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synonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed plate
glass and sanitary fittings’ cover. This will cover accidental loss of damage to which of the
following?I. Fixed plate glass
II. Sanitary fittings
III. Neon signs
IV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and taken
it for a drive. Out of nowhere, a dog comes in the way and to avoid hitting it, Revathi
swerves sharply, breaks and goes over the divider, hits another car and injures a
person walking on the road. The outcome of a single incident has resulted in damage
to Revathi’s own car, public property, another car and also caused injury to anotherperson.In this scenario, if Revathi does not have a car insurance, she may end up paying far
more than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?
Should the other party’s insurance pay for Revathi’s actions?
What if they don't have insurance?31That is why the laws of the land make it mandatory to have third-party liability
insurance. While motor insurance does not prevent these things from happening, it
provides a financial security blanket for the owner.Apart from an accident, the car can also be stolen, damaged by an accident or
destroyed by fire and the owner would suffer financially.Motor insurance must be taken by a vehicle owner (i.e. the person in whose name
the vehicle is registered with the Regional Transport Authority in India.)**Important****Mandatory Third Party Insurance**As per the Motor Vehicles Act, 1988, it is mandatory for every owner of a vehicle
plying on public roads, to take an insurance policy, to cover the amount, which the
owner becomes legally liable to pay as damages to third parties as a result of
accidental death, bodily injury or damage to property. A Certificate of Insurance
must be carried in the vehicle as a proof of such insurance.**1.** **Motor insurance coverage**The country has a large vehicle population. A number of new vehicles keep coming
on to the road every day. Many of them are very costly as well. People say that in
India, vehicles do not get junked, but only keep changing hands. This means that
old vehicles continue to be on the road and new vehicles get added. The area of the
roads (the space for driving) is not growing correspondingly with the number of
vehicles. The number of people walking on the road is also increasing. Police and
hospital statistics say that the number of road accidents in the country is increasing.
The amount of compensations awarded to accident victims by Courts of Law are
increasing. Even vehicle repair costs are going up. **All these show the importance**
**of motor insurance in the country.**Motor insurance covers the loss of vehicles and the damages to them due to
accidents and some other reasons. Motor insurance also covers the legal liability of
vehicle owners to compensate the victims of the accidents caused by their vehicles.Despite, the government mandate, all the vehicles in the country are not insured.**Motor Insurance covers all types of vehicles plying on public roads such as:** Two wheelers
Private cars
All types of commercial vehicles: Goods carrying and passenger carrying
Miscellaneous type of vehicles e.g. cranes,
Motor Trade (Vehicles in Showrooms and Garages)32**‘Third-Party Insurance’**An insurance policy purchased for protection against the legal actions of another
party. Third-party insurance is purchased by the insured (first party) from an
insurance company (second party) for protection against another party's claims
(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**
**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any vehicle
plying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death
Third party property damageLiability is covered for an unlimited amount in respect of death or injury and
damage.
The claims for compensation to third party victims in case of death or injury caused
by a motor accident are to be filed by the complainant in Motor Accident Claim
Tribunal (MACT).
**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident cover | IC 38 -IA-Eng-Non-Life.md | null | Test Yourself 2 | IC 38 -IA-Eng-Non-Life_018 | {
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party. Third-party insurance is purchased by the insured (first party) from an
insurance company (second party) for protection against another party's claims
(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**
**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any vehicle
plying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death
Third party property damageLiability is covered for an unlimited amount in respect of death or injury and
damage.
The claims for compensation to third party victims in case of death or injury caused
by a motor accident are to be filed by the complainant in Motor Accident Claim
Tribunal (MACT).
**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident cover
for Owner-Driver effective 1st January, 2019. The Cover is provided to the OwnerDriver whilst driving the vehicle including mounting into/ dismounting from or
traveling in the insured vehicle as a co-driver. However, the policyholder can choose
to opt for the CPA cover as part of the Liability Only policy or the Package policy.
In the event the policyholder chooses to take a stand-alone CPA policy, the CPA
cover offered as part of Liability only or Package policy shall be deleted.**Package/ Comprehensive Policy: (Own Damage + Third Party Liability)**In addition to the above, the loss or damage to the vehicle insured by specified
perils (known as own damage to motor vehicles) is also covered subject to the value
declared (called IDV – discussed above) other terms and conditions in the policy.
Some of these perils are fire, theft, riot and strike, earthquake, flood, accident etc.Some insurers may also pay for towing charges from the place of accident to the
workshop. A restricted cover is also available covering the risk of fire and/ or theft
only, in addition to the compulsory cover granted under Act (Liability) Only Policy.The policy can also cover loss or damage to accessories fitted in the vehicle,
personal accident cover under private car policies for passengers, paid driver; legal
liability to employees and non-fare paying passengers in commercial vehicles.
Insurers also provide free emergency services or use of alternative car in case of
breakdown.33**2.** **Exclusions**Some of the important exclusions under the policies are wear and tear, breakdowns,
consequential loss, and loss due to driving with invalid driving license or under the
influence of alcohol. Use of vehicle not in accordance with `limitations as to use '
(e.g. private car being used as a taxi) is not covered.**3.** **Sum Insured and Premium**The sum insured of a vehicle in a Motor Policy is referred to as Insured's Declared
Value (IDV).In case of theft of vehicle or total damage beyond repairs in an accident, the claim
amount will be determined on the basis of the IDV.Rating/ premium calculation depends on factors like the Insured's Declared Value,
cubic capacity, geographical zone, age of the vehicle etc.**Test Yourself 3**Motor insurance should be taken in whose name?I. In the name of the vehicle owner whose name is registered with RegionalTransport Authority
II. If the person who will be driving the vehicle is different from the owner, thenin the name of the person who will be driving the vehicle, subject to approval
from Regional Transport Authority
III. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority
IV. If the vehicle will be driven by anyone other than the owner, then primary policyshould be in the name of the vehicle owner and additional policies should be
purchased in the names of all the people who will be driving the vehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred to aninsured property from hazards or events named in the policy. The perils covered
will be clearly spelt out.
