FIRE INS

April 11, 2023

FIRE/FIRE LOP/IAR FIRE/FIRE LOP/IAR INSURANCEINSURANCE

BY

R.R.JOSHI

April 11, 2023

AGENDA

• PURPOSE OF FIRE INSURANCE

• PROPERTY COVERED

• PERILS COVERED

• EXCLUSIONS/ CONDITIONS

• TARIFF RATING SYSTEM

• SPECIAL POLICIES /CLAUSES

• FIRE LOP/IAR POLICIES

April 11, 2023

FIRE INSURANCE

PURPOSE

TO PROVIDE FINANCIAL PROTECTION AGAINST LOSS(OR) DAMAGE TO PROPERTY BY FIRE & OTHER SPECIFIED PERILS

PRICE

GOVERNED BY TARIFF TILL 31/12/2006, PRESENTLY DE-TARIFFED ONLY AS FAR AS RATING

April 11, 2023

PROPERTY COVERED

a) BUILDING –INCLUDINGELECTRICAL INSTALLATION, PIPELINES ETC. b) CONTENTSi) PLANT & MACHINERY,

EQUIPMENTS, ACCESSORIESii) FURNITURE ,FIXTURES AND

FITTINGS iii)STOCK

•RAW MATERIAL•STOCK IN PROCESS•SEMI FINISHED GOODS•FINISHED GOODS

April 11, 2023

VALUATION ASPECTS IN VALUATION ASPECTS IN FIREFIRE

CURRENT NEW REINSTATEMENT/ REPLACEMENT VALUE—CNRV

MARKET VALUE=CNRV--DEPRECIATION

PURCHASE VALUEWRITTEN DOWN VALUE=PURCHASE

VALUE-DEPRECIATION

April 11, 2023

STANDARD FIRE AND SPECIAL PERILS POLICY-COVERAGE

1. FIRE-EXCLUDING SPONTANEOUS COMBUSITON

/BURNING BY PUBLIC AUTHORITY…(S/COMBUSTION CAN BE COVERED AT EXTRA PREMIUM)

2. LIGHTNING3. EXPLOSION/IMPLOSION- EXCLUDING DAMAGE TO BOILERS etc. OR

THEIR CONTENTS DUE TO CENTRIFUGAL FORCES

4. AIRCRAFT DAMAGE

April 11, 2023

PERILS COVERED contd...

5 . RIOT , STRIKE AND MALICIOUS DAMAGE EXCLUSION- BURGLARY, HOUSEBREAKING & THEFT ETC. TERRORISM 6.STORM,CYCLONE,TYPHOON, TEMPEST, HURRICANE,TORNADO,FLOOD & INUNDATION--EXCLUDING E/Q,VOLCANIC ERUPTION AND OTHER CONVULSIONS OF NATURE

April 11, 2023

PERILS COVERED…contd

7. IMPACT DAMAGE BY RAIL/ROAD VEHICLES,ANIMALS(NOT BELONGING TO OR /OWNED BY INSURED/OCCUPIER OF PREMISES)8. SUBSIDENCE AND LANDSLIDE INCLUDING ROCK SLIDE9. BURSTING AND/OR OVERFLOWING OF WATER TANKS, APPARATUS,PIPES

April 11, 2023

PERILS COVERED…. contd.PERILS COVERED…. contd.

10.MISSILE TESTING OPERATIONS11. LEAKAGE FROM AUTOMATIC

SPRINKLER INSTALLATION 12. BUSH FIRE---EXCLUDING FOREST FIRE

April 11, 2023

GENERAL EXCLUSIONS

1. EXCESS -5% OF CLAIM(MIN Rs.10000/-)FOR AOG CLAIMS AND Rs.10000/- FOR OTHER PERILS

LOSS OR DAMAGE DUE TO-

2. WAR AND ALLIED PERILS

3. NUCLEAR PERILS

April 11, 2023

4. POLLUTION OR CONTAMINATION UNLESS RESULTING FROM OR RESULTING IN INSURED PERIL

5.LOSS TO BULLION,UNSET PRECIOUS STONES,CURIOS, WORKS OF ART (exceedingRs10000value),SECURITIES,STAMPS, CURRENCY,BOOKS, COMPUTER RECORDS, EXPLOSIVES unless specifically insured

GENERAL EXCLUSIONS contd..

