- Fire Insurance
- Fire Insurance Tariff System
- General Rules and Regulation
- Scope of Cover
- Dwellings, Offices, etc
- Industrial Risks
Fire Insurance:Fire Insurance is designed to provide protection for property against loss or damage by fire and other specified perils.
Examples of Insurable property
- Electrical installation in buildings such as machinery, plant and equipment, accessories etc.
- goods(raw materials, stock in-process, semifinished, finished, packing materials,etc.) in factories, godowns.
- goods in the open
- contents in dwellings, shops, hotels,etc.
- furniture,fixture and fittings
- pipelines,(including contents)located inside or outside the compound, etc.
Fire Insurance Tariff System:Fire business is governed by All India Fire Tariff.
All India fire Tariff contains totally eight section and they are as follows:-
|SECTION-I||General Rules and Regulation|
|II||Standard Fire and Special Perils Policy|
|III||Dwellings, Offices, Hotels, Shops etc. located outside the compounds of Industrial/Manufacturing Risks|
|V||Utilities located outside the compounds of Industrial/Manufacturing Risks|
|VI||Storage Risks outside the compounds of Industrial/Manufacturing Risks|
|VII||Tank Farms/Gas Holders outside the compounds of Industrial/Manufacturing Risks|
How to Use Tariff
Step 1: Identify the Risk i.e., whether it is Dwelling, Hotel,Industry,Utilities or Storage area or Tanks located inside or outside the manufacturing risk etc.
Step 2: Refer the appropriate Section for rating i.e., Sec.III to Sec.VIII under which the risk Category falls.
Step 3: The Premium rates are given in alphabetical order under each section and the rate applicable to a particular risk can be found out
Step 4: In case the Insured opts for additional cover, Sec VIII of All India Fire Tariff may be referred and the Rate can be found out directly.
Step 5: In case the insured desires to opt out RIOT, STRIKE, MALICIOUS DAMAGE and/or STORM, TEMPEST FLOOD & INUNDATION at the inception of the policy, the appropriate rate may be deducted from the basic premium rate which is given separately under each section.
Step 6: The discount, if any is to be allowed loading, if any to be charged, are as given under Fire Insurance Rating Computation, which is furnished below.
COMPUTATION OF RATE
The following sequence shall be adopted for computation of the rate:
- Basic rate.
- 5% Reduction for Sprinkiered blocks if applicable (for riskrateable under Sec.III,IV,V and VI)
- Reduction in rates for deletion of STFI and /or RSMD perils, if opted out.
- Tariff extra for 'Kutcha' Construction, if applicable(to be applied on 1-2-3)
- Discount/loading for claims experience(to be applied on 1-2-3-4)
- Discount for FEA on protected blocks(to be applied on 1-2-3-4)
- Discount for voluntary deductible to be applied on the total premium calculated on the basis of final rate worked out as above
General Rules and Regulation:SECTION-I:GENERAL RULES AND REGULATIONS
Fire business is governed by All India Fire Tariff. Only standard Fire and special perils policy with the permitted “Add on” covers can be issued. Unless otherwise specifically provided for, this Tariff is applicable to land-based properties only.
Any risk, which has not been provided for in the Tariff shall be referred to the Committee for rating, Provisional rate of Rs.2.50 per mile shall be charged in such cases for covering the risks under Standard Fire and Special Perils Policy. No discounts shall be allowed on this rate.
Valued policy(ies)can be issued only for properties whose market value cannot be ascertained, e.g.Curios, Works of Art, Manuscripts, Obsolete machinery and the like subject to the valuation certificate being submitted and found acceptable by the insurers.
3. LONG TERM POLICIES:
Fire policies for a period exceeding 12 months shall not be issued “Except for Dwellings”. Long term policies shall be issued to house/flat owners only based on either of the following 2 methods subject to the conditions below:
- The policy shall be issued for a minimum period of 3 years.
- No refund shall be allowed for mid-term cancellation of such policies.
- Mid-term inclusion of perils shall be not be allowed.
- Premium for entire policy period shall be collected in advance.
Premium shall be charged in full without any discount. However sum insured under the policy shall be deemed to have increased by 10% of the original sum insured at the end of every 12 months period.