b) Householder’s insurance covers the structure and its contents against fire, riots,bursting of pipes, earthquakes etc. Apart from the structure, it covers the
contents against burglary, housebreaking, larceny and theft.
c) Package covers give, under a single document, a combination of covers.
d) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV). | IC 38 -IA-Eng-Non-Life.md | null | Two important types of covers that are popular in the market are discussed | IC 38 -IA-Eng-Non-Life_019 | {
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from Regional Transport Authority
III. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority
IV. If the vehicle will be driven by anyone other than the owner, then primary policyshould be in the name of the vehicle owner and additional policies should be
purchased in the names of all the people who will be driving the vehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred to aninsured property from hazards or events named in the policy. The perils covered
will be clearly spelt out.
b) Householder’s insurance covers the structure and its contents against fire, riots,bursting of pipes, earthquakes etc. Apart from the structure, it covers the
contents against burglary, housebreaking, larceny and theft.
c) Package covers give, under a single document, a combination of covers.
d) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).
e) Shopkeeper’s insurance usually covers damage to the shop structure andcontents due to fire, earthquake, flooding or malicious damage; and burglary.
Shop insurance can also include business interruption protection.
f) Motor insurance covers the loss of vehicles and the damages to them due toaccidents and some other reasons. Motor insurance also covers the legal liability34of vehicle owners to compensate the victims of the accidents caused by their
vehicles. Compulsory Personal Accident cover for Owner-Driver is provided to
whilst driving the vehicle including mounting into/ dismounting from or traveling
in the insured vehicle as a co-driver.**Key terms**a) Householder’s insurance
b) Shopkeeper’s insurance
c) Motor insurance**Answers to Test Yourself****Answer 1** - The correct option is I.
**Answer 2** - The correct option is IV.
**Answer 3** - The correct option is I.35## CHAPTER G-04## COMMERCIAL INSURANCE**Chapter Introduction**In the previous chapter we considered various kinds of insurance products that cover
the risks faced by individuals and households. There is another set of customers who
have other needs for protection. These are the commercial or business enterprises
or firms, who are engaged in or deal with of various kinds of goods and services. In
this chapter we shall consider the insurance products available to cover the risks
faced by this segment.**Learning Outcomes**After studying this chapter, you should be able to understand the importance and
basic purposes of the 11 types of insurances discussed.36**A.** **Property/ Fire Insurance**Commercial enterprises are broadly divided into two types: Small and Medium Enterprises [SMEs]Bharat Sookshma PolicyBharat Laghu Policy Large Business Enterprises-Standard fire and Special Perils Policy (SFSP), IAR etc.Historically, general insurance sector has largely developed by catering to the needs
of these customers.Selling general insurance products to commercial enterprises calls for a careful
matching of insurance products with their needs. Agents must have a proper
understanding of the products available. Let us briefly consider some of these
general insurance products.**1. Standard Fire and Special Perils Policy (SFSP)**Fire insurance policy is suitable for commercial establishments as well as for the
owner of property, one who holds property in trust or in commission and for,
individuals/ financial institutions who have financial interest in the property.All immovable and movable property located at a particular premises such as
buildings, plant and machinery, furniture, fixtures, fittings and other contents,
stocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from
the premises for repairs can be insured. Monetary relief is essential to rebuild and
renew the property damaged to bring back the business to its normal course. It is
here that fire insurance plays its role.**1.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile All
India Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire
Lightning
Explosion/ implosion
Riot strike and malicious damage
Impact damage
Aircraft damage
Storm, tempest, cyclone, typhoon, hurricane, tornado, flood and inundation
Subsidence and landslide including rock slide
Bursting and overflowing of water tanks, apparatus and pipes
Missile testing operations
Leakages from automatic sprinkler installation
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stocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from
the premises for repairs can be insured. Monetary relief is essential to rebuild and
renew the property damaged to bring back the business to its normal course. It is
here that fire insurance plays its role.**1.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile All
India Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire
Lightning
Explosion/ implosion
Riot strike and malicious damage
Impact damage
Aircraft damage
Storm, tempest, cyclone, typhoon, hurricane, tornado, flood and inundation
Subsidence and landslide including rock slide
Bursting and overflowing of water tanks, apparatus and pipes
Missile testing operations
Leakages from automatic sprinkler installation
Bush fire37There are two important features which differentiate commercial insurance from
individual and retail lines.a) The insurance needs of firms or business enterprises are much larger than thatof individuals. The reason is that the value of the assets of a commercial
enterprise is much larger than that of an individual’s assets. Their loss or damage
could adversely impact the very survival and future of the company.b) The demand for insurance of commercial enterprise is often mandated or madenecessary by legal or other requirements. For instance, when plants and assets
are set up through a bank loan, their insurance may be a condition of the loan.
Many corporate enterprises in India are professionally run companies and a
number of them are multinationals.They are required to maintain global quality standards, including the adoption
of appropriate risk management strategies and insurance for protecting their
assets.Any loss arising out of the above perils is covered by the policy subject to some
exclusion.**1.2.** **Revised Standard Fire and Special Perils (SFSP) Policies:**IRDAI has issued guidelines with effect from 1st April, 2021 whereby the Standard
Fire and Special Perils (SFSP) Policy will be replaced by the following two standard
products **for the risks** given **below** that shall be mandatorily offered by all general
insurers carrying on Fire and allied perils insurance business.**i.** **Bharat Sookshma Udyam Suraksha (meant for enterprises where the total****value at risk is upto Rs. 5 Crore)** - designed for financial protection of MSMEsThis policy provides cover for the Building/ Structures, Plant and Machinery, Stock
and other assets of enterprises where the total value at risk across all insurable
asset classes at one location is up to Rs. 5 Crore. This policy also offers cover against
a wide range of perils, quite similar to the policy meant for Dwellings.The policy has many in-built covers in addition to the basic coverage — Cover for
alterations, additions or extensions, Cover for stocks on a floater basis, Cover for
temporary removal of stocks, Cover for Specific Contents, Cover for start-up
expenses (following a loss), Cover for payment of professional fees for Architects,
Surveyors and Consulting Engineers, Cost for removal of debris and Costs compelled
by Municipal Regulations.The policy can be taken by micro level enterprises such as offices, hotels, industries,
storage risks and so on. The policy underinsurance to the extent of 15% is waived.