April 11, 2023

6. STOCKS IN COLD STORAGE DUE TO CHANGE IN TEMPERATURE7. ARCHITECTS, SURVEYORS AND CONSULTING ENGINEER’S FEES IN EXCESS OF 3% OF CLAIM AMOUNT8. DEBRIS REMOVAL EXPENSES IN EXCESS OF 1% OF CLAIM AMOUNT9.LOSS OF EARNINGS,DELAY AND CONSEQUENTIAL LOSSES10.SPOILAGE OF MATERIAL DUE TO INTERRUPTION/CESSATION OF PROCESS


April 11, 2023

11.ELECTRICAL FITTINGS, ELECTRONIC MACHINES DUE TO OVER RUNNING, EXCESSIVE PRESSURE, SHORT CIRCUITING , LEAKAGE OF ELECTRICITY AND ARCING

12.THEFT DURING OR AFTER THE OCCURANCE OF FIRE

13.PROPERTY REMOVED FROM THE INSURED PREMISES(EXCEPT MACHINERY FOR REPAIRS etc. UPTO 60 DAYS)


April 11, 2023

GENERAL CONDITIONS

- 1. NON-DISCLOSURE OR MISREPRESENTATION OF MATERIAL FACT WILL RENDER THE CONTRACT NULL AND VOID- BREACH OF UTMOST GOOD FAITH

2. INSURANCE CEASES AFTER 7 DAYS FROM THE DATE OF FALL (OR) DISPLACEMENT OF BUILDING (OR) PART OF BUILDING,IF SUCH FALL IS NOT DUE TO AN INSURED PERIL. INSURED MUST INFORM INSURERS WITHIN 7 DAYS OF SUCH FALL OR DISPLACEMENT IN WHICH CASE INSURANCE MAY BE CONTINUED SUBJECT TO REVISED RATES,TERMS AND CONDITIONS IF REQUIRED BY THE INSURER.

April 11, 2023

3.INSURANCE WILL CEASE TO ATTACH IF - a) THERE IS ALTERATION IN

TRADE/MANUFACTURE/OCCUPATION IN SUCH A WAY THAT THE RISK INCREASES

b) THE BUILDING (OR) THE PREMISES REMAIN UNOCCUPIED FOR MORE THAN 30 DAYS

c) CHANGE OF INTEREST IN THE PROPERTY , OTHERWISE THAN BY WILL OR OPERATION OF LAW

GENERAL CONDITIONS contd..

April 11, 2023


4.IF THERE IS A MARINE POLICY COVERING THE SAME RISK , FIRE POLICY WILL PAY

ONLY OVER AND ABOVE THE CLAIM UNDER MARINE POLICY.

5. CANCELLATION - POLICY MAY BE CANCELLED BY EITHER OF THE PARTIES --

i) IF INSURED CANCELS---REFUND ON SHORT PERIOD BASIS

ii)IF INSURER CANCELS---REFUND ON PRORATA BASIS

April 11, 2023


6.CLAIMS PROCEDURE-

PART I -DEALS WITH THE DUTIES OF THE INSURED ON THE HAPPENING OF THE LOSS

i. INSURED TO GIVE NOTICE OF LOSS

ii) CLAIM FORM TO BE SUBMITTED WITH IN 15 DAYS OF DATE OF LOSS

PART II-DEALS WITH TIME BAR AND SUIT BAR OF CLAIMS

April 11, 2023

7. RIGHTS OF THE INSURER- WHEN THERE IS A CLAIM,THE INSURER

HAS THE RIGHT- • TO TAKE POSSESSION OF PREMISES (OR) BUILDING(OR) PROPERTY•TO REMOVE, SORT AND SALVAGE THE PROPERTY•TO SELL (OR) DISPOSE OFF THE PROPERTY IN THE INTEREST OF ALL CONCERNED.


