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A Reliance Capital company

FIRE INSURANCE

Fundamentals of Underwriting 2.20

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confidential A Reliance Capital company

WHAT IS FIRE ?

One of the five natural elements

Great boon to mankind

Can destroy life & property

A good servant but a bad master

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THE FIRE TRIANGLE

OXYGENFUEL

HEAT

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THE FIRE TRIANGLE

Three essential ingredients:

Fuel- Coal, Timber, Jute, Rubber,

Petrol, Methanol, Paraffin, Butane,

LPG, Coal Gas etc.

Heat- Flame

Oxygen- Free air in atmosphere

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Three basic facts:

There exists a material/property

susceptible to damage or destruction byfire or other perils

The property has intrinsic value in terms of

money

The occurrence of a fire will result not only

in loss or damage to the material property

but also in consequential loss

WHY DO WE NEED FIRE INSURANCE ?

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Meaning of Fire:

There should be an actual ignition. Fire must be accompanied by

visible sparks or Flames. Mere heating without ignition scorching,

charring and damage by SMOKE without actual burning is not

considered as fire. There must be something on FIRE which ought not to be on FIRE.

Fire should be fortuitous in origin and not deliberately caused at least

so far as insured is concerned. Fire caused by wilful act of the third

party without the connivance of the insured is covered under the policy.

There must be something in the nature of an accident.

FIRE INSURANCE

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Damage during or immediately following a fire caused by

SMOKE, HEAT, SCORCHING and FALLING WALLS.

Damage due to WATER or any other extinguishing media used

in putting out fire. Damage due to legitimate acts of Fire Brigade.

Damage due to collapse of Floors and roofs consequent to

Fire.

Damage to property whilst being removed from the burning

Building in an effort to mitigate the loss.

RESULTING LOSSES

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FIRE INSURANCE

Contracts of insurance against Physical

Damage/ Loss/Destruction by or incidental to fire

or other perils covered under the policy

Fire Insurance Business in India was until

recently regulated by Tariff Advisory Committee,

as per the provisions of the Insurance Act,1938. It was applicable to all insurers transacting Fire

Insurance Business in India.

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Section I General Rules and Regulations

Section II Policy wordings

Section III Dwellings,Offices,Hotels,Shops etc.

Section IV Industrial/Manufacturing Risks

Section V Utilities Located Outside the Compound of

Manufacturing/Industrial Risks (Stand Alone)

Section VI Storage Risks Outside the Compound of

Industrial/Manufacturing Risks (Stand Alone)

Section VII Tank farm/Gas Holders outside the compound of

Industrial/Manufacturing Risks

Section VIII Add on covers

DIFFERENT INTERNAL GUIDE SECTIONS

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Fire Insurance is applicable for land-based properties

Block-wise Sum Insured to be shown in the policy

ONE RISK ~ ONE RATE.

STFI and/or RSMTD Perils can be deleted at the inception of

policy for the entire property in one complex.

No option for selection of property

Reduction in Premium Rates

Valued policies can be issued for Specified Items.

Long-term policies (> 12 months) can be issued only for

DWELLINGS subject to under-writing guidelines applicable

SALIENT FEATURES

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Mid term cover for STFI &/or RSMDT perils can be issued on

short period rates

Minimum fire premium Rs. 100/- per policy except risks

under Section III.

Partial Insurance is not permissible

Plinth & Foundations of a BLDG can be excluded.

Escalation to provide automatic regular Increase in Sum

Insured (Max=25%). Applicable for BMA and not for Stocks.

Mid-Term Increase in Sum Insured- Premium-Pro-Rata Basis

Mid-Term Decrease in Sum Insured- Premium-Short Period

SALIENT FEATURES

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STANDARD FIRE AND SPECIALPERILS POLICY

PERILS COVERED:

a. Fire

b. Lightning

c. Explosion/Implosion

d. Aircraft damage

e. Riots, Strikes, Malicious and Terrorism Damage

f. Storm, Cyclone, Typhoon, Tempest, Hurricane,

Tornado, Flood & Inundation

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g. Impact Damage- Direct Impact

h. Subsidence and Landslide including Rockslide

i. Bursting and/or Overflowing of Water Tanks, Apparatus

& Pipes

j. Missile Testing Operations

k. Leakage from Automatic Sprinkler Installations

l. Bush Fire

PERILS COVERED

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5 % of each & every claim (Min Rs. 10,000) arising due tolightning, STFI, subsidence & land slide including rock slide.