There shall be not be any automatic increase in sum insured as in method A. However appropriate discounts shall be allowable on applicable gross premium as per table below:
|DURATION OF POLICY|
|3 years policy||3 years premium in advance less 15% discount|
|4 years policy||4 years premium in advance less 20% discount|
|5 years policy||5 years premium in advance less 25% discount|
|6 years policy||6 years premium in advance less 30% discount|
|7 years policy||7 years premium in advance less 35% discount|
|8 years policy||8 years premium in advance less 40% discount|
|9 years policy||9 years premium in advance less 45% discount|
|10 years & above||Entire premium in advance less 50% discount|
4. MID- TERM COVER:
Generally it is not permissible to grant mid-term cover for STFI and/or RSMD perils. The following provisions shall apply, where such covers are granted mid-term.
- Insurers must receive specific advice from the insurance accompanied by payment of the required additional premium in cash or by draft. This additional premium shall not be adjusted against existing Cash deposits or debited to Bank guarantee.
- Mid-term cover shall be granted for the entire property at one complex compound location cover9ing the entire interest of the insured under the one or more policy (ies). Insured shall not have any option for selection.
- Cover shall commence 15days after the receipt of the premium.
- The premium rates as under shall be charged on short period scale on full sum insured at one complex/compound/location covering the entire interest of the insured for the balance period up to the expiry of the policy.
| ||SECTION IV V AND VII|
5. PAYMENT OF PREMIUM
Premium shall be paid in full and shall not be accepted in installments or by deferred payments in any form.
6. MINIMUM PREMIUM
Minimum premium shall be Rs.100/- per policy except for risks ratable under Section III and Tiny Sector Industries under section IV in which casesthe miniuim premium shall be Rs.50/- per policy.
7. PARTIAL INSURANCE
It is not permissible
- To issue a policy covering only certain portions of a building Not withstanding this, the plinth and foundations or only the foundation of a building may be excluded.
- To issue a policy covering only specified machinery(except boilers) parts of machine or accessories there of housed in the same block/building.
8. RATES FOR SHORT PERIOD INSURANCE
Polices for a period of less than 12 months shall be issued at the rates set out hereunder.
|For a period not exceeding||15 days||10% of the Annual rate|
|-do-||1 month||15% of the annual rate|
|-do-||2 month||30% of the annual rate|
|-do-||3 month||30% of the annual rate|
|-do-||4 month||40% of the annual rate|
|-do-||5 month||50% of the annual rate|
|-do-||6 month||60% of the annual rate|
|-do-||7 month||70% of the annual rate|
|-do-||8 month||75% of the annual rate|
|-do-||9 month||80% of the annual rate|
|For a period exceeding||9 month||The full annual rate|
9. LOADING FOR “DUTCHA”CONSTRUCTION
Buildings having walls and or roofs of wooden planks/thatched leaves and/or grass/hay of any kind/bamboo plastic cloth/asphalt cloth /canvas/tarpaulin and the like shall be treated as of “Kutcha” Construction for rating.
An additional rate of Rs. 4.00% shall be charged for such buildings and/ or contents there of.
10. RULES FOR CANCELLATIONS
For cancellation of insurance policy at the option of the insured.
- Retention of premium shall be at short period scale for the period the policy has been in force, subject of the retention of minimum by the insurer.
- During the currency, if a policy is replaced with the same insurer by a new annual one covering the identical property, refund of the premium may be allowed on pro-rate basis at the original rates for the sum insured replaced.
- Fir the sum insured not replaced, refund must be calculated after charging premium at short period scale on such sum for the time the insurance has been in force subject to retention of the minimum premium by the insurer.
- In case of short period policies, premium shall be retained at a the applicable short period scale.
- For cancellation of insurance policy at the option of the insurer, refund of premium shall be on pro-rate basis for the unexpired term.
11. MID-TERM REVISION IN SUM INSURED:
Mid term revision in sum insured shall be allowed as follows:
Increase in sum insured: on pro-rata basis
Decrease in sum insured: on short-period scale
12. ESCALATION CLAUSE:
It will be in order for insurers to allow automatic regular increase in the Sum insured through out the period of the policy in return for an additional premium to be paid in advance. The terms and conditions for this extension shall be as follows:
- The selected percentage increase shall not exceed 25% of the sum insured.
- The additional premium, payable in advance, shall; be at 50% of the final rate, to be chargedon the selected percentage increase.