April 11, 2023

8.FRAUD- THE INSURED IS NOT ENTITLED TO ANY BENEFITS UNDER THE POLICY IF-I) THE INSURED CAUSES LOSS TO THE PROPERTY WILLFULLY (or)ii) PRODUCES FALSE EVIDENCE FOR THE SETTLEMENT OF THE CLAIM (or)iii) THE CLAIM IS FRAUDULENT


April 11, 2023

9. INSURER’S OPTION TO REINSTATE OR REPLACE THE DAMAGED PROPERTY OR REPAIR OR PAY BY CASH 10. CONDITION OF AVERAGE:-IF THE SUM INSURED IS LESS THAN THE VALUE OF PROPERTY ON THE DATE OF LOSS,THE INSURED HAS TO BEAR A PROPORTION OF THE LOSS.AMOUNT PAYABLE WILL BE = S/I X LOSS M/V

GENERAL CONDITIONS contd...

April 11, 2023

11. CONTRIBUTION:- ALL CONCERNED INSURERS FOR THE SAME PERIL/PROPERTY

WILL SHARE THE LOSS PROPORTIONATELY

12.SUBROGATION:- THE INSURED IS TO GIVE ALL ASSISTANCE TO THE INSURER TO RECOVER LOSS FROM THIRD PARTY

13. ARBITRATION :- DISPUTE IN AMOUNT OF CLAIM PAYABLE MAY BE REFERRED TO

ARBITRATION


April 11, 2023

14. NOTICE (or) OTHER COMMUNICATION TO THE INSURER MUST BE IN WRITING

15.AUTOMATIC REINSTATEMENT OF SUM INSURED-THE S/I MUST BE MAINTAINED AT THE SAME LEVEL THROUGHOUT THE POLICY PERIOD. PRO-RATA PREMIUM ON THE AMOUNT OF LOSS RELATING TO THE UNEXPIRED PERIOD OF THE POLICY WILL BE DEDUCTED FROM THE CLAIM PAYABLE, UNLESS INSURED DESIRES OTHERWISE .


April 11, 2023

SECTIONS OF THE FIRE TARIFF

TOTAL NO.OF SECTIONS ARE EIGHT

SECTION I - GENERAL RULES & REGULATION

SECTION II- STANDARD FIRE & SPECIAL PERILS POLICY (SF &SP)

SECTION III – RATING OF DWELLINGS/SHOPS etc-SIMPLE RISKS

-

April 11, 2023

SECTIONS OF THE FIRE TARIFF…contd

SECTION IV- RATING OF INDUSTRIAL AND MANUFACTURING RISKS

SECTION V - RATING OF UTILITES LOCATED OUTSIDE INDUSTRIAL AND MANUFACTURING RISKS

EXAMPLE : BOILER HOUSE , PUMP HOUSE

LABORATARY , PIPE LINES

April 11, 2023


SECTION VI - STORAGE RISKS OUTSIDE THE COMPOUND OF INDUSTRIAL /MANUFACTURING RISKS

- RATES PROVIDED ACCORDING TO THE TYPES OF GOODS--HAZARDOUS , NON-HAZARDOUS, ETC.

April 11, 2023


SECTION VII –RATING OF TANK FARMS/GAS HOLDERS OUTSIDE THE COMPOUND OF INDUSTRIAL/ MANUFACTURING RISK

- STORAGE OF LIQUAFIED GAS

- LIQUIDS/CHEMICALS /OIL

- INFLAMMABLE LIQUID/ GAS

April 11, 2023


SECTION VIII - - ADD-ON COVERS AND RATING FOR EARTHQUAKE PERIL RATES DEPEND ON EARTHQUAKE ZONEZONE I - 1.00ZONE II- 0.50ZONE III-0.20ZONE IV 0.10

