1. INTRODUCTION TO INSURANCE

1.1 Meaning of Insurance

As stated in the very beginning, insurance companies bear risk in

return for a fee called premium. Thus, insurance companies are risk bearers.

They accept or underwrite the risk in return for an insurance premium.

Accordingly, the term insurance may be defined as a co-operative

mechanism to spread the loss caused by a particular risk over a number of

persons who are exposed to it and who agree to ensure themselves against

that risk. Risk is, in fact, an uncertainty of a financial loss. Risk must not be

confused with loss itself that is the unintentional decline in or disappearance

of value arising from a contingency. The function of insurance include

providing certainty, protection, risk sharing, prevention of loss and capital

formation. Wherever there is uncertainty with respect to a probable loss

there is risk. The insurance is also defined as a social apparatus to

accumulate funds to meet the uncertain losses arising through a certain

hazard to a person insured for such hazard.

Insurance has been defined to be that in which a sum of money as a

premium is paid by the insured in consideration of the insurers bearing the

risk of paying a large sum upon a given contingency. The insurance, thus, is

a contract whereby: -

Certain sum, termed as premium, is charged in consideration

Against the said consideration, a large amount is guaranteed to be

paid by the insurer who received the premium.

The compensation will be made in a certain definite sum, i.e., the

loss or the policy amount whichever may be, and the payment is

made only a contingency.

1.2 Introduction To Insurance

Insurance is a tool by which fatalities of a small number are

compensated out of funds (premium payment) collected from plenteous.

Insurance companies pay back for financial losses arising out of occurrence

of insured events, e.g. in personal accident policy death due to accident, in

fire policy the insured events are fire and other allied perils like riot and

strike, explosion, etc. Hence, insurance is safeguard against uncertainties. It

provides financial recompense for losses suffered due to incident of

unanticipated events, insured within policy of insurance. Moreover, through

a number of Acts of parliaments, specific types of insurance are legally

enforced in our country, e.g. third party insurance under Motor vehicles Act,

public liability insurance for handlers of hazardous substances under

Environment Protection Act, etc.

Insurance, essentially, is an arrangement where the losses experienced

by a few are extended over several who are exposed to similar risks.

Insurance is a protection against financial loss arising on the happening of an

unexpected event. Insurance companies collect premium to provide security

for the purpose. As loss is paid out of the premium collected from the

insuring public and the insurance companies act as trustees to the amount so

collected. Insurance companies have standard proposal forms, which are to

be filed up giving the details of insurance company. Depending upon the

answers given in proposal form insurance companies assess the risk and

quote the premium. On payment of premium and acceptance thereof by

insurance company the insurance is affected. Nonetheless, there is no

insurance cover if premium is not paid.

2. INTRODUCTION TO BAJAJ ALLIANZ

FIRE INSURANCE

2.1 Meaning

Fire insurance is a contract

to indemnity, to the insured for

destruction of or damage to property

caused by fire. The insurer undertakes

to indemnify the insured against loss

due to fire caused to the property insured against, not in excess of the

maximum amount stated in policy. A contract of indemnity, and not against

accident, but against loss caused by fire.

For example, if a person has insured his house of Rs. 1.00 lakh

against loss by fire, the insurer is not liable to pay the sum, unless the house

is destroyed by fire, but actual loss subject to the maximum limit of Rs. 1.00

lakh.

2.2 Definition

Section 2(6) of the Fire Insurance Act, defines, “Fire insurance

business means the business of affecting, otherwise than in evidently, to

some other class of business, contacts of insurance against loss by or

incidental to fire or other assurance customarily included among the risks

insured against in fire insurance policies.”

2.3 Characteristics or Nature of Fire Insurance

It is a means of security against risk of fire on any material or property.

It is an indemnity contract.

The insurer undertakes to indemnity the insured against actual loss subject to

the maximum limit of sum insured.

It is contract of utmost good faith; the insurer and the insured must disclose

all material facts relating to the subject matter of insurance.

A fire insurance policy is usually issued for one year only with option to the

parties to renew it for a further period on payment of stipulated premium.

If the property is insured with more than one insurer, and on loss by fire, all

the insurers are called upon to contribute towards the claim.

The insurer is not liable for payment of any claim if the fire is caused

deliberately.

In British Law, the fire insurance policies can be assigned only with prior

permission of the insurer, but under Indian Law the consent of the insurer is

not necessary to make valid assignment of policy, only a notice of

information is sufficient.

On occurrence of fire, a notice of fire should be given to the insurer so that

the insurer may take prompt steps forthwith to safeguard his interests, in

dealing with salvage and also judge the cause and nature of fire, and the

extent of the loss.

It is the duty of the insured to act as a man of ordinary produce to take

necessary steps to save the property from loss of fire, as in the absence of

any insurance against the property.

2.4 Meaning of Fire

The word fire means “loss by fire” and in literal sense means a fire

has broken bounds. Therefore fire, which is used for ordinary domestic

purposes or even for manufacturing, is not fire. „Fire‟ in fire insurance must

have the following two features:

Production of ignition, light and heat.

Fire by accident.

2.5 Definition of Fire

According to Justice Boyles (in Everett vs. London Association

Company 1885) “Fire means the production of light and heat by combustion

and unless there is actual ignition there is no fire within the mean sing of

term in ordinary policy.”

2.6 The various loss caused by fire

The losses by the following instances or losses subsidiary to

fire are as follows:

Damage, which occurs as a result of smoke or of putting out the fire,

would be covered by the fire risks.

Any loss resulting from apparently necessary and bona fide efforts to

put out a fire, whether it be by spoiling goods by water, or throwing

articles of furniture out of the window, are covered by the fire risks.

Even by damages to a neighboring house by explosion done for the

purpose of arresting fire, would be covered by the fire risks.

Every loss directly, or if not directly at least consequently resulting

from the fire is within the policy (In Stanley vs. Western ins. Co.,

1968).

Loss by theft during a fire is covered as a fire risk (In Levy vs.

Bailey, 1831).

Even loss by fire caused by the insured‟s negligence is covered by

the policy (In Harris vs. Poland, 1941).

3. NATURE AND USE OF FIRE INSURANCE

3.1 Nature

Fire insurance is a device to compensate for the loss consequent upon destruction

by fire. Thus the fire insurer shifts the burden of fire losses from their actual

victims over to all the members of the society. It is a cooperative device to share

the loss. It relieves the insured from the horror of the fire losses to which he is

exposed.

3.2 Functions

It is a well-known fact that the fire causes huge losses every year. The individual

owner by taking fire insurance can prevent the fire waste to some extent. The

insurer acts as a middleman between all the members of the society who are

exposed to the fire risk on the one hand and the members who will be the actual

victims of the fire losses on the other. The insurer changes the premium from all

the insured members and makes good the losses when they occur to any of them.