Bharat Sookshma Udyam Policies allow increase in Sum Insurer during the policy
tenure by endorsement.38**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total value****at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for financial
protection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery, Stock
and other assets of enterprises where the total value of risk across all insurable
asset classes at one location exceeds Rs.5 Crore but does not exceed Rs. 50 Crore
at the policy commencement date. This policy also has all the in-built covers offered
by the policy for micro level enterprises mentioned above. The perils against which
insurance is offered are also similar to the policy meant for micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,
industries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in | IC 38 -IA-Eng-Non-Life.md | e37 | What does the Standard Fire policy cover? | IC 38 -IA-Eng-Non-Life_021 | {
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storage risks and so on. The policy underinsurance to the extent of 15% is waived.
Bharat Sookshma Udyam Policies allow increase in Sum Insurer during the policy
tenure by endorsement.38**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total value****at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for financial
protection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery, Stock
and other assets of enterprises where the total value of risk across all insurable
asset classes at one location exceeds Rs.5 Crore but does not exceed Rs. 50 Crore
at the policy commencement date. This policy also has all the in-built covers offered
by the policy for micro level enterprises mentioned above. The perils against which
insurance is offered are also similar to the policy meant for micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,
industries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in
Sum Insurer during the policy tenure by endorsement.**iii.** **Exclusions under Fire Policies**Insurers traditionally exclude the following from the scope of Fire policies.**Losses due to excepted perils like**i. War and war like activities.
ii. Nuclear perils
iii. Ionisation and radiationiv. Pollution and contamination losses**Perils that are covered by other policies in General Insurance**i. Machinery Breakdown,
ii. Business Interruptioniv. **Add-on Covers**However some perils can be covered by payment of additional premium like earth
quake, fire and shock; deterioration of stock in the cold storages following power
failure as a result of insured peril, additional expenditure involved in removal of
debris, architect, consulting engineers’ fee over and above the amount covered by
the policy, forest fire, spontaneous combustion and impact damage due to own
vehicles; terrorism.v. **Variants of Fire policy**Fire policies are generally issued for a period of 12 months. Only for dwellings,
insurance companies offer long term policies, i.e. for a period over 12 months. In
some cases short period policies are also issued, to which the short period scales
are applicable.a. **Market Value and Reinstatement Value Policies:** In the event of a loss, theinsurer would normally pay the market value [which is the depreciated value].
Under Reinstatement Value Policy, however, the insurers would pay cost of
replacement of the damaged property, by new property of the same kind.39Reinstatement value policies are issued for covering buildings, plant,
machinery and furniture, fixture, fittings. Reinstatement value policies are not
issued to cover stocks, which are usually covered on market value basis.b. **Declaration Policy:** To take care of frequent fluctuations in stocks values inwarehouse, Declaration Policy is granted subject to certain conditions. The sum
insured should be the highest value that is expected to be stored in the godown
during the period of policy. On this value a provisional premium is charged. The
insured has to declare the value of his stocks at agreed intervals, during the
currency of policy. This is adjustable along with the premium at the end of the
policy period.c. **Floater Policies:** Floater policies may be issued for stocks of goods which arestored at various specified locations under one sum insured. Unspecified
locations are not covered. The premium rate is the highest rate applicable to
insured’s stocks at any one location with a loading of 10%. These are also called
fire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.
b) All property located in an industrial complex will be charged one ratedepending on the product(s) made.
c) Facilities outside industrial complexes will be rated depending on the natureof occupancy at individual location.
d) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include "Add on" covers.
f) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.
g) One can also opt out of riot, strike, malicious damage covers and flood groupperils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway
II. Fire on ship
III. Explosion in factory
IV. Hospitalization due to fire**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or | IC 38 -IA-Eng-Non-Life.md | null | Bharat Laghu Udyam Suraksha(meant for enterprises where the total value | IC 38 -IA-Eng-Non-Life_022 | {
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fire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.
b) All property located in an industrial complex will be charged one ratedepending on the product(s) made.
c) Facilities outside industrial complexes will be rated depending on the natureof occupancy at individual location.
d) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include "Add on" covers.
f) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.