April 11, 2023


ADD-ON COVERS: ARCHITECTS/SURVEYERS FEES IN EXCESS OF

3% OF CLAIM UPTO MAX. 7.5% OF ADJUSTED LOSS

REMOVAL OF DEBRIS IN EXCESS OF 1% OF CLAIM UPTO MAX.10%OF TOTAL S/I

DOS IN COLD STORAGE PREMISES DUE TO: 1)FAILURE OF ELECTRIC SUPPLY ARISING FROM DAMAGE

CAUSED BY ID./ PERILTO PROPERTY ON ID. PREMISES/ELECTRIC SUBSTATION

2)DAMAGE TO REFRIGERATION MACHINERY DUE TO ID./PERIL

April 11, 2023


FOREST FIRE IMPACT DAMAGE DUE TO INSURED’S OWN

VEHICLES/FORKLIFTS/CRANES/STACKERS etc. AND ARTICLES DROPPED THEREFROM

SPONTANEOUS COMBUSTION/NATURAL HEATING/OWN FERMENTATION

OMISSION TO INSURE ADDITIONS/ALTERATIONS/EXTENSIONS UPTO MAX.5%OF S/I BY EACH ITEM

SPOILAGE MATERIAL DAMAGE COVER DUE TO PERILS OF THE STANDARD FIRE AND SPECIAL PERILS POLICY

April 11, 2023


EARTHQUAKE(FIRE AND SHOCK)- A)IF OPTION TO DELETE STFI IS EXERCISED---DAMAGE

DUE TO FLOOD/OVERFLOW OF SEA/LAKES/RIVERS DUE TO E/Q WILL NOT BE COVERED

B)IF OPTION TO DELETE STFI IS NOT EXERCISED---DAMAGE DUE TO FLOOD etc. WILL BE COVERED

LEAKAGE AND CONTAMINATION COVER—FOR OILS AND CHEMICALS ONLY

TEMPORARY REMOVAL OF STOCKS (not exceeding 10% of the sum insured on stock) TO OTHER PREMISES FOR FABRICATION,PROCESSING,FINISHING

LOSS OF RENT (LIMIT=RP/RENT INSURED TERM XS/I

April 11, 2023


ADDITIONAL EXPENSES OF RENT FOR ALTERNATIVE ACCOMODATION (NON-MANUFACTURING RISKS ONLY)—MAX. INDEMNITY PERIOD WILL BE THREE YEARS:

For Tenant:-A/E=NEW RENT- ORIGINAL RENT(if he is not obliged to pay rent for protecting tenancy rights)

A/E=NEW RENT(if he is obliged to pay rent for protecting tenancy rights)

For Owner-Occupant :- A/E=NEW RENT –STANDARD RENT MOLTEN MATERIAL DAMAGE START-UP EXPENSES

April 11, 2023

Floater PolicyFloater Policy Some times, an Insured is not able to keep day to

day account of his stocks in various godowns. He can give only the total value of all his stocks lying in various locations / godowns. To cater to such clients a floater policy is issued.

The floater policy covers in one sum insured , stocks stored in different godowns/locations

The policy can be granted only on stocks. The address of each location/godown must be declared by the insured.

The highest rate applicable is charged with a loading of 10%

April 11, 2023

Declaration PolicyDeclaration Policy Many insured may have stocks which frequently fluctuate in value.

To take care of such fluctuation in quantity/ value , a declaration policy is issued.

The sum insured will be the maximum possible value at any point of time during the policy period. The minimum sum insured will be Rs. 1 cr. in one or more locations and shall not be less than Rs.25 lacs in atleast one of these locations.

Monthly declarations based on

a) The average of the values at risk on each day of the month or

b) The highest value at risk during the month.

must be submitted by the insured before the end of the succeeding month.

April 11, 2023

Declaration Policy …contdDeclaration Policy …contd If declaration is not received for a particular

month, the sum insured will be treated as the declaration for the month.

Reduction in sum insured is not allowed. Increase in sum insured can be done with prior agreement.

Refund of premium on adjustment basis on the declarations / cancellations shall not exceed 50% of the total premium.

Basis of value for declaration will be the market value.

Declaration policy cannot be issued for stock in process/ retail stores /short period insurance.

April 11, 2023

Floater Declaration PolicyFloater Declaration Policy

Floater Declaration policy can be issued subject to a minimum sum insured of Rs. 2 crs. and compliance with rules for floater and declaration policy.

Minimum retention of premium on the expiry of the policy will be 80% of the annual premium.