- The sum insured at any point of time would be assessed after application of the escalation clause.
- Escalation clause shall apply to policies covering building, Machinery and Accessories only and shall not apply to policies covering stock.
- Escalation clause shall apply to all policies issued on reinstatement value basis.
- Pro-rata condition of average shall continue to apply as usual
- The automatic increase operates from the date of inception upto the date of operation of any of the insured perils.
SECTION II-SCOPE OF COVER:
PERILS COVERED UNDER THE STANDARD FIRE AND SPECIAL PERILS POLICY:
|5||RSMD(Riot, Strike, Malicious, Damage)|
|6||STFI (Storm, Tempest, Flood , Inundation)|
|8||Subsidence and land slide including rocks slide|
|9||Bursting and or overflowing of water tanks, apparatus and pipes|
|10||Missile testing operations|
|11||Leakage from Automatic sprinkler installations|
|12||Bush Fire excluding destruction and damage caused by forest fire.|
NOTE: It is permissible to exclude the following two perils only at the inception of the policy.
- RSMD- a discount of Rs.0.10% may be granted
- STFI—a discount of 0.15%to 1.50% depending upon the risk.
Excluding destruction or damage caused to the property insured by
- Its own fermentation, natural heating or spontaneous combustion.
- its undergoing any heating or drying process.
- Burning of property insured by order of any public Authority
Damage caused by lightning is payable whether fire follows or not.
Means a sudden increase in pressure in the atmosphere or surrounding gases resulting from a sudden and violent expansion of any subject matter. However policy will not extend to cover the damage to the boiler in which steam is generated. Such properties are insured by a separate policy issued by Engineering Department.
IMPLOSION:Implosion means bursting inwards or collapse due to external pressure
Any damage caused by aircraft or space devices or caused by any articles dropped from such aircraft or space devices. This excludes destruction or damage occasioned by pressure waves caused by such devices.
RSMD-(RIOT, STRIKE, MALICIOUS DAMAGE):
Loss of or visible physical damage or destruction or by external violent means directly caused to the property insured by excluding those caused by
- Total or partial cessation of work or the retardation or interruption or cessation of any process or operations or omissions of any kind.
- Permanent or temporary dispossession resulting from confiscation, commandeering, requisition or destruction by order of the government or any lawfully constituted Authority.
- Permanent or temporary dispossession of any building or plant or unit or machinery resulting from the unlawful occupation by any person of such building or plant or unity or machinery or prevention of access to the same.
- Burglary, housebreaking, theft, larceny or any such attempt or any mission of any kind of any person (Whether or not such act is committed in the course of disturbance of public peace)in any malicious act.
STFI-(Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado Flood and Inundation)
Loss, destruction or damage directly caused by storm, cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation excluding those resulting from earthquake, volcanic eruption or other convulsions of nature.
The cover provides in respect of damage to the insured’s property by any Rail/Road Vehicle or animal by direct contact not belonging to or owned by
- The insured or any occupier of the premises or
- Their employees while acting in the course of their employment.
SUBSIDENCE AND LANDSLIDE INCLUDING ROCK SLIDE:
Loss, destruction or damage directly caused bny subsidence of a part of the site on which the property stands or land slide/Rock slide excluding:
- The normal cracking, settlement or bedding down of new structures.
- The settlement or movement of made up ground
- Coastal or river erosion
- Defective design or workmanship or use of defective materials.
- Demolition, construction, structural alterations or repairs of any property or ground works or excavations.
LEAKAGE FROM AUTOMATIC SPRINKLER INSTALLATION
Excluding Loss, destruction or damage caused by
- Repairs or alterations to the buildings or premises.
- Repairs, removals or extension or the sprinkler installation
- Defects in construction known to the insured
It covers only Bush Fire. Forest Fire is excluded here.
- Excess under the policy:
- The first 5% of each and every claim subject to a minimum of Rs.10,000/- in respect of Act of God only perils such as lighting STFI subsidence Landslide and Rock slide.
- The first Rs.10,00/- for each and every loss arising out of other perils.
- The excess shall apply on the basis of per event per insured However this does not apply to policies covering dwellings.
War and war like perils:- Loss, destruction or damage caused by war, invasion act of foreign enemy hostilities or war like operations(Whether war be declared or not) civil war mutiny, civil commotion assuming the proportions of or amounting to popular rising, military rising, rebellion, revolution, insurrection or military or usurped power.