g) One can also opt out of riot, strike, malicious damage covers and flood groupperils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway
II. Fire on ship
III. Explosion in factory
IV. Hospitalization due to fire**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or
Loss of Profit Insurance.Fire insurance provides indemnity against material or property damage or loss
suffered to building, plant, machinery fixtures, fittings, merchandise goods, etc. by40insured perils. **This may result in total or partial interruption of the insured’s**
**business**, resulting in various economic losses, during the period of interruption.**Coverage under Business Interruption Policy**Consequential Loss (CL) Policy [Business Interruption (BI)] provides indemnity for
loss of what is termed as gross profit – which includes Net Profit plus Standing
Charges along with the increased cost of working incurred by the insured to get the
business back to normalcy, as soon as possible to reduce the final loss. The perils
covered and conditions are the same as those covered under the fire policy.**Example**If a Fire results in damage to the car manufacturer's plant, the production loss will
result in loss of income to the manufacturer. This loss of income along with extra
expenses incurred can be insured provided it has resulted from a peril insured.This policy can be taken only in conjunction with standard fire and special perils
policy as claims under this policy are admissible only if there is a claim under
standard fire and special perils policy.**Test Yourself 2**A business interruption insurance policy can be taken only in conjunction with____________.I. Standard fire and special perils insurance policy
II. Standard marine insurance policy
III. Standard motor insurance policy
IV. Standard health insurance policy**C.** **Burglary Insurance**The policy is meant for business premises like factories, shops, offices, warehouses
and godowns which may contain stocks, goods, furniture fixtures and cash in a
locked safe which can be stolen. The scope of cover is clearly expressed in the
policy.**Risks covered under burglary insurance**a) Loss of property following actual forcible and violent entry into the premises orloss followed by actual, forcible and violent exit from the premises or hold up.b) Damage to insured property or premises by burglars. Property insured is coveredonly when it is lost from the insured premises and not from any other premises.**Cash cover:** An important part of burglary cover is cash cover. It operates only when
the cash is secured in a safe, which is burglar proof and is of an approved make and
design. The common conditions applicable for granting cash cover are given below:a) Cash lost from the safe following the use of the original key to open, it is coveredonly where such key has been obtained by violence or threats of violence or
through means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some place otherthan the safe. The liability of the insurer is limited to the amount actually shown
by such records.41**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales, grain,
sugar etc.) the risk of losing the entire stock on a single occasion is considered
remote. The value that can be burgled is ascertained as probable maximum loss
(PML) and the full premium is charged for this maximum probable loss and
certain percentage of full premium is charged on rest amount of stock as PML
floats over the entire stock. It is assumed that a second burglary may not follow
immediately or the insured may take additional security measures from itsrecurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other persons | IC 38 -IA-Eng-Non-Life.md | y40 | Premium rating depends on: | IC 38 -IA-Eng-Non-Life_023 | {
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through means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some place otherthan the safe. The liability of the insurer is limited to the amount actually shown
by such records.41**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales, grain,
sugar etc.) the risk of losing the entire stock on a single occasion is considered
remote. The value that can be burgled is ascertained as probable maximum loss
(PML) and the full premium is charged for this maximum probable loss and
certain percentage of full premium is charged on rest amount of stock as PML
floats over the entire stock. It is assumed that a second burglary may not follow
immediately or the insured may take additional security measures from itsrecurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other persons
who are lawfully on the premises, nor does it cover larceny or ordinary theft. It
also excludes losses that are covered by a fire or plate glass policy.**4.** **Extensions**The policy can be extended to cover riot, strikes and terrorism risks at extra
premium.**5.** **Premium**Rates of premium for burglary policy depend upon the nature of insured
property, the moral hazard of the insured himself, construction and location of
premises, safety measures ( _e.g. watchmen, burglar alarm)_, previous claims
experience etc.In addition to details given in the proposal form, a pre-acceptance inspection is
done by insurers where high values are involved.**Test Yourself 3**The premium for burglary policy depends on ______________.I. Nature of insured property
II. Moral hazard of the insured himself
III. Construction and location of the premises
IV. All of the above**D.** **Money Insurance**Handling of cash is an integral part of any business. The Money Insurance policy is
intended to protect banks and industrial business establishments against loss of
money. Money is at risk in the premises as well as outside. It can be unlawfully taken
away while withdrawing, depositing, making payments or collections.**1.** **Coverage of Money Insurance**Money insurance policy is designed to cover the losses that may occur while cash,
cheques/ postal orders/ postal stamps are being handled. The policy normally
provides cover under two sections42**a)** **Transit section:** It covers loss of money as a result of robbery or theft or otherfortuitous cause whilst it is carried outside by the insured or her authorised
employees.The transit section specifies two amounts:**i.** **Limit per carrying** : This is the maximum amount that insurers may berequired to pay in respect of each loss.**ii.** **Estimated amount in transit during the policy period:** It represents theamount to which the rate of premium is to be applied to arrive at the amount
of premium.Policies can be issued on “ **declaration basis”**, similar to the practice in fire
insurance. Insurers thus charge a provisional premium on the estimated amount
in transit and adjust this premium at the time of expiry of the policy, based on
actual amount in transit during the policy period, as declared by the insured.**b)** **Premises section:** This section covers loss of cash from one’s premises/ lockedsafe due to burglary, housebreaking, hold up etc. Other features of the policy
are normally the same as of burglary insurance (of business premises) that this
was discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized person andc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risksc) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the
company at any one time, the mode of conveyance, distance involved, safety
measures taken etc. Premium is adjustable according to actual cash carried
throughout the year based on declaration made within 30 days of expiry of the
policy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission
II. Loss of cash from one’s premises due to burglary
III. Loss of money that has been entrusted to other than authorized person | IC 38 -IA-Eng-Non-Life.md | s42 | First Loss Insurance | IC 38 -IA-Eng-Non-Life_024 | {
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are normally the same as of burglary insurance (of business premises) that this
was discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized person andc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risksc) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the
company at any one time, the mode of conveyance, distance involved, safety
measures taken etc. Premium is adjustable according to actual cash carried
throughout the year based on declaration made within 30 days of expiry of the
policy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission
II. Loss of cash from one’s premises due to burglary
III. Loss of money that has been entrusted to other than authorized person
IV. Riot, strike and terrorism43**E.** **Fidelity Guarantee Insurance**Companies suffer financial loss due to what are termed as white collar crimes like
fraud or dishonesty of their employees. Fidelity guarantee insurance indemnifies
employers against the financial loss suffered by them due to fraud or dishonesty of
their employees by forgery, embezzlement, larceny, misappropriation and default.**1.** **Coverage under Fidelity Guarantee Insurance**Cover is granted against a direct pecuniary loss and does not include consequential
losses.a) The loss should be in respect of moneys, securities or goodsb) The act should be committed in the course of the duties specified;c) The loss has be discovered within 12 months of expiry of the policy or deathretirement resignation or dismissal of the employee, whichever is earlierd) No cover is provided in respect of a dishonest employee who has been re
employed**2.** **Types of Fidelity Guarantee Policy**There are various types of fidelity guarantee policies, as discussed below:**a)** **Individual policy:** This type of policy is used where only one individual is tobe guaranteed. Name, designation of the employee and amount of guarantee
has to be specified.**b)** **Collective policy:** This policy comprises a schedule listing out the names ofthose employees to whom the guarantee applies, along with a note on the
duties of each employee and separate individual sums insured.**c)** **Floating policy or floater:** In this policy, the names and duties of theindividuals to be covered are inserted in a schedule, but instead of individual
amounts of guarantee, a specified amount of guarantee is “floated” over the
whole group. A claim in respect of any one employee will, therefore, reduce
the floated guarantee, unless the original sum is reinstated by payment of an
extra premium.**d)** **Positions policy:** This is similar to a collective policy with the difference thatonly the schedule lists out "positions’ (say, Cashier, Account Officer Etc.) that
are to be guaranteed for a specified amount and the name are not mentioned.**e)** **Blanket policy:** This policy covers the entire staff without showing names orpositions. No enquiries about the employees are made by the insurers. Such
policies are only suitable for an employer with a large staff and the
organization makes adequate enquiries into the antecedents of employees.