April 11, 2023

Reinstatement Value PolicyReinstatement Value Policy This policy can be issued for Building, Plant and

Machinery, Furniture Fixture & Fittings only.After the World Wars, when inflation was high, the indemnity on market value basis was grossly inadequate to rebuild the factories/ plants.Hence this policy was launched on public demand

The Standard Fire & Special Perils policy is issued with the reinstatement value clause attached thereon.

The policy indemnifies the cost of reinstatement of building/ replacement of machinery to a condition equal to but not better or more extensive than its condition when new. Hence this policy is new for old

April 11, 2023

Reinstatement Value Policy ..contd.Reinstatement Value Policy ..contd. Any technical improvements will go to the account of the

insured. Reinstatement must be carried out by the insured in order to

obtain the benefits of the special basis of settlement. The work of reinstatement must be completed within 12

months from the date of loss, failing which the claim will be settled on market value basis.

The sum insured must be equal to the cost of reinstatement of the entire property on the date of reinstatement, otherwise underinsurance will apply.

The RIV basis of settlement will not apply if the insured fails to intimates within 6 months from the date of loss, his intention to replace / reinstate the damaged property.

April 11, 2023

LOCAL AUTHORITIES CLAUSELOCAL AUTHORITIES CLAUSE

RIV policy may be extended to cover additional cost of reinstatement incurred solely by reason of the necessity to comply with the regulations of the local authority.

No additional premium is charged for inclusion of this clause in the policy. However sum insured must include such additional cost.

The clause excludes any tax, duty, development or other charges arising out of capital appreciation of the property.

April 11, 2023

REMOVAL OF DEBRIS CLAUSEREMOVAL OF DEBRIS CLAUSE Removal of debris is covered upto 1% of the

admissible claim amount under the Standard Fire & Special Perils policy.

The indemnity applies to removal of debris from the premises and dismantling / demolishing / shoring or propping up in case of loss damage to Building/ Plant & Machinery.

This tantamounts to a supplementary contract between the insured and insurer and no additional premium is charged for the same.

By charging additional premium, removal of debris may be covered in excess of 1% of claim amount

April 11, 2023

ESCALATION CLAUSEESCALATION CLAUSE Escalation clause is attached to the Standard Fire and

Special Perils policy to take care of the escalation of the value of building / plant and machinery during the policy period.

An additional premium @ 50% of the applicable premium rate is charged on the escalation sum insured.

The selected percentage increase shall not exceed 25% of the sum insured.

The indemnity is provided by increasing the sum insured by 1 / 365th ( for each day ) of the specified percentage increase per annum.

April 11, 2023

Architects, Surveyor’s And Architects, Surveyor’s And Engineers’ Fees ClauseEngineers’ Fees Clause

The Standard Fire & Special Perils policy covers the above fees upto 3% of the adjusted loss amount.

The indemnity will not include the cost in connection with the preparation of the insured’s claim / estimate of loss due to the operation of the insured’s perils.

By payment of additional premium, the Architects etc. fees may be paid upto 7.5% of the adjusted loss.

April 11, 2023

CONTRACT PRICE CLAUSECONTRACT PRICE CLAUSE This clause is applicable in case of insurance of

imported goods only which are sold under a contract which may be cancelled either wholly or to the extent of loss or damage due to the operation of insured perils

The indemnity will apply to goods sold but not delivered and for which the insured is responsible

The company’s liability will be on the basis of the contract price i.e. this is an agreed value policy and not a pure indemnity policy.

April 11, 2023

DESIGNATION OF PROPERTY DESIGNATION OF PROPERTY CLAUSECLAUSE

Sometimes, following a loss it is found that a particular item is capitalized by the insured under a heading which may or may not be acceptable to the insurer. e.g. Compound wall may be capitalized as plant or air conditioner may be classified as machinery and not electrical installation.

To avoid disputes, the insurers agree to accept the designation under which the property has been entered in the insured’s books of accounts.

April 11, 2023

AGREEDAGREED BANK CLAUSEBANK CLAUSE All policies in which a bank/ financial institutions

has insurable interest will be issued in the name of Bank/ Financial Institutions and owner / mortgagor.

The insurer will pay the claim amount to the Bank whose receipt shall be complete discharge and shall be binding on all the parties to the insurers contract.

