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Principles & Policy Coverage
•Utmost Good Faith
•Proximate Cause •Indemnity - Subrogation - Contribution
© Copyright Bajaj Allianz 3/21/2013
3 Anurag Rastogi
Causes of Fire
•Fire is an oxidation reaction in which fuel such as carbon or hydrogen combines with oxygen and produces heat and visible light. •Energy conversion system in which oxygen combines with fuel and energy stored in the fuel is released as heat and light. •Energy released by fire in the form of heat transferred by – conduction, convection, radiation.
© Copyright Bajaj Allianz 3/21/2013
4 Anurag Rastogi
Originating or Inception Fire Hazard •Electrical •Smoking •Friction •Overheated Materials •Hot Surfaces •Burner Flames •Combustion Sparks •Spontaneous Combustion •Cutting and Welding © Copyright Bajaj Allianz 3/21/2013 5 Anurag Rastogi .
•Incendiarism •Mechanical Sparks •Molten Substances •Chemical Action •Static Sparks •Lightning © Copyright Bajaj Allianz 3/21/2013 6 Anurag Rastogi .
landslide Bursting of pipes/tanks Missile testing Sprinkler Leakage Bush fire(excluding forest fire) Debris removal & Architect fee 7 Anurag Rastogi OTHERS .Fire Policy FIRE RIOT © Copyright Bajaj Allianz 3/21/2013 FLEXA STFI RSMD LIGHTNING EXPLOSION AICRAFT DAMAGE STORM TEMPEST FLOOD INUNDATION STRIKE MALICIOUS DAMAGE Impact damage Subsidence.
10.Resulting from insured peril .Exclusions Per insured per event •Excess of Rs.000 for each and every loss (Max of 5% or 10000 for AOG perils) •War group of perils •Nuclear perils •Pollution or Contamination. excluding : .Insured peril resulting from pollution or contamination © Copyright Bajaj Allianz 3/21/2013 19 Anurag Rastogi .
surveyors fees exceeding 3% of claim amount •Debris Removal expenses exceeding 1% of the claim amount •Loss of earnings.Exclusions… •Stocks in Cold Storage premises caused by change in temperature •Architects. loss by delay. loss of market and other consequential and indirect losses •Spoilage of materials caused by insured perils •Loss by theft during or after operation of insured perils © Copyright Bajaj Allianz 3/21/2013 20 Anurag Rastogi .
securities. manuscripts. Volcanic eruption or any other convulsions of nature •Insured property removed from the insured premises. curios etc above Rs.Exclusions… •Earthquake.bullion. documents. cleaning.Equipment temporarily removed for repairs.10.000. explosives unless specifically covered © Copyright Bajaj Allianz 3/21/2013 21 Anurag Rastogi . money. renovation or other similar purposes for a period of 60 days are covered • Electrical exclusion • Goods held in Trust. however .
insurable interest •Unoccupied building •Coverage of same property by marine insurance •Policy termination •Notice of loss within 15 days •Disclaimer after 12 months © Copyright Bajaj Allianz 3/21/2013 22 Anurag Rastogi .Conditions •Misrepresentation •Policy expiry after 7 days from fall / displacement of any building-if not caused by insured peril •Changes in risk.
replace or reinstate •Average clause-separately for each item •Contribution clause •Subrogation •Arbitration •Auto-reinstatement © Copyright Bajaj Allianz 3/21/2013 23 Anurag Rastogi .Conditions… •Rights of company on damaged property •Fraudulent claims/means •Company’s option to repair.
alterations or extensions (5% 0f SI) © Copyright Bajaj Allianz 3/21/2013 24 Anurag Rastogi . Surveyors & Consulting Engineers Fees upto 7.5% of adjusted loss •Removal Debris ( > 1% of claim amount) •Deterioration of Stock (cold storages).Add On Covers •Architects. FOES extension •Forest Fire •Impact Damage due to Insured’s own vehicles •Spontaneous Combustion •Omission to insure additions.
