MASTERS IN MANAGEMENT STUDIES

Project Report on Fire Insurance Policy

Submitted by:

AMIT KAMRA & GROUP

Name of Coordinator: Prof. V. N. Mani

Mumbai Institute of Management and Research

(Approved by AICTE & Affiliated to University of Mumbai)

September 2010

Fire Insurance Policy Page 1

DECLARATION

I hereby declare that the Project Report submitted on Fire Insurance Policy, As the Partial

Fulfillment of the MMS Degree Program (Affiliated to University of Mumbai) is the

original work of me and my group members.

Group Members:

1.) Amit Kamra

2.) Nikhil Kesarkar

3.) Wasim Shaikh

4.) Prasahnt Shirshekar

5.) Sonal Ranka

6.) Maya Kamath

7.) Shivangi Bhatt

8.) Nikita Shah

9.) Dayanand Palankar

10.) Sachin Shintre

11.) Hazra Sheikh

12.) Prashant Kolekar

Place: Mumbai

Date: 29-09-2010

Prof. V.N. Mani Amit Kamra

Guest Faculty MIMR Group Leader

ACKNOWLEDGEMENT

I wish to express my gratitude to Prof. V. S. Mani Guest Faculty MIMR Wadala for giving

me and my group members an opportunity to work on the project entitled “Fire insurance

Policy”.

I wish to express my thanks to Mr. Bhagwan Patil, Asst Manager ( Marketing) and Mrs.

Anjali P. Karve Admn. Officer of The New India Assurance Co. Ltd.

I wish to thank Mr. Venkata N. Malladi, Head Account & Finance, M/S Anandji Haridas

& Co. Pvt. Ltd. for giving us the valuable time and information required for the project

Place: MumbaiDate: 12 October , 2010

Group Leader

( Amit Kamra )

Fire Insurance policy

Definition:Property insured described in the said schedule or any part of such property be destroyed or damaged by any of the perils specified here under during the period of insurance named in the said schedule or of any subsequent period in respect of which the insured shall have paid and the company shall have accepted the premium required for the renewal of policy, the company shall pay to the insured the value of the property at the time of the happening of its destruction or the amount of such damage or at its auction reinstate or replace such property or any part thereof.

Fire insurance is a contract by which the insurance company agrees on payment of premium to indemnify the insured, up to an agreed amount, against financial loss by fire which may arise during a particular period to the subject matter. It is a contract of indemnity which is usually in the form of policy. The fire insurance contract is for a period of one year and often is cancel able by either party before the term has expired. Fire insurance company not only grants protection to policy holders against the fire risk but also renders valuable part in the reduction of fire waste. They spend money on fire prevention techniques and conduct research in order to find out means for minimizing the chances of losses.

Characteristics of Fire Insurance1. Fire insurance is a contract of indemnity. The insurer is liable only to the extent of

the actual loss suffered. If there is no loss there is no liability even if there is a fire. 2. Fire insurance is a contract of good faith. The policy-holder and the insurer must

disclose all the material facts known to them. 3. Fire insurance policy is usually made for one year only. The policy can be renewed

according to the terms of the policy. 4. The contract of insurance is embodied in a policy called the fire policy. Such

policies usually cover specific properties for a specified period. 5. Insurable Interest: A fire policy is valid only if the policy-holder has an insurable

interest in the property covered. Such interest must exist at the time when the loss occurs. In English cases it has been held that the following persons have insurable interest for the purposes of fire insurance- owner; tenants, bailees, including carriers; mortgages and charge-holders.

6. In case of several policies for the same property, each insurer is entitled to contribution from the others. After a loss occurs and payment is made, the insurer is subrogated to the rights and interests of the policy-holder. An insurer can reinsure a part of the risk.

7. Fire policies cover losses caused proximately by fire. The term loss by fire is interpreted liberally. Example: A women hid her jewellery under the coal in her fireplace. Later on she forgot about the jewellery and lit the fire. The jewellery was damaged. Held, she could recover under the fire policy.