The system of fire insurance cannot save the society from the economic loss to the

community to the extent of the property lost by fire, but it compensates someone

and this saves him from a ruinous loss, at the cost of group of some others.

3.3 Causes of Fire

Fire waste is the result of two types of hazard viz., „physical‟ and

„moral‟.

a. Physical Hazard

It refers to the inherent risk of fire in the property, which may

occur due to inflammable nature, construction, artificial lighting and

heating, lack of extinguishing apparatus use of the property etc.

b. Moral Hazard

The moral hazard depends upon the man as physical hazard

depends on the property. The property may be set on fire by the owner

or by any person with his willingness, carelessness and lack of sense

of duty may also increase the fire waste. Sometimes, when market

price is going down the owner can willingly set fire on the property

and gain from the payment of insurance money. Thus, where the

property was destroyed with the willingness of the property owner,

moral hazard exists.

c. Prevention of Loss:

Insurance is meant for indemnification of loss and not for

prevention of loss although every reasonable step can be taken to

eliminate it or minimize it through the agencies engaged in prevention

of loss. Thus, insurance may help in two ways:

I. Indemnification and

II. Preventive Efforts.

I. Indemnification or Curative Efforts: - According to doctrine

of indemnification, the financial loss suffered by the perils

insured against will compensated in full, not more than this and

not less than this. The insurance provides protection by

indemnifying the financial loss suffered by insured person,

which occurred beyond the control of insured and insurer.

II. Preventive Efforts: - The loss cannot be prevented by

insurance. But, the insurers help those who are engaged in the

preventive efforts by granting financial and other assistances.

This will benefit insurers as well because if the loss of society

is reduced, they can charge lesser premium, which will

stimulate the public of insurance. Fire insurers stimulate the

installation of protective devices and better types of

construction through granting credit. They help in installation

of fire-fighting apparatus, water supply and engineering

services.

Preventive efforts are divided into two parts:

Private activities and

Public activities

Private Activities:

Private Activities are those which include those activities which the

property owner may engage in for the purpose of preventing fire loss.

Insurers give sincere advice of financial help to property owner on the

following factors.

Construction

In construction of building, fire resistive materials, fireproof

construction, greatest care in exercising selection of the type and

planning of the construction, availability of fire extinguisher, water

supply, etc.

Fire Services

The important thing is to extinguish fire before it reaches large

proportions. The owner should consider equipping his building with an

automatic sprinkler system. Similar fire fighting equipment may be

established. Insurers with the help of fighting associations can provide

such services.

Occupation

There are considerable hazard in certain occupation e.g. in oil

or coke or chemical industry. Insurance in these concerns is available at

higher rate. Insurance help by stimulation and charging lesser premium in

fire fencing occupation.

Management

Good management of property may reduce the chances of fire.

Carelessness and indifference cannot be over emphasized because these

increase the chance of fire.

Exposure

Fire insurance rates are determined on the basis of possibility of

exposure. Fireproof services may reduce the chances of exposure to a

greater extent.

Public Fire Prevention Activities:

Fire insurers have performed numerous important services to

reduce the fire waste with the help of public institutions, which are

engaged in fire fighting activities.

Community Surveys

Engineering survey of the cities and localities is made. As a

result of its investigation many have improved their fire departments,

water supplies and other facilities involved in the protection against fire.

Standard Schedule For Grading Cities

Under this schedule a number of cities, town, or Mohall as are

divided, according to fire preventive devices. The deficiencies in each

party sorted out and attempts are made to remove them.

Underwriter’s Laboratories

The laboratories are to find out the possible causes of fire

losses. Every time research or investigation is made to find out the

possible attempts to prevent fire losses.

Equipment

Fire can be properly checked only through the possession and

maintenance of adequate equipment, personnel fire alarm system and

water supply. The Fire Protection Association can determine fire fighting

apparatus and equipment for any city or town.

Salvage Corps and Salvage Works By Fire Departments

The chief aim of the corps is to protect property from

unnecessary smoke and water damage. The protective benefits are

extended to all those who suffer fire damages regardless of whether they

are insured or not. Training school and colleges are, sometimes, engaged

in giving general education to all and particular education to few students

to train them in fire fighting methods and fire preventive methods.

Legislation and Regulation

National Board of fire underwriter‟s fire brigade and other such

associations are engaged in fire preventive and protective efforts under a

certain law. The property owner and the fire protection engineer must

keep in mind the numerous legal requirements relating to the various

phases of fire prevention.

General Devices

Apart from the above contribution to prevention protection, the

following devices are utilized for preventing the losses.

i. The insurer compensates loss at a reasonable cost.

ii. Serious hazards are to be cooperatively reinsured.

iii. Loans are provided for better construction and building.

iv. Fire insurers stimulate the installation of protective devices to reduce

losses.

v. Fire fighting methods are organized with public utility concerns.

vi. Insurers investigate the causes of loss and attempts ate made to

reduce the causes.

Insurers study various devices for fire proof, protection and

problems of special processes. Periodical examination of insured

property is made and instructions are issued for the purpose of

investigation.

4. SCOPE FOR FIRE INSURANCE

A contract of fire insurance is a

contract whereby the insurer agrees, in

consideration of a sum of money called

premium, to compensate another person

known as the insured for any loss or

damage to the insured property. The contract specifies the period during

which the indemnity is to last and also the maximum amount to which the

insurer can be held liable.

The need for fire insurance arises out of the following facts: There

exists material property susceptible to damage or destruction by fire or other

peril.

1) That such material property has intrinsic value measurable in terms of

money.

2) The occurrence of fire will result in not only loss or damage to

material property, but also other consequential loss such as loss of

production, etc. in order to make the insurer liable for the loss under the

fire policy the following two conditions must be satisfied:

I. There must be fire in actual sense or ignition, and

II. The fire must be accidental.

Ignition

There must be actual ignition. This means that loss or damage must be

by fire. The cause of fire is not important but it should be proved that loss

was caused by fire. Ignition means burning and therefore the presence of

flame is a precedent condition.

Fire Must Be Accidental

Any loss caused by willful consent does not come

under the term „fire‟. There must be an accidental fire and not intentional.

This applies only to the insured.

Section 2 of the Indian insurance act, 1938, states the scope of fire

insurance to include:

1. Fire insurance business is different from other insurance business

in operation and covers the risk caused by fire.

2. In addition to the risk caused by fire, it also includes other risk and

occurrences, which can be customarily, be included among risks

insured under fire insurance contracts.