Add On Covers… • Terrorism • • • • • • Earthquake (Fire & Shock) Spoilage Material Damage Leakage and Contamination Cover (for oils and chemicals only) Temporary Removal of Stocks Clause Loss of Rent Clause Insurance of Additional Expenses of Rent for An Alternative Accommodation 25 Anurag Rastogi © Copyright Bajaj Allianz 3/21/2013 .
refund maximum 50% •Basis of declaration •Omission to declare •Two average conditions •No reduction in sum insured © Copyright Bajaj Allianz 3/21/2013 28 Anurag Rastogi .Declaration Policy •For fluctuating stocks above 1 crore •Premium adjustment at the end of policy.
Floater Policy •For several specified locations where locationwise sum insured can not be ascertained •One sum insured floats over all the locations •No floater extra for stocks floating within the same complex/compound Floater Declaration Policy •Amalgamation of floater & declaration concepts •Minimum sum insured Rs. 2 crores •Maximum refund 80% © Copyright Bajaj Allianz 3/21/2013 30 Anurag Rastogi .
Often MV settlement better that RIV settlement in case of heavy underinsurance © Copyright Bajaj Allianz 3/21/2013 31 Anurag Rastogi . FFF only •Not for Stock •Applies only if property actually reinstated. for Buildings. P&M.Reinstatement Value Policy •New for Old. else claim settlement on Market Value basis •Reinstatement should be completed within 12 months (extra time allowed by company) of damage/destruction •Insured’s option to accept settlement on RIV or indemnity basis •Average Clause applies as usual.
Other Clauses •Escalation(upto 25%) Clause •Local Authorities Clause •Agreed Bank Clause •Contract Price Clause •Designation of property clause © Copyright Bajaj Allianz 3/21/2013 32 Anurag Rastogi .
Fixing Sum Insured .
Sum Insured • Recognized facts about Sum Insured Always fixed by proposer Is the limit of insurer’s liability Is the amount on which rate is applied to determine premium Should represent actual value of property being insured Over insurance means definite loss of premium Underinsurance means a probable loss on occurrence of claim © Copyright Bajaj Allianz 3/21/2013 34 Anurag Rastogi .
Buildings •Below plinth / above plinth •Inclusion of embedded items like pipes. electric & telephone wiring •Inclusion of Furniture. fixtures and fittings •Value to insure for? © Copyright Bajaj Allianz 3/21/2013 35 Anurag Rastogi .
CPWD rates .Valuation •Capitalized Cost •Book Value/WDV •Reinstatement Value .Depreciation on merit © Copyright Bajaj Allianz 3/21/2013 36 Anurag Rastogi .Cost indices by National Building Organization •Market Value .
Indicative Building Depreciation RCC construction 1% Factory sheds with RCC frame Factory sheds with AC sheets roofs on steel / wooden framework Other construction 1½-2% 2-4% 2-2½% © Copyright Bajaj Allianz 3/21/2013 37 Anurag Rastogi .
Old P&M-RIV-from where? • Old plant might have undergone technological improvements • May be out of production • Imported earlier. but available indigenously now • P & M may be obsolete © Copyright Bajaj Allianz 3/21/2013 38 Anurag Rastogi .
inflate landed cost by RBI index © Copyright Bajaj Allianz 3/21/2013 39 Anurag Rastogi . OR Landed cost of (imported) machinery. OR Current replacement cost of available machinery LESS adjustments for improvements. (+) Fall / (-) Gain in value of Rs. Vis-a-vis foreign currency (+) Inflation (foreign currency) (+) Increase / (-) Decrease in duty • Alternatively. if available.Plant & Machinery • Methods of finding RIV Current replacement value of similar machinery.
maintenance Maximum depreciation and residual value • A special case of computers and other electronic machinery © Copyright Bajaj Allianz 3/21/2013 40 Anurag Rastogi .Plant & Machinery • Book Value • Market Value For marketable P&M For specialized P&M Depreciation as per plant load. usage.