8. Nothing can be recovered under a fire policy if the fire is caused by a deliberate act of policy-holder. In such cases the policy-holder is liable to criminal prosecution.

9. Fire policies generally contain a condition that the insurer will not be liable if the fire is caused by riot, civil disturbances, war and explosions. In the absence of any specific expectation the insurer is liable for all losses caused by fire, whatever may be the causes of the fire.

10. Assignment: According to English law a policy of fire insurance can be assigned only with the consent of the insurer. In India such consent is not necessary and the policy can be assigned as a chose-in-action under the Transfer of Property Act. The insurer is bound when notice is given to him. But the assignee cannot be recovering damages unless he has an insurable interest in the property at the time when the loss occurs. A stranger cannot sue on a fire policy.

11. Payment of Claims: Fire policies generally contain a clause providing that upon the occurrence of fire the insurer shall be immediately notified so that the insurer can take steps to salvage the remainder of the property and can also determine the extent of the loss. Insurance companies keep experts on their staff of value the loss. If in a policy there is an international over valuation of the property by the policy-holder, the policy may be avoided on the ground of fraud.

Essentials of fire insurance contract:

1. Disclosure of material facts

The insured must disclose all material facts in respect of the subject matter. The contract shall be voidable in the event of misrepresentation or non disclosing of an necessary facts.

2. Insurable interest

It is the essential for the insured to have insurable interest in the subject matter of both when the policy is affected and when the loss takes place.

3. Contract of indemnity

The principle of the contract of indemnity is applicable to fire insurance. The amount can be claimed only after the loss has taken place during the stated period. If there is no loss no claim will be accepted.

4. Personal contract

Fire insurance is a personal contract between the insured and insurer. The policyholder cannot assign or transfer it without the perior consent of the insurance company.

5. Duration

A fire policy is issued for a period of 10 days to 12 months but it can be renewed after the expiry of their period.

6. General conditions

There must be an agreement in the prescribed form. The concerned parties must be competent to contract. The object must be legal and not against the public interest.

7. Personal Right

The person, whose name has been mentioned in the contract, is entitled to receive the insured sum from the insurer at the event of loss by fire on insured property.

8. Claim Limit

The actual market value of the goods or property destroyed by fire can be claimed only by the insurer. In such type of contract there is no profit motive.

9. The premium and Consideration

The contract is based on the consideration which means the granting of protection by the insurer in exchange for the payment of premium by the insured. The policy must mention the sum of insurance and the rate of premium.

10. Description of the subject matter

It is essential part of the contract that the policy must describe the: location of the property. It helps the insurer to determine the rate of premium.

11. Scope of protection

The insurance company may grant the protection against all direct loss by fire lightning and other perils. The contract must specify the description of loss in order to consider the approximate cause.

12. Termination of the contract

The contract of fire insurance may be terminated due to three events:

(i) Violations of the rules (ii) Cancellation (iii) Expiration of the term without renewal.

13. Subrogation

Under this principle the insurer after paying a loss has ful1 right and privileges against third party in respect of loss so paid for. These rights may be justified, The problem of subrogation arises when a fire is caused by the negligence of the third party, for which negligence the party whose property is destroyed by fire may recover under rules.

14. Suspension of the policy

The insurance company is empowered to suspend the insurance due to some reasons. The insurer shall not be liable for loss happening if the chances of risk increase by any means within the control of the policy holder.

15. Notice of loss

The policy holder must serve immediate notice in writing to the concerned insurance company of any loss. It enables him to take action to reduce the loss, to investigate the reason of fire and to determine his liability.

16. Adjustment of loss

On receiving the notice; the insurer makes arrangement to adjust the loss. The company or its representatives with considerable authority may enter and take possession of the damaged property.

Properties that are covered: All moveable/ immoveable properties of the proposer on land (excluding those in transit) broadly categorised as follows :

Building (including plinth and foundations, if required): Whether completed or in course of construction (excluding the value of land). Interiors, Partitions and Electricals.