- Loss or damage caused by ionizing radiation or contamination.
- Loss or damage caused by pollution or contamination excluding:
- Pollution or contamination which itself results from a perils hereby insured against.
- Any peril hereby insured against which itself results from pollution or contamination.
- Loss, destruction or damage to bullion or use precious stones, any curios or works of art for an amount exceeding Rs.10,000/- goods held in trust or on commission, manuscripts, plans, drawings, securities, obligations or documents or any kind, stamps, coins or paper money, cheques, books of accounts or other business books of accounts or other business books computer system records, explosives unless otherwise expressly stated in the policy.
- Loss or damage to stocks in clod storage premises caused by change of temperature.
- Loss, destruction or damage to any electrical machine, apparatus, fixture or fitting arising from or occasioned by over running, excessive pressure, short circuiting, arcing, self hearing or leakage or electricity from whatever cause. This exclusion shall apply only to the particular electrical machine, apparatus fixture or fitting so affected and not to other electrical machine, apparatus, fixture or fittings which may be destroyed or damaged by fire so set up.
- Expenses necessarily incurred on
- Architects, surveyors and consulting engineer’s fees.
- Debris removal by insured following a loss destruction or damage to the property insured by an insured peril in excess of 3% and 1%of the claim amount respectively
- Loss or damage by spoilage
- Loss by Theft during or after the occurrence of any insured peril except as provided under Riot, Strike, Malicious and Damage cover.
- Loss or damage caused by earthquake, volcanic eruption or other convulsion of the nature.
- Loss or damage to property insured if removed to any building or place other than in which it is herein stated to be insured except machinery and equipment temporarily removed for repairs, cleaning renovation or other similar purposes for a period not exceeding 60 days.
LOCATED OUTSIDE THE COMPOUNDS OF INDUSTRIAL/MANUFACTURING RISKS
- The ‘Buildings’ and ‘contents’ of risks rateable under this Section shall be rated ‘per se’
- Stocks belonging to the insured stored in the open area adjacent to the insured’s premises are held covered.
- Incidental operations such as grinding of lenses in optical frame shops, polishing and /or varnishing in furniture shops, occasional repairs etc, are permitted.
- For seasonal storage of crackers during the currency of the policy in shops dealing in goods otherwise not provided a loading of 10% shall be charged on the rates applicable to contents.
- The presence of hazardous goods (as per list attached)not exceeding 5% of the total value of the stock may be ignored.
- The reduction in premium rates for deletion of SFTI and or RSMD perils at the inception of the policy shall be as under:
LIST OF HAZARDOUS GOODS:
- Celluloid goods
- Crackers and fire works
- Explosives of any kind
- Hemp jute(loose)
- Matches methylated spirit
- Nitro-cellulose plastics
- Oils/ether/industrial solvaents and other inflammable liquids flashing at and below 32C (closed cup test )other than in sealed tins or drums
- Vegetable fibers of any kind including Rayon Fiber.
SECTION-IV - INDUSTRIAL/MANUFACTURING RISKS:
Rates provided in this section are for the "entire insured property in the same industrial compound" i.e. all process areas, storage area, offices, utilities, miscellaneous blocks, pipelines, roads, compound wall, cables, street lights etc.
In cases where more than one product is manufactured in the same block, the highest rate applicable shall be charged overall.If two or more factories are situated in the same compound or independent products are manufactured in the same compound the manufacturing blocks be rateable 'per se' if located detached. Auxiliaries/miscellaneous blocks and go downs farms, pipelines, roads, compound wall etc. in such cases shall carry highest rate of all such manufacturing blocks.
- Operations incidental to the main process shall be rated at par with the main process blocks if such operations are carried out inside the man process blocks.
- Dwelling houses located inside the factory compound may be rated "per se".
- In case of any clarification, insurers may refer the matter to the Tariff Advisory committee after charging a provisional rate of Rs. 2.5 per mille.
- Detached/Segregated blocks within a risk which are protected by automatic sprinkler installation with its own independent pumping arrangement, etc as per the Committee's rules for sprinkler installation shall be allowed 5% reduction on the basic rates.
- The reduction in premium for deletion of STFI and perils at the inception of the policy shall be as under.