First Rs 10,000/- for each and every loss arising out of other

perils, per event per insured.

War & war group of perils

Nuclear group of perils

Bullion or unset precious stones, curios or work of art for anamount exceeding Rs. 10,000/-; manuscripts, plans, drawings,

securities, paper-money, cheques, books of accounts and

computer system records

GENERAL EXCLUSIONS

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GENERAL EXCLUSIONS

Damage to the stock in cold storage premises caused by changeof temperature

Electrical & / or Mechanical breakdowns due to over running,

excessive pressure, short circuiting, arching, self heating orleakage of electricity

Architects, Surveyors & Consulting Engineers fee (in Excess of3%) and debris removal (in Excess of 1%) of claim amount

Loss of earning, market or other consequential loss, loss by delay,theft during or after the occurrence of insured peril, propertyinsured removed to other Building.

Loss or Damage due to Earthquake, Volcanic Eruption or otherconvulsions of nature.

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ADD ON COVERS Architects, Surveyors and Consultant Engineer Fee (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 powerfailure/change in temperature as a result of damage to the coldstorage machinery due to an operation of an insured peril

Forest fire

Impact damage due to insurer's own vehicles, fork lifts, cranes,

stackers and articles dropped therefrom. Spontaneous combustion

Omission to insure additions, alterations or extensions

Earthquake (fire and shock)

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ADD ON COVERS

Spoilage Material Damage

Leakage and Contamination Loss of Rent

Temporary Removal of stocks

Additional Expenses of Rent

Startup Expenses

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GENERAL PRINCIPLES FOR ADD ON COVERS/

EXTENSIONS

Cover- extension of basic cover amount of insurance (S.I) may be

identical.

Liability limited to S.I. only

All conditions of basic cover applicable except to the extent varied byspecial conditions in extension Endorsements

Generally to exclude consequential losses

Onus of proof on the Insured

Excess clause

No refund for cancellations of extraneous (special) perils unless basic

policy also cancelled simultaneously

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CLAUSES

Architects, Surveyors and Consulting Engineers Fees

Designation of Property

Omission to insure Additions, Alterations or Extensions

Removal of Debris following damage

Temporary Removal of stocks

Escalation Clause

Deterioration of stocks in cold storage

Earthquake (Fire and shock)

STFI

Contract Price Insurance

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Spontaneous Combustion

Impact Damage due to Insureds Own Rail/Road

Vehicles cranes

Leakage and Contamination

Spoilage and Material Damage

Deterioration of Stocks

Loss of Rent

Additional Expenses of rent for an alternate

accommodation

Start up Expenses

CLAUSES

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Agreed Bank Clause

Designation of Property Clause

Re-instatement Value clause

Local Authorities Clause

Escalation Clause

Floater

Declaration

Voluntary Deductible

CLAUSES

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DECLARATION POLICYMinimum Sum Insured: Rs. 10 million IN ONE OR MORE

locations and not less than Rs. 2.5 million in at least one

of these locations.

Monthly Declarations

Reduction in Sum Insured not allowed

Refund of premium on adjustment based on declarations

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STOCKS

Specific Sum

Insured for

each location

Single SumInsured for

stocks lying at

various locations

Sum Insuredlocation-wise subject

to fluctuation

adjusted at the end

Co. Internal

Rate

Schedule

Loading on Co

Internal rate

for all perils

Co. Internal

Rate Schedule

FLOATERSPECIFIC DECLARATION

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FLOATER DECLARATION CONDITIONS Declaration basis- within 30 days of the succeeding

month

- Average of the highest value at risk on each day or- Highest value on any day of the month

Under insurance applicable if total value of stocks as

on the date of loss exceeds sum insured

Adjustment of premium on expiry of policy

- minimum retention- 80% of the total premium paid

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SECTION III

DWELLINGS, OFFICES, HOTELS, SHOPS ETC

Buildings and Contents to be rated per se

Deletion of STFI risks (less Rs. 0.05 %0 fordwellings and Rs.0.10%0 for others)

Deletion of RSMDT risks (less Rs. 0.075 %0)

Pump houses, garages, compound walls and/or other utilities shall carry the applicable rates

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Section VI

Storage Risks (Outside The Compound Of

Industrial/Manufacturing Risks)

Premium rates are based on category of goods stored

Incidental operations such as packing, selecting and

assorting are allowed

Utilities/miscellaneous blocks shall attract rate of Rs.