3. Thus we can divide the total scope of fire insurance into two parts,

or the scope of fire insurance may be studied from two angles, viz.,

Ordinary scope of fire insurance

Comprehensive scope of fire insurance

1. Ordinary Scope Of Fire Insurance

Ordinary fire insurance products includes those risks, which

define the narrower scope of fire insurance viz., the losses caused by

fire only. As such, under the fire insurance contracts the claims for

losses by fire must fulfill two basic conditions.

a. There must be actual fire or ignition

b. The fire must be incidental, not intentional

c. Risks covered under fire insurance

The risks causing losses must be mentioned under fire

insurance policy and only those risks are indemnified by the insurer

incase of loss. Usually, the following risks caused by fire are covered

under fire insurance.

i. Fire or ignition.

ii. Blasting of boiler used for household purposes.

iii. Blast of gas cylinder used for household cooking.

iv. Blast of gas etc. used for the purposes of lightening and

heating in any building.

d. Risks not covered under fire insurance policies

These are the risks for which insurance company do not

indemnify the insured in the case of loss.

i. Some goods and properties are not eligible for insurance under

fire insurance policies such as: precious stones and metals,

articles, maps, stamps, cheques, goods or properties kept under

trust, account books and records, archives, and rare documents

and writings, etc.

ii. Losses caused by certain uncertain events such as riots, civil

disturbances, revolutions, wars, aggression, internal

emergencies, marital law etc., natural calamities like

earthquakes, storms, cyclones, floods, drought, excessive heat

or cold eave.

iii. Spontaneous fire in jungles or bushes.

iv. Spontaneous combustion caused by chemicals.

v. Theft during fire or after the breakout of fire.

2. Comprehensive Scope of Fire Insurance:

Various types of policies are available in the form of fire

insurance policies, which cover various types of risks allied to the risk of

fire. Coverage of such risks under the purview of fire insurance has widened

the scope of fire insurance. Some special policies have helped in a great way

in broadening the scope of fire insurance in the following manner:

(i) By including the excluded perils and risks.

(ii) By including consequential losses and other indirect fire risks.

In the first category, such excluded risks, which cannot be

insured under general insurance schemes or policies, have been included

under the cover of fire insurance. Such policies are called special perils

insurance relating to spontaneous combustion, earthquakes, blasts etc.

In the second category, such indirect risks and losses are covered.

These are called consequential losses or risks.

5. SIGNIFICANCE OF FIRE INSURANCE

The industry, trade and commercial articles have been developing and

diversifying at faster rate in India. Along with the growth of industrial and

commercial articles the infrastructure fields like transport, communication, finance,

advertising, stock marketing, etc., have also been developing continuously so as to

cope with the pace of economic development. The importance of foreign trade also

has been very much for a developing country like India. All these developments in

various fields brought in much risks and uncertainties in business activities.

Insurance is the only field that provides security, against business risks. The role of

fire insurance has been increasing day-by-day as a means against destruction or

damage of business property caused by fire.

The significance of fire insurance can be discussed under the following

points:

As A Source For Minimizing Losses:

Fire can destroy property in goods and fixed assets of crore of

rupees or can create damages to the business property. Fire insurance

indemnifies losses or damages done to fire and resources the mental

worries of businessmen.

Decreases In Probabilities of Fire Losses:

The increasing uses of energy petrol like electricity, gas and

other such items have increased the probability of losses or damages

to goods and property. In order to minimize this calamity, various

types of fire extinguishing devices have been destroyed throughout

the world. Moreover, the fire insurance is another device to indemnity

the losses thus removes mental worries by extending financial

support.

Increase In Production of Fireproof Materials:

Fire insurance cannot prevent occurrence of fire, but can reduce

the losses. Today various devices are produced in the country like fire

extinguisher. Fire brigades are set up at every cities and towns to

extinguish fire by the government and local bodies.

Decrease In Social Loss of Fire:

Social awareness has been created in the country to put out fire

and to reduce the effect of fire. The social organizations provide

training to the people in the use of such items given below.

i. Assets Valuation:

Assets are valued for obtaining a fire insurance

policy. It requires the insured to be more cautious in protecting

his property or goods.

ii. Loss Preventing Efforts and Advice By The Insurer:

An insurer not only indemnity against fire losses,

but also advices the insured to reduce the incidence of fire. Fire

insurance companies establishes, „salvage corps,‟ to extinguish

fire so that the extent of loss can be minimized.

iii. Helpful In Business Progress:

Due to the facilities provide by the insurance

companies, the business enterprises undertake large-scale

production, and invest in business and marketing activities

without any botheration. This lead to continuous progress in

industrial and commercial activities, leading to extinguish fire

so that the extent of loss can be minimized.

iv. Beneficial For New Industries:

The new industrial units usually face complex

problems of production, finance, competition and sales etc. In

such a situation, they cannot afford the losses/damages due to

fire. The fire insurance relives such entrepreneurs from worries,

by indemnifying the loss/damages, if any, from the occurrence

fire.

v. Credit Facility:

Where the assets are secured by fire insurance, it

becomes easier for such enterprises to get credit from banks and

other financial institutions. This will increase the credit

worthiness of the enterprise.

vi. Distribution of Risks:

Fire insurance is effective device to distribute the

risks in a group, enabling the individual or the institution to

maintain its efficiency.

6. PROCEDURE OF BAJAJ ALLIANZ FIRE

INSURANCE

The steps to be followed in connection with affecting fire insurance

are as under:

I. Selection of Insurer: The selection of the insurance company is the first

step. The insured is required to select a suitable company for this purpose

amongst a large number of companies engaged in this business.

The proposer can select any of these companies according to his

convenience, rationality, goodwill of the company, its financial soundness,

premium rates, policies and service provided etc.

II. Presentation of Proposal In The Prescribed Form: After the selection of

the insurance company a proposal form is obtained and furnished with the

insurer or his agent. The particulars about the name, address, occupation of

the proposer, value and nature of the subject matter of insurance, type of

policy required, amount of sum insured, etc. are to be furnished with care

and utmost good faith. All the facts about the subject matter should be

clearly disclosed.

III. Evidence of Goodwill: The proposer is required to furnish a certificate as

evidence of his goodwill along with the proposal. The formal of this

certificate is given with the proposal form itself. Usually, the insurance agent

certifies that he knows the proposer for a period time and his reputation is

good in the society. In case the proposer will be asked to furnish such

evidence from any reputed person in the society.

IV. Recommendations By Agent: The agent also gives his recommendations in

the proposal form at the place provided for this purpose. The insurer takes

the decision to accept a proposal keeping in view of the recommendations

given by the agent.

V. Survey of The Subject Matter: When a proposal for fire insurance is

received in the office of the company, it makes a thorough study of the

proposal and if necessary, a survey of the subject matter of insurance is

conducted. Such a survey is conducted by expert surveyors, who will go into

enquire about the conditions of the subject matter, surrounding situations of

the subject matter, risks involved etc. The surveyors also verify the accuracy

of the details furnished in the proposal.

VI. Report by Surveyors: After the survey, the surveyors present a report to the

insurance company. This report will state the physical and moral hazards

involved in the proposal. This report serves as an important base for

determining premium.

