Gen Ins - Pillai

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General Insurance


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What is General Insurance?

Includes fire insurance, marine insurance, motor insurance & health

and accident insurance

Has evolved with evolution of business & lifestyle of human beings

Covers everything from space expeditions to voice of famous

singers


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Types - General Insurance

General insurance

Insurance

of property

Insurance

of persons

Liability

insurance

Special

Risks

Building

Motor vehicles

Aircraft

Machinery Factories

Ships

Live-stocks

Furniture

Cash

Personal

Accidents

Disability

Health relatedrisks

Public liability

Product

liability

Professionalindemnities

Loss of skills

Space

expeditions

Exploration ofpoles & jungles


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Importance of general insurance in economy

General insurance companies pool together huge amounts to cover

business related risks, which, eventually gets invested in building

economic infrastructure of the country

Protects the capital employed in the industry

Removes all queries & fears associated with several business risks,

making it possible to carry out certain economic activities

Encourages entrepreneurial expansion of the economy

Makes foreign trade possible almost in totality Rural insurance schemes provide necessary financial protection to

the rural economy


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Fire Insurance


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What is fire insurance?

Fire insurance is a contract to indemnify the insured for destruction

of or damage to property or goods, caused by fire or other specified

perils, during a specified period, in return for payment of a

premium in lumpsum or by instalments

Fire insurance is governed by a tariff under the Tariff Advisory

Committee(TAC)

Property that can be covered under fire insurance includes

Building Machinery

Equipments

Accessories

Goods

Raw materials Electrical installations of a bldg

Residential houses

Furnitures & fittings

Pipelines located outside & inside the bldg


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Standard Fire & Special Perils policy

The perils specified in the policy can be grouped as:-

Fire Perils Fire

Explosion / implosion

Aircraft damage

Lightning. Storm, cyclone, tempest, hurricane, tornado & flood

Subsidence & landslide including rock slide

Social Perils Riot, strike, malicious damage

Terrorism (the optional cover)

Other perils Impact damage

Bursting or overflowing of water tanks & pipes

Leakage from Automatic Sprinkler installation

Missile testing operation

Bush fire


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A typical fire policy does not cover

5% of each claim resulting from operation of lightning /storm/

tempest/ flood/ inundation/ subsidence & landslide covered under thepolicy

Loss, destruction or damage caused by war

Loss, destruction or damage due to nuclear hazard

Loss, destruction or damage caused by pollution

Loss, destruction or damage to unset precious stones or works of art,manuscripts, drawings stamps, coins or paper money and the like foran amount exceeding Rs 10000/-

Loss or damage to the stocks in cold storage caused by change intemperature

Loss, destruction or damage to any electrical/electronic appliances,fixture or fitting caused due to over-running/excessive pressure/self-heating or leakage of electricity

Contd..


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A typical fire policy does not cover

Expenses incurred on

Architects,Surveyors & Cosulting Engineers fees and

Debris removal

following a loss, destruction or damage to insured property in excess

of 3% & 1% of the claim amount respectively


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General conditions in a fire policy

The policy will become void in case of non-disclosure of material facts

or misrepresentation

Cancellation of the policy is possible by either party

Notice of loss or damage should be given to the insurer immediately &

the claim should be submitted within 15 days

All notices should be given in writing

The insurer has a right to enter & take possession of the building or

premises where the loss has occurred, remove or salvage the insured

property

If the claim is fraudulent, the insured will lose all the benefits under thepolicy

The insurer has a right to replace, re-instate the property lost or

damaged instead of paying for the loss or damage


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General conditions in a fire policy

An insured is expected to insure his property to the fullest extent of its

value, otherwise average clause will be applied & insured will get

proportionate amount of loss or damage

In case of one or more policies covering the same property for the

same hazard, all policies will contribute the claim in the proportion of

sum assured If the loss or damage is caused by a third party, the insured is required

to help the insurer to recover the loss from the third party responsible

for the loss or damage


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Fire insurance procedure & documentation

3. Policy

Is the final contract between the insured & the insurer

Is a stamped document

Contains the details of the contract with relevant schedules & rates

4. Claim

Is a form prescribed by the insurer which contains the name &

address of the insured, policy number, date, time, place & cause

of fire, details of the property damaged etc..

5. Survey report

Is a report submitted by the surveyor to the insurance company

giving the details of cause of the fire, event of loss, value of

salvage, expenses etc..


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Fire insurance procedure & documentation

Surveyor is appointed by the insurance company to assess the

loss of the policy. He has to give the amount of extent of loss

incurred in the policy

On the basis of the survey report, the insurance claim is settled

with the insured


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Marine Insurance


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Marine insurance is a contract of insurance under which the insurerundertakes to indemnify the insured against losses incidental to

marine adventure which may cover loss or damages to the ship, cargo,

freight, vessels or any other subject of a marine adventure

The object of marine insurance is to make good losses exposed to

seafarers due to sea conditions, war, pirates, weather, spoilage etc..