The references that the employer obtains must be available to the insurers in
the event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the
employee, the system of check and supervision.44**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud or dishonestyof their employees
II. Employees against the financial loss suffered by them due to fraud or dishonestyof their employer
III. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate
IV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions
who deal with operations involving money, considering the special risks faced by
them regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance** | IC 38 -IA-Eng-Non-Life.md | m43 | Important exclusions | IC 38 -IA-Eng-Non-Life_025 | {
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organization makes adequate enquiries into the antecedents of employees.
The references that the employer obtains must be available to the insurers in
the event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the
employee, the system of check and supervision.44**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud or dishonestyof their employees
II. Employees against the financial loss suffered by them due to fraud or dishonestyof their employer
III. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate
IV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions
who deal with operations involving money, considering the special risks faced by
them regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**
There are different variations to this policy based on the requirement of banker.a) Money securities lost or damaged whilst within the premises due to fire,burglary, riot and strike.b) Loss suffered due to any cause whatsoever including negligence of theemployees, when the property is carried outside the premises in the hands
of authorized employees.c) Forgery or alteration of cheques, drafts, fixed deposit receipts etc.d) Dishonesty of employees with reference to money/ securities or in respectof goods pledged.e) Dispatches by registered post parcels.f) Dishonesty of appraisers.g) Money lost while in the hands of agents of the bank like ‘Janata Agents’,‘Chhoti Bachat Yojana Agents’.The cover is issued on discovery basis, this means the policy will respond to a period
during which a loss is discovered and not necessarily the period when it occurred.
But a cover should have been in existence when the loss actually occurred.Conventionally losses within a period of 2 years prior to date of discovery only are
payable, subject to the cover having been continuous, from a date earlier than that
when the loss has occurred.**2.** **Important exclusions**
Major exclusions are Trading losses, Negligence, Software crimes and dishonesty of
the partners/ directors45**3.** **Scope**
The policy comprises of 7 sections viz.:1. On Premises2. In Transit
3. Forgery or Alteration
4. Dishonesty
5. Hypothecated Goods
6. Registered Postal Service
7. Appraisers
8. Janata Agents**4.** **Sum insured**The bank has to fix the **sum insured** which would usually float over the first 5
sections. This is termed as ‘basic sum insured’. Additional sum insured can be
purchased for section (1) and (2) if the basic sum insured is not sufficient. The policy
also allows one compulsory and automatic reinstatement of sum insured by payment
of an extra premium**5.** **Rating**The premium calculation is based on:a) Basic sum insured
b) Additional sum insured
c) Number of staff
d) Number of branches.**Test Yourself 6**Which of the below can be covered under a bankers indemnity insurance policy?I. Money securities lost or damaged whilst within the premises due to fire
II. Forgery or alteration of cheques
III. Dishonesty of employees with reference to money
IV. All of the above**G.** **Jewelers’ Block Policy**In recent years India has emerged as a leading centre in world trade for jewellery,
especially diamonds. Imported raw diamonds are cut, polished and exported. It
takes care of all risks of a jeweller whose business involves sale of articles of high
value in small bulk like jewellery gold &silver articles, diamonds and precious
stones, wrist watches etc. The trade involves stocking these expensive items in large
quantity and moving them between different premises.46**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.
Coverage under Section 1 is usually made compulsory while the insured are allowed
to avail of other sections at their option. It is also the market practice to include
some more sections to cover other assets like Electronic equipment, Plate glass,
Signage etc. and liabilities like Employees Compensation, Infidelity of employees.Fidelity guarantee cover should also be taken by the insured for full protection if
there is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for each
section with discounts for exclusive round the clock watchman, close circuit TV/ | IC 38 -IA-Eng-Non-Life.md | s45 | Premium | IC 38 -IA-Eng-Non-Life_026 | {
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especially diamonds. Imported raw diamonds are cut, polished and exported. It
takes care of all risks of a jeweller whose business involves sale of articles of high
value in small bulk like jewellery gold &silver articles, diamonds and precious
stones, wrist watches etc. The trade involves stocking these expensive items in large
quantity and moving them between different premises.46**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.
Coverage under Section 1 is usually made compulsory while the insured are allowed
to avail of other sections at their option. It is also the market practice to include
some more sections to cover other assets like Electronic equipment, Plate glass,
Signage etc. and liabilities like Employees Compensation, Infidelity of employees.Fidelity guarantee cover should also be taken by the insured for full protection if
there is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for each
section with discounts for exclusive round the clock watchman, close circuit TV/
alarm system, exclusive strong room and for any other safety expedient etc.**Test Yourself 7**In case of a Jeweller’s Block Policy, there are traditionally multiple sections, of
which one is usually compulsory while the remaining sections are ____________.I. Mandatory
II. Retrospective
III. Optional
IV. Compensatory**H.** **Engineering Insurance**Engineering insurance is a branch of general insurance that developed parallel with
the growth of fire insurance. Its origins can be traced to the development of
industrialization, which highlighted the need for a separate cover for plant and
machinery. Concept of **All Risks** cover was also developed with regard to
engineering projects - covering damage due to any cause except those specifically
excluded. The products covered various stages – from construction to testing till the
plant became operational. The customers for this insurance are both large and small
industrial units. This also includes units having electronic equipment and
contractors doing big projects. There are two types of engineering insurance
policies:1) Annual Policies-Generally of one year duration
a. Machinery Breakdown Policy
b. Boiler Pressure Plant policy
c. Electronic Equipment Policy
d. Contractor’s Plant & Machinery Policy
e. Deterioration of Stock Policy
f. Civil Engineering Completed Risk
2) Project Policies with variable duration based on project period
a) Contractors All Risk Policy
b) Erection All Risk Policy47There are two “Consequential Loss” policies associated with Engineering Policies:a) Machinery Breakdown Loss of Profit Policy (MBLOP) taken with Machinery
Breakdown Policy or with Boiler and Pressure Plant policy andb) Advance loss of Profit (ALOP) or Delay in Startup (DSU) Policy taken with
project policy.Let us briefly consider the policies:
**A.** **Annual Policies****1.** **Machinery Breakdown Policy (MB):** This policy is suitable for every industrywhich operates on machines and for whom breakdown of plant and machinery is
of serious consequence. This policy covers machines like generators,
transformer and other electrical, mechanical and lifting equipment.The policy covers unforeseen and sudden physical damage by mechanical or
electrical breakdown by any cause (subject to excepted risks) to the insured
property:a) While it is at work or at rest.