VII. Acceptance of Proposal: After determination of premium on the basis of

risk involved, the proposal is accepted and intimation is sent to the proposer

asking him to pay the premium within a specified period of time. If the

surveyors present an adverse report, the proposal is rejected and a regret

letter is sent to proposer.

VIII. Depositing of Premium Money: A lawful contract between the insured and

the insurer is entered into, when the premium money is deposited by the

insured. The risk commences as soon as the premium is remitted.

IX. Issue of Cover Note: As soon as the premium money is deposited, the

insurer issues a cover note (a provisional policy) indicating there is that the

insured has deposited the premium and the insurer has accepted the

proposal. On issue of absolute policy the legality of the cover note ends. A

cover note can also be insured pending the process of survey of the subject

matter and the premium has not been determined.

X. Issue of Insurance Policy: When all the requirements under the risks have

been complied with, the insurer issues the policy duly stamped and

containing all terms and conditions. These terms and conditions define the

mutual rights and liabilities between the insurer and the insured's.

7. BAJAJ ALLIANZ FIRE INSURANCE –

RATE FIXATION

Rate fixation on scientific basis in fire

insurance is still not fully developed as in the

case of life insurance. Under fire

insurance, after the inspection of risk,

physical hazards can be assessed but moral

hazards cannot be assessed properly.

Therefore, rate fixation is different. The past

experience can only be used as a guideline for the estimation of risk. While fixing

the rates of premium for different risks in fir insurance, the insurer must ensure that

the calculation work is carried out as accurately as possible.

Thus, the rate so determined should cover the probable claims and the premiums

must be equitable, stable and consistent.

System of Rate Fixation

Actual process of rating consists of two steps:

Classification,

Discrimination, and

Scheduled rating.

Classification:

The classification rating method is based upon the experience

of several years and of several persons and therefore can be

considered as superior over the personal judgment method. Under this

method, risks are classified according to their loss experience.

Properties have been classified into three categories.

i. Ordinary

ii. Hazardous, and

iii. Extra hazardous

Therefore different premium rates are to be fixed for each

class. While fixing the rate the following points are to be taken into

consideration:

Construction:

The construction of the building has a great impact

in the fixation of the rate. Buildings made of bricks are

sound than wooden buildings. A fireproof building is

considered better than a without fireproof building.

Occupancy:

Occupancy means the use of the building. The

building may be used for various purposes, as for

example, general shop, hardware store, and go down and

for residential purposes.

Flooring:

The wooden floor in the building its an accidental

hazard and is worst than stone flooring. In case of fire,

wooden floor prove a bad risk.

Height:

The height is an extra physical hazard for rating.

The sky scrapper buildings have proved a very bad risk

in case of fire.

Lighting, heating and power:

Short circuits may lead to fire and faulty

installation may result in combustion.

Situation:

The location, the adjoining premises, the distance

from the fire brigade station or water supply point and

congestion are all-important sources for considering the

fire risk rating.

Discrimination:

Discrimination rate system is very old system of rate fixation in

fire insurance. Under this method, premium rates are dependent upon

the judgment of a person skilled in the fire field. All the bad factors

and good factors are put together and the rate is to be calculated. The

method has many shortcomings because personal judgment may differ

and different rates may be determined to the same risk by the different

companies.

Under this method the most important factor, which influences

the rate fixation in fire insurance, is the discrimination, i.e.

differentiation. Every risk is considered individually.

Schedule Rating:

Under this system of rating a normal property is considered as

„standard‟ and for each standard risk a standard premium is charged.

For any defect, addition is made in standard premium and for good

feature deduction is made. The main advantage of the schedule rating

is that it provides equitable treatment for all risks.

A scheduled rate means a standard rate of premium or an

average premium. The average premium rate for a particular class of

risk is determined taking into the account the total loss and the sum

insured during a period of years. For finding out the average rate

percent, the following formula is applied: the average rate percent (R)

= L/V x 100 where, R = average rate percent, L represents „Loss‟, V

represents the total sum insured of the subject matter. The gross or

office premium is called the „Normal rate‟ or „average rate‟ of

premium. As discussed above, each class of risk may differ from one

another and therefore the principle of discrimination may also be

applied.

8. BAJAJ ALLIANZ FIRE INSURANCE

CONTRACT

Fire insurance contract may be defined as “an agreement whereby one

party in return for a consideration undertakes to indemnify the other party of

certain defined subject-matter being damaged or destroyed by fire or other

defined perils up to an agreed amount.” The party responsible to indemnify the

loss is called the insurer, the party who is to be indemnified is called the

insured, the consideration for the contract is termed „the premium‟, the defined

subject matter is termed „the property insured‟ the sum set forth in the contract

is called the assured sum, and the document containing the terms and conditions

of the contract is known as „the policy‟.

8.1ELEMENTS OF FIRE INSURANCE CONTRACT

1.Features of General Contract:

All the features of general contract are also applicable to the

fire insurance contract.

A. Proposal:

The proposal for fire insurance can be made either verbally or in writing.

The proposer gives the necessary description of the property to be insured. In

practice the printed proposal form is used for the purpose. Introduction, type of

properties, value of properties, construction, occupation, etc., are the various

information, which are required by the insurer. The answers to these questions

must be completely correct. The assured must disclose all the material facts and

should observe utmost good faith. The description of the subject matter of

insurance is the basis of the contract for assessing the risk and fixing the premium.

B. Acceptance:

On receipt of the proposal form, the insurer will assess the risk. Sometimes,

when the contents and subject matters are not of very high amount, the insurer may

accept on the basis of proposal forms only. When the subject-matters is of larger

magnitude and where the hazard involved is of a variable or unknown nature, the

insurer may send his surveyor to survey the property. The surveyors being expert

in the field of insurance evaluation will consider the proposal in the light of this

report. The unknown proposes are required to submit an evidence of respectability.

The insured is required to submit a certificate from some known and respectable

person about honesty and integrity. As soon as the proposal is accepted, the

assured is informed about the decision.