Plant & Machinery, Equipments & Accessories (including foundations, if required) Bought Second hand. Bought New Obsolete Machinery

Stocks: Raw Material Finished Goods In process In trade belonging to Wholesaler, Manufacturer and Retailer.

Other Contents such as Furniture, Fixtures and Fittings Cables, Pipings Spares, Tools and Stores Household goods etc.

Specific Items such as bullion, unset precious stones, curios, work of arts, manuscripts, plans, drawings, securities, obligations or documents, stamps, coins or paper money, cheques, books of accounts, computer system records, explosives.

STANDARD FIRE AND SPECIAL PERILS POLICY(MATERIAL DAMAGE)IN CONSIDERATION OF the isured named in the schedule hereto having paid to the The New India Assurance company Limited (hereinafter called the company) the premium mentioned in the said schedule ,The company Agrees,(Subject to the condition and Exclusions contained herein or endorsed or otherwise expressed hereon) that if after payment of the premium the Property insured described in the said Schedule or any part of such Property be destroyed or damaged by any of the perils specified hereunder during the period of insurance named in the said schedule or of any subsequent period in respect of which the insured shall have paid and the Company shall have accepted the premium required for the renewal of the policy, the company shall pay to the Insured the value of the Property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof:

FireExcluding destruction or damage caused to the property bya) i) its own fermentation, natural heating or spontaneous combustion. ii) its undergoing any heating or drying process.b) burning of property insured by order of any public Authority

LightningExplosion/ImplosionExcluding destruction or damage caused to the boilers (other the domestics boilers),economizers or other vessels in which steam is generated,machinery or apparatus subject to centrifugal force by its own explosion/implosion

Aircraft DamageDestruction or damage caused by Aircraft, other aerial or space devices and articles and articles dropped therefrom excluding those caused by pressure waves

Riot, Strike, Malicious Damagea) total or partial cessation of work or the retarding or interruption or cessation, commandeering,requisitng,requisition or destruisition or destruction or omissions of any kind.

b) permanent or temporary dispossession resulting from confiscation, commandeering , requisition or destruction by order of the Government or any lawfully constituted Authority .c) 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 unit or machinery resulting from the unlawful occupation by any person of such building or plant or unit or machinery or prevention of access to the same.

d) burglary , housebreaking, theft ,larceny or any such attempt or any omission of any kind of any person (whether or not act is committed in the course of a disturbance or public peace) in any malicious act. Storm, cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and lnundationLoss, destruction or damage directly caused by storm , cyclone, typhoon, tempest, hurricane, tornado, flood or inuding those resulting from earthquake, volcanic eruption or other convulsions of nature .

Impact damageLoss of or visible physical damage or destruction caused to the property insured due to impact by any rail/road vehicle or animal by direct contact not belonging to or owned bya) The insured or any occupier of the premises b) their employees while acting in the course of their employment

Subsidence and landslide including rock slidea) the normal cracking , settlement or bedding down of new structureB) the settlement or movement of made up groundc) coastal or river erosiond) defective design or workmanship or use of defective materialse) demolition, construction, structural alterations or repair of any property or groundworks or excavations.

Bursting and overflowing of water tanks, apparatus and pipes

Missile testing operation

Leakage from automatic sprinkler installationsa) Repairs or alterations to the building or premisesb) Repairs, removal or extension of the sprinkler installationc) defects in construction know to the insured.

Bush fireProvided that the liability of the company shall in no case exceed in respect of each terms sum expressed in the said schedule to be insured thereon or in the whole the total sum or sums as may be substituted therefor by memorandum hereon or attached hereto signed by or on behalf of the company.

Special types of Policies available for Stocks: Declaration Policy :

To care care of frequent fluctuations in Stocks/ Stock Values Minimum Sum Insured Rs. 1 crore per location.

Monthly declaration on any one of the following basis to be submitted before the last day of the succeeding month1.) average of the highest values at risk on each day (or) 2.) highest value on any day of the month.

Refund of premium, on expiry of policy, based on the average declaration upto 50% of the provisional premium.