0.75%0

Discount for deletion of STFI & RSMDT risks

For Central Warehousing Corp (CWC) Special rate

sanctioned by TAC will continue.

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Block-wise/Building-wise Sum Insured to be declared.

Breakup should be given for building/plant/machinery/

electrical installation/furniture & fixtures/stocks and stocksin process.

Specific advice to be given if Plinth/Foundation are to

included in Sum Insured, preferably separate value to be

given.

Roads cannot be covered against earthquake or flood

damage.

Points to receive attent ion whi le declar ing Sum Insured:

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Developmental expenses incurred at beginning of

project and fees for technical know-how which are one

time expenses should be excluded while declaring Sum

Insured

Tanks should be covered as building/structure and

pumps as machinery.

Item-wise single Sum Insured to be declared for

following items:

- Air/steam/gas/oil pipelines cables

- Pipes and cable racks

- Surface and underground drains.

Points to receive attent ion wh i le declar ing Sum Insu red:

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BASIS OF SUM INSURED

Building/Machinery

Furniture/Fixtures Stocks

Reinstatement

ValueMarket Value Market Value

Basis

Reinstatement

Value

Reinstatement

Value- Dep.

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DISCOUNTS

CLAIMS EXPERIENCE DISCOUNT:

(for preceding 36 Months excluding expir ing po l icy per iod)

Claim Ratio upto 10% : 10%

Above 10% & upto 25% : 7.5%

Above 25% & upto 45% : 5%

Above 45% : To be referred to Under-writers

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DISCOUNTS - FEA

FIRE EXTINGUISHING DISCOUNT

Hand Appliances +Trailer pumps/fire engines: 2.5% Hand appliances & hydrant system: 5%

Hand appliances & sprinkler/fixed water

spray system: 7.5%

Hand appliances + hydrant system &sprinkler/fixed water spray system: 10%

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COMPUTATION OF RATE

Basic Rate

Reduction in Rates for Deletion of STFI and/or RSMTD Perils,

If Opted Out

Good feature Discount/adverse feature loading on above

worked out rate: Claims experience discount/loading

Age of the risk

Distance from neighbouring risk

Class of Construction discount : Class A 10%, Class

B

2.5% OR Tariff Extra for Kutcha Construction

Discount for FEA on protected blocks

Discount for Voluntary Deductible on the total premium

calculated on the basis of final rate blocks

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FIRE POLICY SCHEDULE

Construction/Occupation classification

Warranties/Endorsements/Add-on

Covers Clauses.

Sum Insured- Reinstatement/Market

value

Escalation opted Location

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FIRE CLAIMS PROCEDURE

SPOT ACTIONS

Summon fire brigade

Inform police

Take internal fire fighting measures till fire

brigade arrives

Inform insurer for survey.

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OTHER STEPS TO BE TAKEN

Leave the damaged/destroyed items forsurvey/ inspection

Take photographs of damaged property

Obtain estimate of loss for different items likefixed assets and stocks


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OTHER STEPS TO BE TAKEN

Take risk minimization measures like shiftingof stocks and temporary repairs of buildings

to prevent aggravation of further losses.

Early disposal of salvage


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Claim intimation to Insurers

Completed Claim Form Occurrence Report

Meteorological Report

Fire Brigade Report First Information Report (FIR)


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Final Report from Police

Estimate of loss

Insurance Register /Books of Accounts for

Surveyors verification

Survey Report

Bills/Invoices for reinstatement in respect of

Building loss.


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THANK YOU !

8 fire 2.20

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