OR ex-factory cost MINUS sales overheads and profit • Imported goods-Contract price/Landed cost • Stocks In Process-Cost of raw material plus other inputs and processing cost © Copyright Bajaj Allianz 3/21/2013 41 Anurag Rastogi .Stock • Raw material-Net cost at which material available on the date & place of loss • Finished goods-Net manufacturing cost including overheads.
surveyor and Engineers’ fee •Omission to insure additions.Extra Protection •Escalation •Removal of debris •Architects. alterations or extensions © Copyright Bajaj Allianz 3/21/2013 42 Anurag Rastogi .
All India Fire Tariff .
•Section I •Section II •Section III •Section IV •Section V •Section VI •Section VII - •Section VIII •Annexure A •Annexure B © Copyright Bajaj Allianz 3/21/2013 General regulations Policy Cover / Exclusion / Conditions Non Industrial risk Industrial / Manufacturing risk Utilities outside Industries Storage risk outside Industries Tank farms / Gas holders outside Industries Add-ons Standard clauses Standard proposal form 44 Anurag Rastogi .
General Regulations •For land based properties only •Separate block wise SI for bldg. machineries. other contents © Copyright Bajaj Allianz 3/21/2013 45 Anurag Rastogi . FFF. stock & SIP.
General Regulations •STFI & RSMD could be deleted at inception •No partial insurance © Copyright Bajaj Allianz 3/21/2013 46 Anurag Rastogi .
2. 5-15% Discount. 2.5-15% loading •FEA discount.General Regulations •SI increase any no. for B&M only •Claim experience discount/loading for SI>50 cr in one location.5-10% •Silent risks © Copyright Bajaj Allianz 3/21/2013 47 Anurag Rastogi . of times at prorata premium •Escalation 5%-25%.
Claims-The Acid Test .
warranties. risk.Date. peril Adequacy Damage quantification Policy conditions.Essentials •Intimation & survey •Coverage . clauses Claim valuation & reinstatement adjustment Salvage Claim recipient & discharge Recovery © Copyright Bajaj Allianz 3/21/2013 49 Anurag Rastogi . insurable interest.
salvage needs special care and prompt action •Salvage is adjusted before application of underinsurance and excess © Copyright Bajaj Allianz 3/21/2013 50 Anurag Rastogi .Salvage •An important component of most fire claims •Insured is the best buyer of salvage! •Hence.
Duties of insured •Common law duty to avoid/minimize the loss •Cost of minimizing losses payable by policy •Duty to give notice •Onus of Proof & associated duties-listed peril Vs All risks policy .Facts and only facts . accurate and authenticated .Figures.Access to premises and records © Copyright Bajaj Allianz 3/21/2013 52 Anurag Rastogi .
2002 © Copyright Bajaj Allianz 3/21/2013 53 Anurag Rastogi .Rights of insured •To receive proper and dispassionate advice •To receive a copy of proposal •Receive an offer of claim settlement within 30 days of the receipt of survey report •Receive penal interest in case of delay in claim payment Source: IRDA Policyholders’ protection regulations.
Rights of insurer •After claim .To exercise removal. sorting or examination etc of property .To take possession of insured property .To sell such property for account of all concerned •Exercise of these rights does not prejudice insurer’s right to deny or diminish liability © Copyright Bajaj Allianz 3/21/2013 54 Anurag Rastogi .To enter. take & keep possession of the premises .
Real or intrinsic value (sans sentimental value) •Depreciation •Average Clause •Excess •Salvage Value © Copyright Bajaj Allianz 3/21/2013 55 Anurag Rastogi .Value at the time of loss .Value at the place of loss .Irritants •Loss Valuation .
The Golden Rule Learn form others’ mistakes and avoid the usual pitfalls Claims optimization begins at the stage of buying insurance and not after loss occurrence © Copyright Bajaj Allianz 3/21/2013 57 Anurag Rastogi .
QUESTIONS? Thank You © Copyright Bajaj Allianz 3/21/2013 58 Anurag Rastogi .
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