b) While being dismantled for cleaning or overhauling
c) During cleaning or overhauling operations and during reassembly thereafter.
d) When being shifted within the premise.Premium is charged on the reinstatement/ replacement value of individual
machinery. The machine as a whole should be insured. Rates depend on the type of
machine; the industry in which it is used and its value. Discounts are offered based
on factors such as stand-by facilities, spares available and claims experience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plant andto surrounding property of the insured; and
b) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse
due to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for adequate**
**cover, both the policies need to be taken. Sum insured under all Engineering**
**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronic equipment,which includes the entire computer system consisting of CPU, keyboards,
monitors, printers, UPS, system software etc. Auxiliary equipment such as airconditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and burglary | IC 38 -IA-Eng-Non-Life.md | y47 | Coverage of Jeweller’s Block Policy | IC 38 -IA-Eng-Non-Life_027 | {
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machine; the industry in which it is used and its value. Discounts are offered based
on factors such as stand-by facilities, spares available and claims experience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plant andto surrounding property of the insured; and
b) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse
due to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for adequate**
**cover, both the policies need to be taken. Sum insured under all Engineering**
**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronic equipment,which includes the entire computer system consisting of CPU, keyboards,
monitors, printers, UPS, system software etc. Auxiliary equipment such as airconditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and burglary
policy. The policy covers the contingencies such as defective design (not covered
under a warranty), effects of natural phenomena; defective functioning due to48voltage fluctuations, impact shock etc., burglary, housebreaking & theft are also
covered.The policy is available to the owner, lessor or hirer, depending upon the
responsibility or liability in each case. It has usually three sections that cover various
types of losses:**a)** **Section 1:** Loss and damage to equipment
**b)** **Section 2:** Loss and damage to external data media like computer externalhard disks
**c)** **Section 3:** Increased cost of working - to ensure continued data processingon substitute equipment up to 12, 26, 40 or 52 weeks.**4.** **Contractors Plant & Machinery (CPM) Policy:** Suitable for contractors involvedin construction business for covering all kinds of machinery like cranes,
excavators from unforeseen and sudden physical loss or damage from any cause
including:a) Burglary, Theft, Riot, Storm, Malicious Damage, Tempest
b) Fire and lightning, external explosion, earthquake and other Acts of Godperils
c) Accidental damage while at work due to faulty manhandling, dropping orfalling, collapse, collision and impact; can be extended for third party
damage.The Premium to be charged depends on the type of equipment and the location
at which it operates.**The cover is operative whilst the equipment is at work or at rest or being**
**dismantled for cleaning or overhauling or re-assembling thereafter. The**
**cover also applies while the same are lying at contractors own premises.**
**However floater policy covering the equipment “Anywhere in India basis” is**
**also available by charging 10% extra premium and with certain conditions.****5.** **Deterioration of Stock Policy:** This policy is suitable for the owner of the coldstorage (individual or a cooperative society) or those who take the cold storage
on lease or hire for storage of perishable commodities. The cover is against the
risk of deterioration and contamination following breakdown of the refrigeration
plant and machinery and also due to rise in temperature and sudden and
unforeseen escape of refrigerants into the cold storage rooms.**6.** **Civil Engineering Completed Risk:** It is generally taken by contractors who hasto maintain the civil projects after completion. The civil projects like – Bridges,
Dry docks, Harbours, Jetties Railway lines, Rock Filled dams, Concrete dams,
Earthen dams, Canals, Irrigation system are considered under this policy. Risks
covered are –1. Fire
2. Lightning
3. Explosion/ Implosion494. Riot, Strike, Malicious Damage
5. Impact by any Rail/ Road or water borne vehicle or animal
6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water
7. Subsidence and Landslide (Including Rockslide) damage
8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami
9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be on
an annual basis.
**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small
buildings to massive dams, buildings, bridges, tunnels, etc. The policy provides
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Dry docks, Harbours, Jetties Railway lines, Rock Filled dams, Concrete dams,
Earthen dams, Canals, Irrigation system are considered under this policy. Risks
covered are –1. Fire
2. Lightning
3. Explosion/ Implosion494. Riot, Strike, Malicious Damage
5. Impact by any Rail/ Road or water borne vehicle or animal
6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water
7. Subsidence and Landslide (Including Rockslide) damage
8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami
9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be on
an annual basis.
**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small
buildings to massive dams, buildings, bridges, tunnels, etc. The policy provides
an “All Risk” cover – thus providing indemnity against any sudden and unforeseen
loss or damage that occurs to property insured at the construction site. This can
be extended to cover third party liability and other exposures. Premium
chargeable depends on the nature of the project, the project cost, the project
period, geographic location and the period of testing.**2.** **Erection All Risks (EAR) Policy:** This policy is also known as Storage-cum
Erection (SCE) policy. It is suitable for the principal or contractors of a project
whereas plant and machinery is being erected as it is exposed to various external
risks. This is a comprehensive insurance policy that covers any sort of
contingency right from the moment the materials are unloaded at the project
site and continues during the entire project period until the project is tested,
commissioned and handed over.Premium chargeable depends on the nature of the project, the cost, the project
period, geographic location, and the period of testing.**If required a marine cover can be issued along with the erection policy for**
**providing coverage to the equipment and materials during the transit phase**
**till delivered at the project site.****C.** **Consequential Loss Policies**These type of policies are issued to cover losses consequential to other losses. These
are also called ‘Business Interruption’ policies or ‘Loss of Profits’ policies.