C. Commencement of Risk:

The risk commences as soon as the contract is completed provided there is

no specific time for the purposes. As soon as the proposal is accepted, risk will

commence irrespective of the fact that no policy was issued and no premium was

paid. Where risks are unknown and tremendous, the payment of premium will be

the basis of the completion of the contract. The risk will be commence only when

the premium has been paid and not before that; when the policy has been issued,

payment of premium will not be the basis of commencement of risk.

a. Cover Note:

The insurer issues a „Cover Note‟ or „Interim Protection

Note‟ when the risk was accepted provisionally or subject to the

condition of payment of premium. This note will cover the property so

far the final policy has not been issued. If loss occurs before issue of

policy cover note will be sufficient to prove insurance. The cover

note, however, is not taken at par to the policy.

b. Policy:

The insurer issues a duly stamped policy which will bear

all the terms and condition of the contract. Any contract of fire

insurance comes within the meaning of the word „policy‟. It is a

different statutory and formal document of insurance contract. There

are a standard form is also used. The policy contains the name and

address of the insured, the subject matter of insurance, the sum

insured, the term and the premium. There are various clauses

governing the conditions of insurance contract. The terms and

conditions of the policy can be changed.

c. Period of Fire Insurance Policies:

Usually fire policies are issued for one year and are

called „Annual Insurance.‟ Policies issued for a period shorter than

one year are known as „Short-Term Policies‟ and those issued for a

period more than one year are called „Long-Term Policies.‟ But in

practice only annual policies are common. „Short-term‟ and „Long-

term‟ policies are rarely used. Long-term policies are generally issued

in case of building. Alteration in the policy will be made according to

the change in building and terms of insurance. The premium rate is

determined according to the nature, location, and construction of the

property.

Moreover, the period of insurance is also taken into

account for computing premiums.

d. More Than One Fire During A Period:

When there is more than one fire in respect of the same

subject matter insured, the insurer is not bound to pay more than the

sum assured. During the policy-life, payment of each loss,

automatically, reduces the amount of the policy by the amount so

paid. When, after payment of certain losses, the property insured is

totally destroyed, the insurer will pay loss not more than the balance

of insured amount remaining after compensation of the previous

losses.

However, if the insured is willing to get payment of full

loss, he can reinstate the assured sum to the original amount by paying

a fresh premium on a pro-rata basis to the date of expiry.

e. More Than One Policy:

If the same subject matter is insured with more than one

insurer, he cannot realize more than the actual loss from all the

insurers. Each insurer will pay his ratable proportion of loss to the

property insured against fire. If there is average clause, then the

insurers will pay accordingly.

9. PRINCIPLE OF FIRE INSURANCE

A. Insurable Interest:

Insurable interest is the general principle of insurance

without which insurance cannot lawfully be enforced for an insurance

unsupported by an insurable interest would be a gambling transaction.

Insurable interest will be there where the subject matter should be in such a

position that the insured may suffer loss at the time of damage and may gain

by its protection. The insurable interest in fire insurance must be present at the

time of contract and at the time of loss. Insurance contract will be invalid if

the property is sold to another party. Similarly if there is no insurable interest

at the time of insurance, the contract will be invalid.

The following conditions must be fulfilled to constitute

an insurable interest.

There should be a physical object capable of being damaged or

destroyed by fire.

The object must be the subject matter of insurance.

The insured must stand in such relationship as recognized by law

where the insured is benefited by the safety of the subject matter or be

prejudiced by its loss.

The insurable interest is the „pecuniary interest‟. The fire

insurance is a personal contract between the insured and the insurer. So, the

transfer of interest would invalidate the contract.

The following persons have insurable interest in the

subject matter concerned.

The owner of the property or asset whether fixed or

current has as insurable interest whether he is the legal owner or the equitable

owner. The owner may be a single or joint holder. Partial owner can take

policy for full value as trustee of all the property. A life tenant entitled to the

use of the property during his lifetime only has an insurable interest.

An agent has insurable interest in the property of his

principal.

A creditor has an insurable interest in the firm‟s property.

A creditor has an insurable interest in property on which

he has a lien for the debt.

An insurer has it in respect of risks underwritten by him

for the purpose of reinsurance.

Where the subject matter is mortgaged, the mortgagor

has an insurable interest in the full value thereof and the

mortgage has an insurable interest in respect of any sum

due to become due under the mortgage.

A bailee can insure any article or property bailed. He

may be a gratuitous bailer or bailee for reward.

A trustee has insurable interest in the property put on

trusteeship.

B. Principle of Good Faith:

The contract of fire insurance is one in which the

observance of the utmost good faith – uberrima fides – by both the parties

are of vital significant. The utmost good faith in fix insurance has two

aspects – first, disclosure of material facts and second, preservation of the

property insured.

The insurer and the insured must furnish detailed

information regarding the subject –matter to be insured. The insured, since

he has more information about the subject matter, must disclose all the

information asked truly and fully. The assured is also required to disclose all

the material information which are known to him although it was not asked

by the insurer; material fact is one which influences the decisions of the

insurance. The decision may be pertaining to the acceptance or declination

or determination of the premium. In case of fire insurance the examples of

material facts are construction of buildings. If the assured has not observed

good faith, other party can avoid the contract. It was immaterial to plead that

the insured was unaware of the fact and could not disclose. In a given

circumstance, it is expected from the insured to know all the material facts.

The insurer has also to disclose such material facts as are within his

knowledge.

The second phase of good faith is preservation of property.

Thus, the observance of good faith is necessary not only during the

negotiations of the contract but throughout the term of the policy and in

making claims. Any change after commencement of risk must be

communicated to the insurer. The insured or his agents as well as the insurer

must take all such steps as may be reasonable for averting or minimizing

loss. Since the insured is near to the property, he must act to prevent the fire

and if fire occurred, he must do his utmost to extinguish it. In such cases he

must act as if he was not insured.

C. Exceptions:

In the following circumstances, the insured is not required

to disclose information.

All those circumstances which diminish the risk.

All those facts, which are known or reasonably presumed to be

known to the insurer.

Information, which are of common knowledge.

Those facts, which the insurer in the ordinary course of his business

ought to know, or which the insurer ought reasonably to have inferred

from the details given.

Those facts, which are superfluous to disclose by reason of a

condition or warranty.

D. Principle of Indemnity:

The doctrine of indemnity aims to compensate the

insured for a loss sustained, and the compensation should be such as to place

him as he occupied immediately before the occurrence. The insured cannot

claim anything in excess of the amount required to recoup the actual loss

sustained. The insurers undertake to make good the insured's loss by

monetary payment or by reinstatement or replacement so that the insured

shall be fully indemnified, but this is subject to the sum insured. The law

does not sanction any insurance, which would enable the insured to profit by

the destruction of the thing destroyed. It will check the temptation to destroy

the property insured thereby to secure the money.

The assured amount is not the measure of indemnity but it

sets an upper limit up to which the loss can be indemnified. The actual

amount of indemnity will be the market value of the subject matter

destroyed or damaged by fire at the time and place of the occurrence of fire.

It will never exceed the assured amount. When the actual loss is more than

the assured amount then only the insured sum will be paid and nothing more

is paid. But, this principle does not hold good when the policy is valued

policy. Here, the basis of indemnity will not be the actual cash value of the

property at the time of loss but the insured value, which is named in the

policy when it was taken. In a valued policy, no consideration is given to the

actual loss. Thus, the amount of claim may be greater or less than the actual

loss at the time of fire in case of valued policies.