Floating policy: This policy is subject to the ‘average clause’. The extent of coverage expands to different properties belonging to the Policy holder under the same contract and one premium. The policy may also provide protection to goods kept at two different stores.

Risks Not Covered:

• First 5% of AOG Perils/Rs.10,000.• Theft during or after the occurrence of any insured risks

• War or nuclear perils

• Electrical breakdowns

• Ordered burning by a public authority

• Subterranean fire.

• Loss or damage to property moved to a different location (except machinery and equipment for cleaning, repairs or renovation for more than 60 days)

• Loss or damage to bullion, precious stones, curios (value more than Rs.10000), plans, drawings, money, securities, cheque books, computer records except if they are categorically included.

•

Add on covers

In addition to the perils/ expenses covered, the proposer can opt to seek cover in respect of the following perils/ expenses at inception or during currency of the policy on payment of additional premium :

Perils:

Loss/ damage/ destruction of the property caused by

Deterioration of Stocks in Cold Storage premises due to power failure following damage due to an insured peril

Forest Fire Impact Damage due to Insured's own Vehicles, Fork lifts and the like and articles

dropped therefrom Spontaneous Combustion Omission to insure additions, alterations or extensions Earthquake (Fire and Shock). Spoilage material damage cover. Leakage and contamination cover. Temporary removal of stocks.

Expenses : Architects , Surveyors and Consulting Engineer's Fees (in excess of 3% claim

amount) Debris Removal (in excess of 1% of claim amount) Loss of rent. Insurance of additional expenses of rent for alternative accommodation.

Start up Expenses.

Documents required by insurer for processing the claim :

I. Common Documents for all claims under a Standard Fire and Special Perils Policy:

1. Certified True copy of the policy along with schedule and Endorsements/clauses.

2. Claim Form. 3. Newspaper reports on the incident, if any. 4. Photographs. 5. 5.Past claims experience

II. Fire Claims (additional documents)

1. Report of the Internal Committee constituted for the purpose of investigating the cause of fire.

2. Fire Brigade Report. 3. First Information Report / Letter of intimation to the Police Station duly

endorsed / Police Panchnama. 4. Forensic Laboratory Report on samples collected at affected site.

5. Drug Inspector's Report on destruction of Drugs/ Pharmaceutical items (for claim on pharma products only).

6. Final Investigation Report. 7. Action taken on the suggestion of TAC/ LPA on loss minimisation of

prevention.

III. Flood Claims (additional documents):

Meteorological Report

IV. Explosion Claims (additional documents):

Factory Inspector's Report or Report of Director of Industrial Safety and Welfare.

COMPANIES VISITED

THE NEW INDIA ASSURANCE CO.LTD.

HistoryIncorporated on July 23rd, 1919 Founded by the House of Tata Founder member - Sir Dorab Tata. Nationalised in 1973.

Present PositionGross Premium (in India) of Rs. 5017.20 crores in the year 2006-2007, as against Rs. 4791.49crores in the year2005-2006. Assets Rs. 27444.57crores as on 31st March 2007. Network of Offices-26 Regional Offices, 393 Divisional Offices, 614 Branches and 34 Direct Agent Branches. Rank No. 1 in the Indian market. Largest Non-Life insurer in Afro-Asia excluding Japan. First Indian non-life company to cross Rs. 5000 crores Gross Premium. Global Re-insurance facilities. Over-seas presence in countries like Japan, U.K, Middle East, Fiji and Australia.

International PresenceOverseas operations commenced in 1920. Operations in 24 countries in the year 2004-05. Network of 19 Branches, 12 Agencies, 2 Associate companies and 2 Subsidiary companies in the year 2004-05. Overseas Premium of Rs. 892.35 crores in the year 2004-05, which accounts for more than 80% of total overseas premium in India.

