Fire Insurance

• Great Fire of London of 1666 • Industrial revolution of the 17th and 18th century • Fire insurance business is “the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured in fire insurance policies”. - Insurance Act, 1938 • Fire portfolio constitutes almost 24% of the total premium of General insurance industry and has been the major support in its profitability. • Fire business is governed as per the tariff of Tariff Advisory Committee.

SCOPE OF COVER UNDER THE STANDARD FIRE AND SPECIAL PERILS POLICY
• • Fire Excluding destruction or damage caused to the property insured by —
• • its own fermentation, natural heating or spontaneous combustion. It’s undergoing any heating or drying process.

Burning of property insured by order of any Public authority.

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Lightning Explosion/implosion
– Excluding destruction or damage caused to the boilers (other than domestic boilers).

Aircraft Damage Riot, Strike, Malicious and Terrorism Damage Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation Impact Damage Subsidence and Landslide including Rock slide Bursting and/or overflowing of Water Tanks, Apparatus and Pipes Missile Testing operations Leakage from Automatic Sprinkler Installations Bush Fire

Add on Covers
• Architects, Surveyors and Consulting Engineer’s Fees in excess of 3% of claim amount). • Debris Removal (in excess of 1% of claim amount). • 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 Rail/Road Vehicles and the like and articles dropped there from. • Spontaneous Combustion. • Omission to insure additions, alterations or extensions. • Earthquake (Fire and Shock).

Sum insured in Fire insurance
• Market value • Reinstatement value • Premium: Premium under the policy depends upon:
– Nature of risk; – Class of construction; and – Sum Insured.

• Extra premium is charged for opting add on perils and discounts are provided for installing fire fighting systems and for a good claim ratio.

VARIOUS TYPES OF FIRE POLICIES
• Floater Policy • Floater Policy can be issued for stocks at various locations under one Sum Insured (The Standard Floater Clause I, Annexure A shall be attached to such policies). • Note: Unspecified locations not allowed. • Rating: The rate is the highest rate applicable to insured’s stocks at any location with a loading of 10 %.

VARIOUS TYPES OF FIRE POLICIES-

Declaration Policies
• To take care of frequent fluctuations in stocks/stock values, Declaration Policy can be granted subject to the following conditions – The minimum sum insured shall be Rs 1 crore in one or more locations and the sum insured shall not be less than Rs. 25 lakhs in any of these locations. It is necessary that the declared values should approximate to this figure at sometime during the policy year. – Monthly declarations based on a) the average of the values at risk on each day of the month or b) the highest value at risk during the month shall be submitted by the Insured latest by the last day of the succeeding month. If declarations are not received within the specified period, the full sum insured under the policy shall be deemed to have been declared. Reduction in sum insured shall not be allowed under any circumstances. Refund of premium on adjustment based on the declarations/ cancellations shall not exceed 50% of the total premium. The basis of value for declaration shall be the Market Value anterior to the loss. It is not permissible to issue declaration policy in respect of – Insurance required for a short period. – Stocks undergoing process. – Stocks at Railway sidings If after occurrence of any loss it is found that the amount of last declaration previous to the loss is less than the amount that ought to have been declared, then the amount which would have been recoverable by the insured shall be reduced in such proportion as the amount of said last declaration bears to the amount that ought to have been declared.

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VARIOUS TYPES OF FIRE POLICIES-

Floater Declaration Policies
• Floater Declaration policy can be issued subject to a minimum sum insured of Rs 2 crores and compliance with the Rules for Floater and Declaration Policies respectively except that the minimum retention shall be 80% of the annual premium.

Rural Insurance
• Need
– Increase in credit finance in the rural areas – Increase in income and assets of rural poor – Availability of information for decision making

• Modus Operandi
– Design tailored products – Establish efficient methods of premium collections and claims settlements. – Create awareness for need of insurance products.

Definition

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“Rural sector shall mean any place as per the latest census which meets the following criteria-a population of less than five thousand; a density of population of less than four hundred per square kilometer; and more than twenty five per cent of the male working population is engaged in agricultural pursuits

Social sector” includes unorganised sector, informal sector, economically vulnerable or backward classes and other categories of persons, both in rural and urban areas;

Obligation –Rural Sector
• Every insurer, who begins to carry on insurance business after the commencement of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), shall, for the purposes of sections 32B and 32C of the Act, ensure that he undertakes the following obligations, during the first five financial years, pertaining to the persons in rural sector,
(i) in respect of a life insurer, -– seven per cent in the first financial year; – nine per cent in the second financial year; – Twelve per cent in the third financial year; – Fourteen per cent in the fourth financial year; – Sixteen per cent in the fifth year;

of total policies written direct in that year; (ii) in respect of a general insurer,-– – – two per cent in the first financial year; three per cent in the second financial year; five per cent there after,

of total gross premium income written direct in that year.

Obligation- social sector
in respect of all insurers, -– – – – – five thousand lives in the first financial year; seven thousand five hundred lives in the second financial year; ten thousand lives in the third financial year; fifteen thousand lives in the fourth financial year; twenty thousand lives in the fifth year;

Provided that in the first financial year, where the period of operation is less than twelve months, proportionate percentage or number of lives, as the case may be, shall be undertaken. Provided further that, in case of a general insurer, the obligations specified shall include insurance for crops.

Rural Insurance Policies
• • • • • • • • • Acqua Culture insurance Cattle Insurance Failed well insurance Farmers’ Package Insurance Fish insurance Floriculture Insurance Lift irrigation/Sprinkler Insurance Plantation/Horticulture Insurance Poultry Insurance

Social Insurance
• Government provides social insurance on compulsory basis. • Objective is to provide minimum level of social security for the large portion of the population. • Maximum benefit to lower income groups. • Social insurance Schemes of GIC: Krishi Bima Yojna, personal accident social security scheme, hut insurance scheme. • Social insurance Schemes of LIC: Landless Agricultural Labourers Scheme, Group Insurance Scheme for beneficiaries of IRDP, Rural Group Life Insurance Schemes etc.