E. Interpretation of Indemnity:

The insured is entitled to perfect indemnity subject to the

sum assured being sufficient. But, in practice such perfection may be

difficult to attain. Previously, the meaning of the word „indemnity‟ was

understood in the sense of material indemnity only, i.e., tangible and

material property only. The intangible loss, i.e., loss of profit, rent, etc., was

not compensated. It worked as a great hardship to the honest insured

persons. Now, the insurance is extended to cover not only the material loss

of property insured but also to cover the „consequential loss‟. When a

business property is burnt not only the material loss on account of the

destruction of building, plant and stock are covered but the consequential

loss of profits on account of cessation of sales, salaries, taxes, rent, rates,

etc., are also indemnified. Now-a-days tangible and intangible losses are

insured and the consequential loss is also within the meaning of indemnity.

F. Consequences of Indemnity:

The consequences of the doctrine of indemnity are as below:

The insured may claim only the amount of the loss sustained.

In case of partial damage, the insured may claim compensation only for the

amount of damage done.

The insured must transfer to the insurer may rights which he may possess

against a third party in respect of the loss.

If the insured have affected more than one policy, he is precluded from

obtaining more than one complete indemnity.

Measure of indemnity varies with the type of properly. For

damaged buildings, the measure of indemnity is the cost of repairing or

reinstating the buildings to their pre-loss condition. Similarly, for machinery,

the measure of indemnity is the market value, which is arrived at after taking

into account wear and tear and depreciation. For stock in trade, the measure

is the net cost to the insured. For stock in trade, the measure is the net cost to

the insured. The indemnification may be in the form of cash, repair,

replacement and reinstatement.

G. Doctrine of Subrogation:

Subrogation means the right of one person to stand in the

place of another and to avail him of the latter‟s rights and remedies. The

principle of subrogation is just a corollary to the principle of indemnity. The

insured can realize only the actual value of the loss or damage to the

property according to the principle of indemnity and it follows that if the

damaged property has any right against a third party regarding that property.

These must pass on to the insurer. If the assured is allowed to retain them, he

shall have realized more than the actual loss, which is contrary to the

indemnity principle. The assured can proceed against the third party, if he so

desires, and if he recovers damages the insurer is relived of liability. If the

insured has received the full amount of loss any sums obtained from the

third party belong to the insurer up to the amount of their disbursement.

The right of subrogation is exercisable at common law

after the insurer has paid the claim made against him.

H. Warranties:

The contents of proposal form are expressly incorporated

in the policy, which form warranty. Warranty is that by which the assured

undertakes that some particular thing shall or shall not be done, or that some

conditions shall be fulfilled or whereby he affirms or negatives the existence

of a particular state of facts. Warranties, which mentioned in the policy, are

called express warranties and those warranties, which are not mentioned in

the policy, are called implied warranties.

Warranties must be complied with literally and the effect

of a breach of warranty is to render void the relevant item of the policy, even

if no increase in risk is involved. Every warranty to which the property

insured or any item thereof is, or may be, made subject, shall from the time

the whole currency of the policies, and non-compliance with any such

warranty, whether it increases the risk or not, shall be a bar to any claim in

respect of such property or item. The condition states that every warranty is

attached during the whole currency of the policy and if during this period a

warranty has not been complied with, the insured will not entertain any

claim in respect of the property or item affected. However, if the policy is

renewed and there was breach of a warranty before the renewal is affected,

in such a case the claim can be made. Non-compliance with a warranty prior

to the current renewal period of a policy is not a bar to a claim. The non-

compliance with a warranty avoids a cover only during the period of

insurance in which the breach occurred.

I. Proximate Cause:

The rule is that the immediate and not the remote cause is

to be regarded – cause proximate non-remote spectature. Proximate cause is

very important in fire insurance. The principle of proximate cause has

already been discussed in detail. The insurer always takes the proximate

cause while paying the claim. If the property insured is burned but the fire

was preceded and brought into operation by an excepted peril, the legal

position depends upon whether the expected peril was the proximate. The

remote cause is when an incendiary bomb damaged the property; the

proximate cause is enemy action.

10. TYPES OF BAJAJ ALLIANZ FIRE

INSURANCE POLICIES

There are different types of fire insurance

policies keeping in view of the various needs of business enterprise. The

important types of policies are described below: -

Average Policy: -

It is policy containing „Average Clause‟ Average policy refers

that if a person insures his property for an amount lesser than its value, the

insurer is not bound to indemnify for the total loss of the property, even if

the claim is not more than the sum insured by the policy. This way, the

insurer shall be liable to pay in proportion to the actual loss, in which

proportion the policy amount and the real value of the subject matter exists.

The formula is an under:

Amount of indemnity = Policy money * actual amount of loss

Market value of the subject matter at the time of fire.

For example:

„A‟ has insured his property in a fire insurance policy containing

„Average clause‟ for Rs. 5.00 lakh. After some time, the property partially

burned by fire causing a loss of Rs. 6.00 lakh. The claim payable to him against

the loss of Rs. 3.00 lakh, by the insurance company is calculated as under:

Amount of indemnity = Policy money * Actual amount of loss

Market value of the property insured.

= 5,00,000* 3,00,000 = Rs. 2,50,000.

6,00,000

Valued Policy: -

In an ordinary fire insurance policy, the insurer simply indemnifies

the insured. In the case of valued policy, the property is valued at the time of

affecting the policy and the insurer agrees to pay the insured sum on

occurrence of fire irrespective of the loss. Here in this case, the contract is

not an indemnity. Under the valued policy the insured can recover a fixed

amount, agreed at the issue of policy without the necessity for any further

proof of value at the time of fire. This is because that the valuation was done

at the time of affecting the policy. The valued policy also is known as

„insured policy‟.

Specific Policy: -

It is a policy under which the property is insured for a fixed or a

specified sum without taking into account the actual value of the property.

The sum assured shall be usually less than the actual value of the insured

property. The insurer‟s liability under this policy arises only when the losses

reach to the extent of certain specified sum. However, the insurer shall not

be liable for indemnity more than the policy money.

Reinstatement or Replacement Policy: -

This a policy in which a clause is inserted in the policy under which

the insured can recover not the value of the buildings or the plant as

depreciated, but the cost of replacement of the property destroyed by new

property of the same kind or the insurer may reinstate the property instead of

paying in cash. In both the cases we have the example of “New lamps for

old”.

Reinstatement or replacement policy is issued for new plant and

machinery of buildings, of reputed companies.

Floating Policy: -

This type of policy is useful for the goods kept at different places and

for floating goods. For example, some of the goods of other trader are kept

in one go down, and few kept in another go down, some are kept in the

railways go down or some at the sea port. This way, for the goods kept at

different places, such a trader to cover the risk of goods lying at different

places can obtain a floating fire insurance policy under one policy.