PerformanceNew India Assurance Company is the largest non-life insurer in India. The financial strength of the Company is reflected from the following figures:-

YearGross

Premium(in India)

Gross Premium(Outside

India)

Net Premium (Global)

Net Profit (Global)

Total Assets (Global)

Net Worth (Global)

 

2007-2008 5276.91 874.55 4914.28 1401.13 31944.14 6972.80  2006-2007 5017.20 919.58 4751.76 1459.95 27444.57 5972.55  2005-2006 4791.49 884.05 4342.66 716.38 27025.58 4706.87  2004-2005 4210.81 892.35 3895.11 402.23 19827.19 4161.69  2003-2004 4045.68 875.79 3634.94 590.21 17510.44 3735.22  2002-2003 3921.24 891.55 3516.43 255.81 12984.75 3404.00  2001-2002 3512.33 685.73 3068.23 142.00 12273.02 3189.39  2000-2001 3041.17 451.88 2671.48 173.54 8292.00 3067.39  1999-2000 2979.53 327.00 2477.45 287.29 7664.71 2859.86  1998-1999 2729.48 288.16 2186.92 375.00 6727.72 2524.23  1997-1998 2433.73 254.04 1945.00 470.94 6071.67 1462.52

PERSON CONTACTED: Mr. Bhagwan Patil, Asst Manager ( Marketing) and Mrs. Anjali P. Karve Admn. Officer Of The New India Assurance Co. Ltd.

SALES PROCESS: Sales Process includes Contacting the client and doing analysis of the Risks client is exposed to. After analysing a detailed presentation is prepared to show it to the client and convey the client risks and policies which covers the risks the client is exposed to.

Who takes Fire insurance?

Generally Fire insurance is taken by companies which uses raw material which easily catches fire. Companies which uses hard metals as raw materials do not wish to take fire insurance.

How to sell Fire insurance? Fire insurance Products are to cover the various risks to which a manufacturing firm is exposed to. Selling procedure includes the survey of these risks and provide awareness to the client about the risks.

Views on fire insurance: Fire insurance an effective tool for any firm or Property owner to minimize the financial loss in event of loss on his/her property. Insufficient Awareness of the policy among people is the main constraint in making positive perception about the policy.

ANANDJI HARIDAS & CO. PVT. LTD.

COMPANY:

Anandji Haridas & Co. Pvt. Ltd. (AHCPL) started in the year 1951, in Mumbai, India to manufacture sheet metal pressed & fabricated components. AHCPL got its OEM supplier status in the year 1957. Today, AHCPL has grown as a leading manufacturer of critical sheet metal pressed, formed and fabricated components and spun sheet metal pulleys for passenger cars, trucks, agricultural tractors, construction equipment and gensets in India.

AHCPL designs and manufactures components for the specific requirements of the customers. AHCPL currently has manufacturing facilities at Mumbai & Pune. The Company has a team of qualified personnel capable of in house DEVELOPMENT OF PRODUCT DESIGNS AND TOOLING.

The Company is TIER I SUPPLIER to major Auto manufacturers in India which includes world leading MNCs. 80% of the products are as SINGLE SOURCE SUPPLIES to our esteemed customers.

The company has successfully participated in the localization and value engineering programs of its customers and has also proposed and successfully implemented indigenous product designs for them.  This gives tremendous dexterity in development of any challenging component in quick time.

Total turnover of the co. is Rs. 25cr. Per annum.

The employee strength is 150 – 200.

Products:

Sheet Metal Spun Pulleys Deep Draws

Tools and Diesfor sheet metal working

Closed Tolerancecomponents

Sheet Metal Stampings

Stretch Draw Panels

Person contacted:

Mr. Venkata N. Malladi, Head Account & Finance, M/S Anandji Haridas & Co. Pvt. Ltd

Insurance Policies Taken:1. Marine Cargo Policy (Bajaj Allianz General Insurance Co. Ltd.)

Total Sum Insured is Rs. 5,65,6392. Standard Fire & Special Peril Policy (United India Insurance Co. Ltd.)

Total Sum Insured is 3 crore.

Claim Record:There were no such claims by the Company.

Views & Experiences about Fire Insurance Policy: Policy is taken as it is compulsory. They renew the policy every year under the guidance of an Insurance Consultant.