Fire Insurance ITC

Fire Insurance
Anurag Rastogi
Principles & Policy Coverage
Basic Principles
Insurable Interest
Utmost Good Faith

Proximate Cause Indemnity - Subrogation - Contribution
Copyright Bajaj Allianz 3/21/2013
3 Anurag Rastogi
Fire Insurance
Originating or Inception Fire Hazard

Electrical
Smoking Friction
Overheated Materials
Hot Surfaces Burner Flames
Combustion Sparks
Spontaneous Combustion Cutting and Welding
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Incendiarism
Mechanical Sparks
Molten Substances Chemical Action Static Sparks Lightning
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Fire Policy
FIRE RIOT
FLEXA
STFI
RSMD
LIGHTNING EXPLOSION AICRAFT DAMAGE STORM TEMPEST FLOOD INUNDATION
STRIKE MALICIOUS DAMAGE

Impact damage Subsidence,landslide Bursting of pipes/tanks Missile testing Sprinkler Leakage Bush fire(excluding forest fire) Debris removal & Architect fee
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OTHERS
Exclusions
Per insured per event
Excess of Rs.10,000 for each and every loss (Max of 5% or 10000 for AOG perils) War group of perils Nuclear perils
Pollution or Contamination, excluding :

- Resulting from insured peril - Insured peril resulting from pollution or contamination
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Exclusions
Stocks in Cold Storage premises caused by change in temperature Architects, surveyors fees exceeding 3% of claim amount Debris Removal expenses exceeding 1% of the claim amount Loss of earnings, loss by delay, loss of market and other consequential and indirect losses
Spoilage of materials caused by insured perils

Loss by theft during or after operation of insured perils
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Exclusions
Earthquake, Volcanic eruption or any other convulsions of nature Insured property removed from the insured premises, however - Equipment temporarily removed for repairs, cleaning, renovation or other similar purposes for a period of 60 days are covered Electrical exclusion
Goods held in Trust,bullion, curios etc above Rs.10,000, manuscripts, securities, documents, money, explosives unless specifically covered
Conditions
Misrepresentation Policy expiry after 7 days from fall / displacement of any building-if not caused by insured peril Changes in risk, insurable interest Unoccupied building Coverage of same property by marine insurance Policy termination Notice of loss within 15 days Disclaimer after 12 months
Conditions
Rights of company on damaged property
Fraudulent claims/means
Companys option to repair, replace or reinstate
Average clause-separately for each item

Contribution clause Subrogation Arbitration Auto-reinstatement
Add On Covers
Architects, Surveyors & Consulting Engineers Fees upto 7.5% of adjusted loss Removal Debris ( > 1% of claim amount) Deterioration of Stock (cold storages), FOES extension Forest Fire Impact Damage due to Insureds own vehicles Spontaneous Combustion Omission to insure additions, alterations or extensions (5% 0f SI)
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
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Customization
Declaration Policy
For fluctuating stocks above 1 crore
Premium adjustment at the end of policy, refund maximum 50%

Basis of declaration
Omission to declare
Two average conditions No reduction in sum insured
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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%
Reinstatement Value Policy

New for Old(?), for Buildings, P&M, FFF only Not for Stock New price of old asset if available as new today Applies only if property actually reinstated, else claim settlement on Market Value basis Reinstatement should be completed within 12 months (extra time allowed by company) of damage/destruction Insureds option to accept settlement on RIV or indemnity basis Average Clause applies as usual. Often MV settlement better that RIV settlement in case of heavy underinsurance
Other Clauses
Escalation(upto 25%) Clause
Local Authorities Clause

Agreed Bank Clause Contract Price Clause Designation of property clause
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Fixing Sum Insured
Sum Insured
Recognized facts about Sum Insured Always fixed by proposer Is the limit of insurers 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
Buildings
Below plinth / above plinth
Inclusion of embedded items like pipes, electric & telephone wiring

Inclusion of Furniture, fixtures and fittings
Value to insure for?
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Valuation
Capitalized Cost Reinstatement Value
- CPWD rates
- Cost indices by National Building Organization
RIV 1000000 1500000 15100000 17340000 Market Value 1000000 1200000 4080000 13872000
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Book Value/WDV
Market Value
- Depreciation on merit
Capitalized Cost Book Value 1976 1986 1996 2006 1000000 1000000 1000000 1000000 1000000 300000 102000 39000
Indicative Building Depreciation

RCC construction 1%
Factory sheds with RCC frame

Factory sheds with AC sheets roofs on steel / wooden framework Other construction
1-2%
2-4%
2-2%
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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
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Plant & Machinery

