand charges for utilities
6. Rent, Rates & Taxes
7. Insurance
8. Travelling & Conveyance
9. Communication expenses
10.Printing & Stationery
11. Advertisement & Publicity
12.Legal & Professional Charges
13.Auditors Remuneration & Expenses
14.Director`s Fees, Remuneration & Profit Commission
15.Sundry & Miscellaneous Expenses
October 14, 2008
SPECIFIED WORKING EXPENSES
LOSS
time
Int. P.
accident
I. P.
I.P.L.
INDEMNITY PERIOD ends, when actual T.O. reaches the same amount, as if no damage would d have occurred.
e.g. - restarting requires several days
October 14, 2008 - loss of market
Monthly Turnover
Annual Turnover
Trend
Reduction
in
T.O. Turnover
Reference
Period
Actual
1991 1991 1992 Turnover 1992 1993
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7
Interruption
Reference Period
Period Indemnity
Period
12 months before Indemnity Period Limited
Time
the accident Date of accident
October 14, 2008
100 $ p.a.
Costs
90 Turnover
}
80 Gross Profit
Net Profit
70
60
50 Break-Even Point
specified working
40 Net Loss
{ expenses Gross Profit
30
(variable costs ) ^
=
Sum Insured
20
10
standing charges (fixed costs)
1 2 3 4 5 6 7 8 9 10
October 14, 2008 units p.a.
Discounts
Fire & Allied Perils
F.E.A discount for approved installation
Claims experience discount
Discount for higher excess
Breakdown risks
Discounted flat rate
Discount for higher excess
October 14, 2008
Deductibles
For material damage claims :
5 % of the claim amount subject to a minimum
of Rs. 5 lakhs and the maximum is Rs. 50
lakhs
For business interruption claims:
FLOP--three days gross profit subject to a minimum of
Rs. 5 lakhs and the maximum is Rs. 50 lakhs for Fire LOP
claims.
MLOP--Shall be as decided by TAC in case of MLOP
claims
October 14, 2008
Voluntary Deductibles
Material Damage Claims
5 % of claim amount with a minimum of
Deductible Discount
Rs. 10 Lakhs 10 %
Rs. 15 Lakhs 15 %
Rs. 20 Lakhs 20 %
Rs. 25 Lakhs 25 %
October 14, 2008
Voluntary Deductibles
Business Interruption Claims
Deductible Discount
No.of Days Minimum
7 days Rs. 10 Lakhs 5%
14 days Rs. 15 Lakhs 10 %
21 days Rs. 20 Lakhs 15 %
28 days Rs. 25 Lakhs 20 %
35 days Rs. 30 Lakhs 25 %
Opting for higher deductibles entails
October 14, 2008
still higher discounts