STFI 0.25% RSMD 0.10%
- Pump houses, garages, compound walls and ancillary equipment and other utilities at the above occupancies shall carry the respective occupancy rate.
STORAGE RISKS-LIST OF HAZARDOUS GOODS
|Category I||Solids which are moderately or slightly combustible.|
|Flammable liquids having flash points above 65 degree celcius|
|Inert and non-combustible gases|
|Highly toxic materials|
|Waste of non-hazardous materials|
|Vechicle store in open including tractors.|
|Category II||Pyrotechnic materials|
|Moderate Oxidising Agents and Oxygen|
|Materials which evolve combustible gases in contact with water.|
|Waste of Category I materials|
|Materials which are self ignitable|
|Flammable liquids having flash point|
|Strong Oxidising agents|
|Waste of Category II and III materials|
- Floater policies can be issued to cover stocks kept at various locations under one sum insured.
- Unspecified location shall not be allowed.
- The Rate shall be the highest rate applicable to insured's stocks at any location with a location with a loading of 10%
- In case stocks in a process block are covered under this policy and the rates for the process blocks happens to be higher than the storage rate, the process rate plus 10% shall apply.
- The presence of "Kuthca" construction may be ignored.
- If stocks stored within the godowns/process blocks, are within the same compound under floater policy, no floater extra is chargeable.
These policies are issued to take care of frequent fluctuations in stocks or stock values. The terms and condition governing issue of such policies are as follows:
- The minimum sum insured shall be Rs.1 crore in one or more locations.
- The sum insured shall not be less than Rs.25 lacs in atleast one of these locations.
- It is essential that the declared values should approximate to the figures at some time during the policy.
- The options for monthly declarations based on one of the two modes may be selected by the insured. The Average of the values at risk on each day of the month. The highest value at risk during the month.
- Such declarations shall be submitted by the insured latest by the last day of the succeeding month
- Where the declarations are not received within the specified period, the sum insured under the policies shall be the amount 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 shall not exceed 50% of the total premium.
- The basis of value for declaration shall be the market value.
FLOATER DECLARATION POLICIES:
- These policies can be issued subject to minimum sum insured of Rs.2 Crores.
- The rules applicable for issue of Floater and Declaration policies shall apply.
- The minimum retention shall be 80% of the annual premium.
REINSTATEMENT VALUE POLICIES:
Though the fire policy indemnifies the insured to the extent of loss, still some times it is inadequate for the following reasons.
The element of depreciation is taken into account when arriving at the amount of claim payable after the loss. Though in principle it is correct, it places the insured ina difficult position. Though he owns a building, say 5 years old, he will have to construct a new one which definitely involves more amount of expenditure than the insurer indemnified him
To surmount the said difficulties, the insurer offers a new type of policy namely, REINSTATEMENT VALUE POLICY that is nothing but the basic policy(Standard Fire and Special Perils Policy) with a special clause attached thereto.
By attaching this RIV clause the insurer undertakes to indemnify the insured with a new property in place of the old one. This new for old policy is also subject to the basic principles of insurance. The salient features of this policy are as follows:
This policy is issued in respect of Buildings, Plant and machinery, Furniture, Fixtures and fittings. Although Reinstatement is an option under the basic policy for the insured it is obligatory on the part of the insured to reinstate the damaged property subject to following conditions.
- Reinstatement must be carried out by the insured who should then seek reimbursement
- The work of reinstatement must be commenced and carried out with reasonable dispatch and in any case should be completed within 12 months after the damage. The insurers at their option can extend this limit of 12 months. If the insured fails to reinstate within the stipulated period the loss shall be settled on normal indemnity basis.
- Until the reinstatement is carried out the liability under the policy remains on the normal indemnity basis.
- If the sum insured at the time of loss is lesser than the cost of reinstatement then the insured will have to bear a rateable proportion of the loss.
- The insured will have to bear the cost of all plans, design etc. necessary for reinstating the property.
- The work of reinstatement may be carried out upon another site and in any manner required by the insured provided the liability under the policy is not thereby increased.
- The reinstatement basis of settlement will not apply in the following cases:
- The insured fails to intimate to the insurer within 6 months or any extended time his intention to replace the damaged property.
- If the insured is unable to replace the damaged property. In such cases the loss will be settled on the normal basis of indemnity.