The major advantage of this policy is that the insured need not obtain

different policies for the goods kept at different places. The insured needs to

declare all his goods for which the floating policy is issued. The

disadvantage for the insurer is that his risk increases. Sometimes one can

make under insurance, by which the loss will be higher for the insurer.

The policy is suitable for those traders whose goods are lying at

different go downs, railway station or seaport for a long period, and the

possibility of risk of fire is much. The touring companies like Circus

Company, Theatre Company, and Auctioneers etc. this floating policy is

beneficial.

Declaration Policy: -

This policy is specifically aimed for wholesalers and distributions of

goods whose stocks usually fluctuate. However, this policy is not issued for

the goods lying in go downs or which are used in manufacturing process.

At the time of effecting the policy, it is estimated that how much of

the goods are to be covered by risk during the tenure of policy. On the basis

of this estimate insurance is affected on maximum value of goods. The

insurer shall be liable up to this limit only.

At the beginning, the insurer charges three-fourth of the premium

fixed on the basis of maximum values of stocks. Thereafter, insured declares

after certain time interval (monthly or quarterly according to the duration of

premium become, due) the value of his actual stock. In the case of loss by

fire, indemnity is calculated on the basis of value of goods declared by

insured, in the above manner. On maturity of this policy, the average value

of stock is ascertained and on the basis of this average the premium is more

than the initial premium charged, the excess is claimed from the insured. On

the other hand, the initial premium charged is more than the average

premium determined at the maturity of the policy, excess amount be

returned to the insured. However, the insurance company retains 50 per cent

of the initially paid premium. This way, the insure is effected on the

maximum value of the stock and the payment of premium is made on the

average stock.

The declaration policy is issued for not less than Rs. 20 lakh, in India.

Adjustable Policy: -

This policy is issued for existing stock. A condition a attached with

this policy that the premium rate shall adjusted according to increases or

decrease in the value of stock. At the beginning this policy is issued like an

ordinary policy and the premium is paid in full at the rate prescribed. It is a

contract limited to merchandise or stock-in-trade, other than farming stock.

When there is variation in the value of stock, this change is notified to the

insurer by the insured. On basis of this information, a suitable endorsement

is made on the policy and the premium is adjusted on a pro-rata basis. On

the basis of endorsement made on the policy, it is assured that the policy is

affected on such an amount. In the case of loss by fire, the amount notified

by the insured at the maturity of the policy is taken as final and indemnified

up to that limit.

In this kind of policy insured can reduce or increase the policy amount

according to his convenience and the premium is adjusted on the basis of

this increase or decrease.

This policy resembles like a declaration policy, but there are certain

differences between the two:

In declaration policy, the stock value declared at the time of

affecting the policy remains as insured sum, whereas in adjustable

policy, the stock value declared at the last time is accepted as sum

insured.

In declaration policy, it is essential to declare the stock at certain

fixed interval, whereas in adjustable policy, this declaration is

depends on the convenience of the insured.

In declaration policy, the money to be indemnified shall be the

same that declared at the beginning whereas in adjustable policy,

the value declared at the last time shall be the amount to be

indemnified.

Although in both the policies, the premium is calculated at the end

of every year, the maximum limit of insured sum differs.

Maximum Value With Discount Policy: -

Under this policy, the insurance is affected on the maximum value of

stock remains throughout the year, and accordingly premium is charged.

There requires neither any declaration of stock value nor any adjustment.

The insurance is affected on the maximum stock value throughout the year

and in the case of no indemnity, one-third of the premium paid is returned to

the insured at the end of the year. The advantages of this policy is that there

requires no declaration by the insured nor requires calculation of premium at

the closing of every year. The one-third premium refunded by the insurer

can be treated as a discount in consideration of variations in value of goods.

Otherwise there is no justification for refund.

Excess Loss Policy: -

This policy is obtained where the stock fluctuate indefinitely. The

trader has to obtain two policies at a time, one for the minimum stock of the

merchandise always remain in stock and the other for such value the stock

may increase. The first policy is known as “First Loss Policy.”

Under the cover of first policy, the loss is indemnified up to the sum

insured. If the loss exceeds this limit, that can be met out from the Excess

Loss Policy.

This policy has the advantages that with a small amount of premium,

larger risk can be covered. The premium rate for the excess loss policy is

very low in comparison to the other polices.

In the case of excess loss policy, the insured is required to declare the

actual stock every month as was needed in declaration policy.

Ordinary or Standard Policy: -

This policy provided security against some fundamental risks. The

premium is kept at lower rate because this policy is obtained by almost all

the insured. This policy has two types:-

For household goods and

For all other purposes such as for factories, shops, go down,

furniture‟s etc.

Usually this type of policies overlooks the risk factors and the insurer

is not liable for the losses. The risks, which are overlooked, include loss due

to natural calamities, like earthquake, explosion of lava from the earth, civil

wars, strikes, explosion, etc.

Special Peril Policy: -

In addition to ordinary risks, this policy provides for coverage of risks

involving explosion, violence, etc. strikes, civil war, earth-quake, etc. and

loss due to floods, explosion of water tanks, explosion in the air by collision

between two air. Crafts, loss to the insured properties by transport vehicles

etc. Additional rate premium is charged for undertaking special kinds of

perils.

Comprehensive Policy: -

This policy not only undertakes full protection against risk of fire, but

also combined with risk of burglary, riot, theft, pest, damage, lightning etc.

This policy is also known as “All in policies”. The major advantage of this

policy to the insurer is the higher rate premium, while the assured is

protected against losses from other kind of perils.

Sprinkler Policy: -

This policy insures destruction of or damage due to accidently leaking

water from automatic sprinkler installation, used in the insured premises to

put out fire.

The policy contains various conditions relating to maintenance of

sprinkler, up keeping and operation.

Rent Policy: -

This policy protects the building owners from the loss of rent. If a

tenant does not pay rent because of fire in the rented portion, the insurance

company will pay for such loss.

This may constitute a separate policy, or can be included within other

forms of cover and may be affected either by the owner, or by the tenant or

by an owner-occupier. If the tenant is not paying rent because of fire, the

owner can claim rent from the insurer. If a tenancy agreement requires for

such insurance, the tenant should insure under this policy. In the event of

fire, the owner-occupies would be required to pay for alternative

accommodation during the period of repairs and reinstatement.

Transit Policy: -

A transit policy covers goods in the course transit from one place to

another by rail, road, air or sea transport. The policy protects the loss due to

damage or loss in transit. But reaching the goods to the destination place.

Builder’s Risk Insurance: -

This policy is insured for loss by fire against buildings, including

machinery and equipment during the process of construction, as well as such

materials incidental to the construction work. This policy is also known as

contractors‟ risk or contract works risks policy. At the beginning this policy

is issued for a minimum sum and accordingly to progress of construction

work, the sum insured is increased.