The legal framework of marine insurance is provided by Marine

Insurance Act, 1963

Marine insurance comprises of

Cargo Insurance: Provides insurance cover for loss/damage togoods during transit by rail, road, sea or air

Hull Insurance: Provides insurance cover for carrier of the goods

What is Marine Insurance?


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Depends on the type of contract of sale

Who can buy a marine insurance policy?

Type of contract Responsibility for insurance

Free On Board

(F.O.B. Contract) Seller is responsible till the goods are placed on board the

ship

The buyer is responsible thereafterFree On Rail(F.O.R. Contract) Same as above Mainly relevant to internal transactions

Cost, Insurance &

Freight

(C.I.F. Contract)

Apart from the same obligations in C& F, the seller

must procure cargo marine insurance against the

buyer's risks of goods during the carriage

Seller arranges for insurance & pays the premium

Cost & Freight

(C&F Contract) Seller is responsible till the goods are placed on board the

ship & also pays for the carriage of goods to the named

destination

The buyer is responsible thereafter


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A contract of marine insurance comprises of Policy form: contains details like name of insured, details of shipment,

sum insured etc..

Clauses: specifies the risks covered, risks excluded and other terms &

conditions of insurance

For inland transit, clauses drafted by the Tariff Advisory Committee

are used

For export/import policies, theInstitute Cargo Clauses (I.C.C) are

used

Structure of Marine Policies


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Institute Cargo Clauses (C)Risks covered:

Fire or explosion

Vessel or craft being stranded, grounded, sunk or capsized

Discharge of cargo at a port of distress

General Average Sacrifice

Jettison

Overturning or derailment of land conveyance

Collision or contact of vessel, craft or conveyance with any externalobject other than water

Institute Cargo Clauses (Sea)


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Institute Cargo Clauses (B)

These clauses cover the following risks in addition to thosementioned in ICC ( C ):

Earthquake, volcanic eruption or lightning

Washing overboard

Entry of sea, lake or river water into vessel, conveyance, liftvan or placeof storage

Total loss of any package lost overboard or dropprd whilst loading orunloading from vessel

Institute Cargo Clauses (A)

These clauses cover all risks of loss or damage to the subject matterinsured. However, these losses need to caused by accidentalcircumstances only


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General Exclusions

All three sets of clauses contain general exclusions. The mostimportant exclusions are:

Loss caused by wilful misconduct of the insured

Ordinary leakage, wear & tear

Loss caused by inherent vice/nature of the subject matter. For eg:

perishable commodities like fruits, vegetables, etc.. may deteriorate withoutany accidental cause

Loss caused by delay

Deliberate damage by the wrongful act of any person*

Loss arising from insolvency of the owner/operator of the vessel

Loss /damage due to inadequate packing War & kindred perils*

Strikes, riots, lock-out, civil commotions & terrorism*

* Can be covered at extra premium


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Duration of cover

Defined in the Transit Clause The cover extends from the time the goods leave the exporters warehouse,continues during the ordinary course of transit until they are delivered

to the importer warehouse at the named destination

or

to any intermediate warehouse used by the importer for

storage/distribution

or

on expiry of 60 days after discharge from the vessel at the final port ofdischarge

whichever occurs first


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Crop Insurance


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Meaning

In India, the agriculture sector engages 72% of the total population. It

has a very high dependence on weather as only 35% of the area isirrigated. The majority of cultivators are uneducated and not fully

aware of the scientific and technologically advanced farm practices

A typical farmer is totally at the mercy of the monsoon. What happens

if there are floods or a drought or a pest attack? What if there is a crop

failure or a crash in prices?

Agriculture crop insurance cannot increase productivity or be a source

of finance, but it can play a role in enhancing both. Crop insurance,

essentially, indemnifies the cultivator against shortfall in crop yield

The government of India introduced the Comprehensive CropInsurance Scheme in 1985 through the General Insurance Corporation

which was later renamed National Agricultural Insurance Scheme

(NAIS) from1999-2000. The Agriculture Insurance Company (AIC)

was constituted to cater to the requirement of agriculture insurance.


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Meaning

Objectives of crop insurance

Stabilising agricultural production or the farmers income by reducing

adverse effects resulting from crop losses due to natural hazards

Encouraging farmers to adopt improved technologies that can lead to

increased production and more efficient use of inputs

Better credit rating, required for the increased flow of crop loans to thefarmers

Concept of crop insurance is over two decades old in India

The failure of crop insurance as a concept is attributed mainly tolack of awareness in the rural areas

There were no takers for crop insurance, until it was mademandatory and linked to farm credit


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Bancassurance


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Meaning

Distribution of insurance plans through banks

Banks have to obtain prior approval of IRDA for acting as

corporate agent.

Helps insurers acquire new customers by leveraging banks

client base

A bank can tie up with only one life insurer and one general

insurer. However, the risk liability is borne entirely by the

insurer


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Benefits of Bancassurance

Benefits to bank

Extra income in the form

of commissions

Offering account-holders

more products helps

strengthens theirrelationship

Benefits to insurer

Helps expand customer

base

Broader customer base

can help offer products

at marginally lowerpremiums

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