**3.** **Machinery Loss of Profits (MLOP) Policy**This policy is suitable for industries where interruptions or delays as a result of
machinery breakdown or boiler explosion result in huge consequential losses.Where the time lag between the breakdown or loss and the restoration is large, this
policy compensates for the loss of profits during the intervening period due to
reduction in turnover and increase in cost of working. The terms and conditions and50coverage of business interruption policy is the same as the business interruption
policy following a fire policy loss, which has been discussed earlier in this chapter.**4.** **Advance Loss of Profit Cover (ALOP) or Delay in Start-up Policy (D.S.U.)**This covers financial consequences of a project being delayed because of accidental
damages during the project. It is suitable for the insured who is deprived of the
anticipated earning and for the financial institutions to the extent of their interest
in the project. It is issued as an extension to the MCE/ EAR/ CAR Policy before the
actual commencement of project.The policy also covers financial losses in the form of continuing expenses such as
interest on term loan, debentures, wages and salaries etc. and on the anticipated
net profit which the business could have earned if it had commenced on the
scheduled date.Premium rating depends on various critical factors and on re-insurance support
available. The anticipated gross profit or turnover and the indemnity period are also
critical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover
II. Advance Loss of Profits coverIII. Contractors All Risk cover
IV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both
manufacturing and storage facilities, anywhere in India under one policy. It provides
indemnification against material damage and business interruption.
Usually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,
ii. Burglary (except larceny)
iii. Machinery breakdown/ boiler explosion/ electronic equipment | IC 38 -IA-Eng-Non-Life.md | n494 | B. | IC 38 -IA-Eng-Non-Life_029 | {
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actual commencement of project.The policy also covers financial losses in the form of continuing expenses such as
interest on term loan, debentures, wages and salaries etc. and on the anticipated
net profit which the business could have earned if it had commenced on the
scheduled date.Premium rating depends on various critical factors and on re-insurance support
available. The anticipated gross profit or turnover and the indemnity period are also
critical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover
II. Advance Loss of Profits coverIII. Contractors All Risk cover
IV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both
manufacturing and storage facilities, anywhere in India under one policy. It provides
indemnification against material damage and business interruption.
Usually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,
ii. Burglary (except larceny)
iii. Machinery breakdown/ boiler explosion/ electronic equipment
iv. Business interruption following operation of perils mentioned above(Note: Business interruption following perils under (iii) above is usually not included
in the package cover but available as optional cover) The policy offers widest range of cover compared to that provided byindividual operational policies.
Premium rates for the policy depend on the cover opted, claims experience,and deductibles opted, risk assessment report for MLOP etc.51**Test Yourself 9**Which of the following is not covered under Industrial All Risks insurance?I. Fire and special perils as per fire insurance practice
II. Larceny
III. Machinery breakdown
IV. Electronic equipment**J.** **Marine Insurance**Marine insurance is classified into two types: marine cargo and marine hull**1.** **Marine Cargo Insurance**Though the term ‘marine’ may indicate only losses due to sea (marine)
misadventures, **marine cargo insurance** covers much more. It provides indemnity
in respect of loss of or damage to goods during transit by rail, road, sea, air or
registered post, within the country as well as abroad. Type of goods may range from
diamonds to household goods, bulk items like cement, grains, over dimensional
cargoes for projects etc.Cargo insurance plays an important role in domestic trade as well as in international
trade. Most contracts of sale require that the goods must be covered, either by the
seller or the buyer, against loss or damage.**Who effects the insurance:** The seller or the buyer of the goods [consignment] may
insure the cargo depending upon the contract of sale.Marine insurance contract needs to have provisions that apply internationally. This
is because it covers goods that are in transit beyond any country’s borders. The
covers are accordingly governed by international conventions and certain clauses
attached to the policy.While the basic policy document contains general conditions, the scope of cover and
exceptions and special exclusions are attached by separate clauses known as
Institute cargo Clauses (ICC). These are drafted by the Institute of London
Underwriters.**a)** **Coverage under Marine Cargo Insurance**
Cargo policies are essentially voyage policies, i.e. they cover the subject matter
whilst in transit from one place to another. However, the insured is required to
always act with reasonable care in all circumstances within his control. The main
feature of this policy is that it's an Agreed Value Policy. The valuation is agreed
between the insurer and insured and is not subject to revaluation later unless fraud
is suspected. The convention for the Sum Insured is CIF + 10% (Cost Insurance &
Freight + 10%). Another unique feature is that the policy is freely assignable.52The cover normally commences from the time the goods leave the warehouse at the
place named in the policy and terminates at the destination named in the policy,
depending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit
ii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea
iii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due to
accident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion
ii. Derailment or overturning of the vehicle
iii. Stranding, grounding or sinking of the vessel (in case of ship)
iv. Collision with an external object
v. Discharge of cargo at a port of distress
vi. General average sacrifice | IC 38 -IA-Eng-Non-Life.md | null | Test Yourself 8 | IC 38 -IA-Eng-Non-Life_030 | {
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between the insurer and insured and is not subject to revaluation later unless fraud
is suspected. The convention for the Sum Insured is CIF + 10% (Cost Insurance &
Freight + 10%). Another unique feature is that the policy is freely assignable.52The cover normally commences from the time the goods leave the warehouse at the
place named in the policy and terminates at the destination named in the policy,
depending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit
ii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea
iii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due to
accident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion
ii. Derailment or overturning of the vehicle
iii. Stranding, grounding or sinking of the vessel (in case of ship)
iv. Collision with an external object
v. Discharge of cargo at a port of distress
vi. General average sacrifice
vii. Jettison.Institute Cargo Clause B is wider than C. Apart from the perils covered in C it also
covers loss or damage due to:i. Act of God (AOG) perils like earthquake, volcanic eruption and lightning
ii. Collapse of bridges in Inland transit