Long-Term Policies: -

Policies for a period exceeding 12 months shall not be issued except for

“Dwellings.”

Macro Picture Of General Insurance

Overall Business Performance of GIC 2005-06

Fire Others

Net Premium 14,246 54,713

Incurred Claims 9,277 45,731

% Of Net Premium 65.1 83.6

Net Commission 4,780 14,023

% of Net Premium 33.6 25.6

Expenses of

Management

149 438

% Of Net Premium 1.0 0.8

Underwriting

Profit/Loss (-)

(512) (9,821)

% Of Net Premium -3.59 -17.95

Inv. Income app to

revenue

2,249 10,957

% Of Net Premium 15.8 20.0

Balance Profit/Loss

(-)

1,741 1,152

% Of Net Premium 12.2 2.1

12. CLAIM PROCEDURE UNDER BAJAJ

ALLIANZ FIRE INSURANCE

A set procedure is followed for the settlement of claim under fire

insurance. The procedure is as follows:

Notice of Fire: -

As per conditions of fire insurance policy, immediately after the

occurrence of fire, the notice of fire is given to the insurance company, in

writing. This is necessary for the insurance company to make preliminary

investigation that deem expedient. Delay in giving notice of fire may

severely prejudice the interest of the policyholder.

Presentation of Claim: -

After giving necessary notice of information of fire, the insured must

present the claim to the insurer in the prescribed claim form. The claim in

the prescribed form should be submitted within 15days from the date of fire.

This period of 15days can be increased by the permission of the insurer. All

the facts should be correctly be furnished in the claim. Usually, the

following types of information are given in the claim: -

a. Complete details of the losses giving the date, time and

place where the incident took place.

b. Causes of loss.

c. Details of damaged property, value of the property at the

time of fire, value of salvage and the claim amount.

d. Subject matter of insurance and loss to every component.

e. Full details of the other policies insured against the same

subject matter.

Presentation of Necessary Documents:-

The following documents and evidence are enclosed with the claim: -

a. A declaration about the claim and about related facts and

figures.

b. The evidence of all details, books, records, statutory books,

plans, vouchers, document, certificate and other information

that give the proof of loss by fire and that create the liability

on the insurer.

c. Any other necessary document, witness, certificate etc. that

is required under the conditions of fire insurance policy.

In case these documents could not be presented together with the

claim, they may be sent within 6months, failing which the insurer can reject

the claim.

Action By The Insurance Company: -

On receipt of claim, the office of the insurance company. It may issue

the receipt of the claim. After that, the claim department undertakes

thorough scrutiny of the claim on the basis of documents and witnesses

presented by the insured with the claim. After that a „Claim Ticket‟ is

prepared and entered it in the „Claim intimation Register‟. This way the

claim file is prepared with claim number.

Survey and Loss Assessment: -

On receipt of notice of information and claim from the insured, the

insurer arranges to undertake survey of the lost properly with help of expert

surveyors and loss assessors.

As per provision of insurance Act, 1938, no insurance company

accepts the claim exceeding Rs. 20,000/- or more unless it receive the

reports of the surveyors about the actual loss of the subject matter. Such a

survey is necessary to find out under what conditions and causes the fire

occurred, and what would be limit of company‟s liability in this behalf. This

survey is calculated by visiting the spot where the fire took place. Under the

conditions of fire insurance, it is the duty of the insured to extend all

necessary assistance and cooperation to the surveyors and assessors.

The surveyor‟s reports usually contain the following information: -

a. Causes of loss occurred.

b. Proximate cause of fire.

c. Assessment of loss.

d. Indirect loss or expenses to insured.

e. Details of expenses made towards assessment of loss.

Mention about the policies obtained by insured from other fire

insurance companies on the same subject matter and the amount of

contribution on the part of the insurer.

Settlement of Claim: -

When the report is received from the surveyors and assessors of loss,

the insurance company takes further steps to settle the claim. The company

studies the reports and the claim received from the insured thoroughly. In

case the claim money charged by the insured and that calculated by the

assessors do not make any difference, the company takes the decision

immediately to make any difference; the company takes the decision

immediately to make the payment of claims. On the other hand, if there is

difference in the claim amounts, the insurance company takes the decision to

pay the claim money calculated by the assessors.

In case there is any provision in the policy for reinstatement, the

company assesses the reinstatement value and reinstates the property instead

of payment of claim by cash.

In connection with the settlement of claim, an insurance company

should take into consideration the following matters.

a. Double Insurance: - Where the insured has obtained

policies for the same risk from different companies; the

claim is not covered by one policy, but under all the policies.

Every insurer in such a situation, liable to contribute towards

the total loss in proportion to the sum assured when each.

b. Under Insurance: -Where the insured gets his property

insured with under the value of his property, a situation of

under insurance arises. In such a situation, the insured is

deemed to be the insurer for the difference of value between

the value of the property and sum assured. For this amount,

the insured is liable proportionately to the loss and the

insurance company is liable to pay average proportionate

loss. As such, the insurer should keep this fact in mind

where the insured takes under insurance policy.

c. Losses At Different Times During The Tenure of Policy:

-The loss to the insured property at various times is possible

during the tenure of the policy. The general rule in this case

is that whenever the claim is paid, that paid claim money is

reduced from the total sum insured. This way the sum

insured gradually reduces. By paying additional premium,

the sum assured can be increased again.

d. Arbitration: - Where the insured is not satisfied with the

claim paid by the insurer, the dispute can be referred to

arbitration as per conditions of insurance policy. The

decision given by arbitrator shall be binding on both the

parties. But the matter can be taken to court if any of the

parties is not satisfied by the decision of arbitration.

CASE STUDY OF BAJAJ ALLIANZ FIRE INSURANCE

13. CONCLUSION

Indian Insurance Companies have come a long way since

independence & more after Liberalization, Privatization, and Globalization

(LPG) era, however they have to cover some distance so as to be

benchmarked with the for sure that the reforms process is on & the insurance

companies are in right directions

In the project study of “FIRE INSURANCE” we can see that the

scope & significance of it to such an extent that every insurance company is

handling it with due care, as the scope insurance business has widen to

from national boundaries to global or international boundaries.

From the topic of “FIRE INSURANCE” a more reformed & deep

study of the same is made. This project study not only covers various aspects

of the same & is a very good example through which we can measure the

growing need, scope & significance of the same.

This project report has not only given an opportunity to me to prepare

a project on the subject above topic but it has also given me a chance to

understand this topic more effectively but has also increased my own

knowledge of the topic.

14.Bibliography & Webliography

14.1 Bibliography

Modern concept of Insurance -M.N.Mishra

Taxmann‟s Insurance law Manual

Insurance principles & pratices-M.N.Sharma

Insurance principles & practices-M.G.Methew.

Icfai.insurance - Magazines