Methods of finding RIV Current replacement value of similar machinery, if available, OR Current replacement cost of available machinery LESS adjustments for improvements, OR Landed cost of (imported) machinery, (+) Fall / (-) Gain in value of Rs. Vis-a-vis foreign currency (+) Inflation (foreign currency) (+) Increase / (-) Decrease in duty Alternatively, inflate landed cost by RBI index
Plant & Machinery

Book Value
Market Value
For marketable P&M For specialized P&M Depreciation as per plant load, usage, maintenance Maximum depreciation and residual value A special case of computers and other electronic machinery
Stock
Raw material-Cost at which material available on the date & place of loss Finished goods-Manufacturing cost including overheads, 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 Waste Products: Commercial value as indicated by earlier sales
Extra Protection
Escalation
Removal of debris
Architects, surveyor and Engineers fee Omission to insure additions, alterations or extensions
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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
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General Regulations
For land based properties only Separate block wise SI for bldg, machineries, stock & SIP, FFF, other contents
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General Regulations
STFI & RSMD could be deleted at inception No partial insurance
Insured
Uninsured
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General Regulations
SI increase any no. of times at prorata premium
Escalation 5%-25%, for B&M only

Claim experience discount/loading for SI>50 cr in one location, 5-15% Discount, 2.5-15% loading FEA discount, 2.5-10% Silent risks
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Claims-The Acid Test
Essentials
Intimation & survey
Coverage
- Date, risk, insurable interest, peril Adequacy
Damage quantification
Policy conditions, warranties, clauses Claim valuation & reinstatement adjustment
Salvage
Claim recipient & discharge Recovery
Salvage
An important component of most fire claims
Insured is the best buyer of salvage!

Hence, salvage needs special care and prompt action
Salvage is adjusted before application of underinsurance and excess

Branding issues
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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 - Figures, accurate and authenticated - Access to premises and records
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, 2002
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Rights of insurer
After claim - To enter, take & keep possession of the premises - To take possession of insured property - To exercise removal, sorting or examination etc of property - To sell such property for account of all concerned Exercise of these rights does not prejudice insurers right to deny or diminish liability
Irritants
Loss Valuation
- Value at the time of loss

- Value at the place of loss - Real or intrinsic value (sans sentimental value) Depreciation Average Clause Excess Salvage Value
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
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QUESTIONS?
Thank You
62 Anurag Rastogi

Fire Insurance ITC

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Fire Insurance ITC

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Droits d'auteur :

Formats disponibles

Fire Insurance

Principles & Policy Coverage

Utmost Good Faith

Copyright Bajaj Allianz 3/21/2013

Originating or Inception Fire Hazard

Copyright Bajaj Allianz 3/21/2013

Copyright Bajaj Allianz 3/21/2013

LIGHTNING EXPLOSION AICRAFT DAMAGE STORM TEMPEST FLOOD INUNDATION

STRIKE MALICIOUS DAMAGE

Per insured per event

Pollution or Contamination, excluding :

Copyright Bajaj Allianz 3/21/2013

Spoilage of materials caused by insured perils

Copyright Bajaj Allianz 3/21/2013

Average clause-separately for each item

Earthquake (Fire & Shock)

Copyright Bajaj Allianz 3/21/2013

Premium adjustment at the end of policy, refund maximum 50%

Copyright Bajaj Allianz 3/21/2013

Floater Declaration Policy

Reinstatement Value Policy

Local Authorities Clause

Copyright Bajaj Allianz 3/21/2013

Fixing Sum Insured

Inclusion of embedded items like pipes, electric & telephone wiring

Value to insure for?

Copyright Bajaj Allianz 3/21/2013

Copyright Bajaj Allianz 3/21/2013

Indicative Building Depreciation

Factory sheds with RCC frame

Copyright Bajaj Allianz 3/21/2013

Old P&M-RIV-from where?

Copyright Bajaj Allianz 3/21/2013

Plant & Machinery

Plant & Machinery

Copyright Bajaj Allianz 3/21/2013

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

Copyright Bajaj Allianz 3/21/2013

Copyright Bajaj Allianz 3/21/2013

Escalation 5%-25%, for B&M only

Copyright Bajaj Allianz 3/21/2013

Claims-The Acid Test

Insured is the best buyer of salvage!

Salvage is adjusted before application of underinsurance and excess

Copyright Bajaj Allianz 3/21/2013

Cost of minimizing losses payable by policy

To receive a copy of proposal

Receive penal interest in case of delay in claim payment

Copyright Bajaj Allianz 3/21/2013

- Value at the time of loss

The Golden Rule

Copyright Bajaj Allianz 3/21/2013

Copyright Bajaj Allianz 3/21/2013

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