The interest of the Bank will not be prejudiced in case the insured commits a breach of Condition 3 (Alteration Condition) of the Standard Fire & Special Perils Policy.

Any notice under the policy is sufficient if given by or to the Bank.

April 11, 2023

OMISSION TO INSURE ADDITIONS, ALTERATIONS OMISSION TO INSURE ADDITIONS, ALTERATIONS & EXTENSIONS CLAUSE& EXTENSIONS CLAUSE

This clause must be incorporated at the time of issuing policy. Indemnity is provided against building / plant and

machinery which the insured may erect or acquire or for which they may become responsible during the course of the policy.

The liability will not exceed 5% of the sum insured by each item under the policy.

All additions/alterations/ extensions during the currency of the policy must be declared at the end of the year and additional premium paid on pro-rata basis from the date of completion till the policy expiry.

April 11, 2023

INDUSTRIAL ALL RISK POLICY

April 11, 2023

IAR - Industrial All Risk Policy

Fire Insurance

BI (Fire)

Machinery Insurance

BI (MB)

Boilerinsurance

Burglaryinsurance

Electronicequipmentinsurance

April 11, 2023

Scope & Structure of IAR Policy

Section I – Material Damage including

(a) Fire & All special perils

(b) Burglary

(C) Machinery Breakdown

(d) Boiler Explosion

(e) Electronic Equipment Insurance

Section II - Business Interruption

Following Fire & All Special Perils – Compulsory

Following Machinery Breakdown / Boiler Explosion / Electronic Equipment - Optional

April 11, 2023

INDUSTRIAL ALL RISK POLICY

Salient Features –

Comprehensive, convenient and cost effective policy

Package policy of All Risk Nature.

Not a named peril policy

All perils covered except certain specific exclusions.

Presently wording is governed by Tariff

Eligibility – Industrial Risks having overall Sum Insured in excess of of Rs. 100 Cr. at one or more locations.

April 11, 2023

Salient Features of IAR Cont….

Single Document Policy

Losses (MD as well as BI) due to Burglary covered.

Transit Risk inside industrial compound covered

Considerable premium saving possible due to lower rates (especially for MB cover) .

Underinsurance up to 15 % is ignored

No depreciation deducted from MB loss (Total or Partial) for Limited Life Equipments.

Handsome discount available for opting higher deductibles as well as good claims experience

April 11, 2023

Salient Features of IAR Cont….

BI due to Fire & Allied perils - Compulsory.

BI due to Machinery Breakdown / Boiler Explosion / Electronic Equipment - Optional.

Compared to traditional policies, higher excess is applicable

No declaration facility available

Insurance under IAR on Reinstatement value basis only except Stocks. Stocks on Market Value basis.

April 11, 2023

Salient Features of IAR Cont….Excluded Causes in Section I (MD Section)

Faulty or defective design

Defective Material or Workmanship

Inherent vice / Latent defect

Gradual deterioration / deformation / distortion

Wear and tear

Interruption of water supply, gas, electricity, fuel

systems( Unless resulted directly by a cause not excluded in the policy)

Collapse or cracking of buildings

April 11, 2023

Excluded Causes in Section I (MD) Cont..

Corrosion, rust, shrinkage, pollution etc.

( Unless resulted directly by a cause not excluded in the policy)

Larceny

Acts of fraud or dishonesty

Inventory shortage, misplacement, unexplained disappearance. Coastal or River erosion Normal Settlement of new structures Willful act or negligence on part of insured Cessation of work

April 11, 2023

Excluded Causes in Section I (MD) Cont.. Delay or loss of market and other indirect losses War, Invasion act of foreign enemy, Civil war. Permanent or temporary dispossession resulting from nationalization commandeering or unlawful occupation Destruction of property by order of public authority Nuclear weapons Ionizing radiations, contamination by radioactivity from nuclear fuel. Impact due to floating / waterborne objects Act of Terrorism

April 11, 2023

Excluded Property under IAR

Unless specifically mentioned as insured -

Money, Cheques, Stamps, Bonds, Credit Cards,

Jewellery, Precious Stones, Precious Metals,

Curios, Works of Art

Goods held in trust, Documents/Manuscripts/Business Books

Computer Systems Records

Patterns / Models / Moulds

Plans, designs, explosives

Land, Road, Rail Lines

Dams, Reservoir, Canals, rigs, wells, tunnels, pipelines

Bridges, Docks, Jetties, Offshore Property etc.

April 11, 2023

Special Exclusions of Section II (BI)

Similar to normal BI (Fire) policy . In brief …..

IAR policy does not cover loss resulting from interruption due to

1. Any restriction on reconstruction or operation imposed by the public authority

2. Insured’s lack of sufficient capital for reinstatement

3. Damage due to Mechanical / Electrical Breakdown

4. Damage to boilers, Turbines or any other pressure vessels

5. Damage to Electronic installation, computers etc.

6. Damage resulting from distortion or corruption of information on computer system (Unless resulting from Fire & allied perils)

Note – If BI due to MB/Boiler Explosion/ Electronic Equipment is opted, exclusions 3, 4, 5 and 6 are deleted.

April 11, 2023

Portfolio Discount for Good Claims Ratio(Applicable after 2 years) Claims ratio below 30 % Discount

2 years 5%3 years 10%4 years 15%5 years 20%6 years & above

25%

April 11, 2023

FIRE INSURANCE COVERS MATERIAL DAMAGE TO

PROPERTY DUE TO THE PERILS INSURED i .e. IT DEALS WITH CAPITAL LOSS L.O.P.INSURANCE DEALS WITH LOSS OF EARNING

POWER COSEQUENT UPON DAMAGE/DESTRUCTION TO THE CAPITAL ASSETS/STOCKS.THUS,SUBJECT MATTER OF LOP INSURANCE IS THE BUSINESS OF THE INSURED

ITEMS OF EXPENSES CAN BROADLY BE DIVIDED INTO-1. 1)VARIABLE CHARGES- WHICH VARY IN PROPORTION TO

THE VOLUME OF BUSINESS

2. 2)STANDING CHARGES-WHICH ARE FIXED IN NATURE,IRRESPECTIVE OF THE VOLUME OF BUSINESS TRANSACTED

CONSEQUENTIAL LOSS (FIRE)INSURANCE POLICY

April 11, 2023

CCONSEQUENTIAL LOSS (FIRE)INSURANCE POLICY….contd.

DURING THE INTERRUPTION OF BUSINESS AS A CONSEQUENCE OF THE OPERATION OF THE PERIL-

1. 1)VARIABLE CHARGES ARE EITHER NOT INCURRED OR GET REDUCED IN PROPORTION TO THE TURNOVER MAINTAINED

2. 2)RAW MATERIALS ARE NOT CONSUMED OR CONSUMED IN PROPOTRTION TO THE TURNOVER MAINTAINED

3. 3)LIABILITY TO PAY STANDING CHARGES CONTINUES,RESULTING IN REDUCED PROFITS OR A LOSS

4. 4)NET PROFIT WILL REDUCE IN PROPORTION TO THE REDUCTION IN TURNOVER

5. 5)ADDITIONAL EXPENDITURE MAY HAVE TO BE INCURRED

TO AVOID STOPPAGE OF BUSINESS.THIS IS CALLED INCREASED COST OF WORKING

April 11, 2023

L.O.P.JARGONL.O.P.JARGON

Gross Profit Turn Over Rate of G.P. Working Expenses Time Exclusion Indemnity Period Standing Charges Standard Turnover Annual Turnover

April 11, 2023

INTEREST COVERED - LOPINTEREST COVERED - LOP

Loss of Gross Profit(covers also any loss minimising cost uptothe cost thereby avoided)due to Reduction in Turnover

Increase in Cost of Working (ICOW)(without cover of loss of G.P.)

Provided interruption caused byan indemnifiable MATERIAL DAMAGE LOSS

or

April 11, 2023

TurnoverTurnover

Working Working ExpensesExpenses

Gross Gross ProfitProfit

StandingStandingChargesCharges

Net Net ProfitProfit

COMPONENTS OF LOP COVER

April 11, 2023

AA BB CC DD TIMETIME

HHHH

GG

FF

0,00,0

A - B TIME EXCLUSIONA - D INDEMNITY PERIOD (I.P)A - C ACTUAL I.P.F - G L.O.P (ACTUAL)A OCCURANCE OF ACCIDENT

COMPONENTS OF COVER

April 11, 2023

JANJAN

APRAPR

JULYJULY

OCTOCT

JANJAN

APRAPRJULYJULY

OCTOCT

JANJAN

APRAPR

JULYJULYOCTOCTJANJAN

19901990

19911991

19921992

19931993

FINANCIAL YEARFINANCIAL YEAR

STANDARD TURNOVERSTANDARD TURNOVER

ANNUAL TURNOVERANNUAL TURNOVER

INTERUPTION PERIODINTERUPTION PERIOD

April 11, 2023

TYPICAL LIST OF STANDING CHARGESTYPICAL LIST OF STANDING CHARGES

1. Employee Cost

2. Interest & Finance Charges

3. Depreciation

4. Repairs & Maintenance including Stores & Spare parts utilised.

5. Minimum demand charges for utilities

6. Rent, Rates & Taxes

7. Insurance

8. Travelling & Conveyance

9. Communication expenses

10.Printing & Stationery

11. Advertisement & Publicity

12.Legal & Professional Charges

13.Auditors Remuneration & Expenses

14.Director`s Fees, Remuneration & Profit Commission

15.Sundry & Miscellaneous Expenses

April 11, 2023

SPECIFIED WORKING EXPENSESSPECIFIED WORKING EXPENSES

Consumption of raw materials Consumption of utilities (net of minimum demand) Consumption of stores/spares (variable linked to production) Packing materials Excise Duty Sales/Turnover tax Discounts/brokerage/commission Inward/outward freight

April 11, 2023

Interruption Period - Indemnity PeriodInterruption Period - Indemnity Period

LOSS

accidentInt. P.

I. P.

I.P.L.INDEMNITY PERIOD ends, when actual T.O. reaches the same amount, as if no damage would d have occurred.

e.g. - restarting requires several days - loss of market

time

April 11, 2023

Annual Turnover

Time

ReductionReduction in in

TurnoverTurnover

ActualActualTurnoverTurnover

T.O.T.O.ReferenceReference

PeriodPeriod

Reference Reference PeriodPeriod

1210 11987654321 765121110987654321 4321

Monthly Turnover

InterruptionPeriod

Indemnity Period

12 months beforethe accident

Indemnity Period Limited

19911991 1991 19921991 1992 1992 1993 1992 1993

Tre

ndDate of accident

April 11, 2023 10

100

90

80

70

60

50

40

30

20

10

987654321

}Net Profit

Gross Profit^

Sum Insured=

units p.a.

$ p.a.Costs

TurnoverGross Profit

Break-Even Point

{specified working

expenses(variable costs )

standing charges (fixed costs)

Net Loss

April 11, 2023

DiscountsDiscounts Fire & Allied Perils F.E.A discount for approved installation Claims experience discount Discount for higher excess

Breakdown risks Discounted flat rate Discount for higher excess

April 11, 2023

DeductiblesDeductibles

For material damage claims :5 % of the claim amount subject to a minimum

of Rs. 5 lakhs and the maximum is Rs. 50 lakhs

For business interruption claims: FLOP--three days gross profit subject to a minimum of Rs.

5 lakhs and the maximum is Rs. 50 lakhs for Fire LOP claims.

MLOP--Shall be as decided by TAC in case of MLOP claims

April 11, 2023

Voluntary DeductiblesVoluntary Deductibles

Material Damage Claims 5 % of claim amount with a minimum of

Deductible Discount

Rs. 10 Lakhs 10 % Rs. 15 Lakhs 15 % Rs. 20 Lakhs 20 % Rs. 25 Lakhs 25 %

April 11, 2023

Voluntary DeductiblesVoluntary Deductibles Business Interruption Claims Deductible Discount No.of Days Minimum 7 days Rs. 10 Lakhs 5 % 14 days Rs. 15 Lakhs 10 % 21 days Rs. 20 Lakhs 15 % 28 days Rs. 25 Lakhs 20 % 35 days Rs. 30 Lakhs 25 % Opting for higher deductibles entails still higher

discounts

FIRE INS

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