iii. Washing overboard and sling loss in case of ocean transit
iv. Entry of water into the vessel.Institute Cargo Clause A is the widest cover as it covers all perils of B and C and loss
or damage due to any other risk except some exclusion specified such as:i. Loss or damage due to wilful conduct of the insured
ii. Ordinary leakage, breakage, wear and tear or ordinary loss in weight/volume
iii. Insufficiency in packing
iv. Inherent vice
v. Delays
vi. Loss due to insolvency of owners
vii. Nuclear perilsThese exclusions are common to all clauses of inland, air and sea. There are
separate clauses also for trading of specific commodities like coal, bulk oil and tea
etc. Marine cover can be extended by paying additional premium to cover War,
Strikes, Riots, Civil Commotion and Terrorism. Marine and Aviation policies are the
only branches of insurance that offer cover against War perils.53**Important**Risks covered under a marine policy, under the standard policy form and under the
various clauses attached to the policy broadly fall into three categories:i. Marine perils,
ii. Extraneous perils and
iii. War, strike riot, civil commotion and terrorism risks.**b)** **Different types of marine policies****i.** **Specific Policy**This policy covers a single shipment. It is valid for the particular voyage or
transit. Merchants who are engaged in regular import and export trade or
who are sending consignments regularly by inland transit would find it
convenient to arrange insurances under special arrangements like the open
policy.**ii.** **Open Policy**The carriage of goods within the country can be covered under an open
policy. The policy is valid for one year and all consignments during this period
have to be declared by the insured to the insurer as agreed between them
on a fortnightly, monthly or quarterly basis.**iii.** **Open Cover**The open cover is a contract for a year giving the Insured continuous
protection to cover a large number of shipments/ despatches. The premium
on the consignments would be adjusted from the respective cash deposit
account maintained by the Insured. Open covers are issued to large exporters
and importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for transactions
of marine dispatches for one-year. The open cover is not a policy and it is
not stamped. A certificate of insurance is issued for each declaration duly
stamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is increased
due to payment of customs duty or increase in the market value of the goods
at the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across different
countries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses** | IC 38 -IA-Eng-Non-Life.md | null | Important | IC 38 -IA-Eng-Non-Life_031 | {
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protection to cover a large number of shipments/ despatches. The premium
on the consignments would be adjusted from the respective cash deposit
account maintained by the Insured. Open covers are issued to large exporters
and importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for transactions
of marine dispatches for one-year. The open cover is not a policy and it is
not stamped. A certificate of insurance is issued for each declaration duly
stamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is increased
due to payment of customs duty or increase in the market value of the goods
at the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across different
countries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**
**b)** **Covering a period of time: Usually one year. The set of clauses used here****are called Institute (Time) Clauses**54**c)** War risks are governed by special regulations and the premiums collected willbe credited to the Central Government.**Information**Hull insurance also includes the following insurances:i. Inland vessels such as barges, launches, passenger vessels etc.
ii. Dredgers (Mechanized or non-mechanized)
iii. Fishing Vessels (Mechanized or non-mechanized)
iv. Sailing Vessels (Mechanized or non-mechanized)
v. Jetties and Wharvesvi. Vessels in the course of construction**The ship owner has insurable interest not only in the ship, but also in the freight**
**to** be earned during the period of insurance. In addition to freight the ship owner
has insurable interest in the amount spent by him in fitting out the vessel, including
provisions and stores. **These expenses are termed disbursements and are insured**
**concurrently with the hull policy for a period of time.****Important****Aviation insurance:** A comprehensive policy is also available for aircraft which
covers loss or damage to the aircraft as also the legal liability to third parties and
to passengers arising out of the operation of the aircraft.**Test Yourself 10**Which branch of insurance offers cover against war perils?I. Marine policies
II. Aviation policies
III. Both of the aboveIV. None of the above**K.** **Liability Policies**Accidents cannot be avoided altogether, however careful a person is. This could
result in injury to oneself and damage to one’s property and also may simultaneously
cause injury to third parties and damage to their property. The persons thus
affected would claim compensation for such loss.A liability could also arise from a defect in a product manufactured and sold, say
chocolates or medicines, causing harm to the consumer. Similarly, liability could
arise from wrong diagnosis/ treatment of a patient or from a case improperly
handled by a lawyer for his client.In all such cases, where a third party, consumer or the patient would demand
compensation for the alleged wrong doing, it would raise a need for payment of
compensation or meeting expenses involved in defending the suits filed by the
claimants. In other words there is a financial loss arising from a liability to pay. The
existence of such a liability and the amount of compensation to be paid would be
decided by a civil court which would go into the aspect of alleged negligence/ fraud.
Liability insurance policies provide coverage of such liabilities. Let us look at some
of the liability policies.**Statutory liability**55There are certain laws or statutes which provide for the payment of compensation.
The laws are: Public Liability Insurance Act, 1991 and
Employees Compensation Act 1923 amended in 2010
Insurance policies are available for protection in respect of such liabilities. Let us
look at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those
who handle hazardous substances if a third party is injured or his property is
damaged during the course of such handling. The names of hazardous substances
and the quantity of each, is listed in the 'Act’. The amount of compensation payable
per person is fixed as shown below.|Compensation payable|Col2|
|---|---|
|Fatal Accident|Rs. 25,000|
|Permanent Total Disability|Rs. 25,000| | IC 38 -IA-Eng-Non-Life.md | l2 | Duty and increased value insurance | IC 38 -IA-Eng-Non-Life_032 | {
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existence of such a liability and the amount of compensation to be paid would be
decided by a civil court which would go into the aspect of alleged negligence/ fraud.
Liability insurance policies provide coverage of such liabilities. Let us look at some
of the liability policies.**Statutory liability**55There are certain laws or statutes which provide for the payment of compensation.
The laws are: Public Liability Insurance Act, 1991 and
Employees Compensation Act 1923 amended in 2010
Insurance policies are available for protection in respect of such liabilities. Let us
look at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those
who handle hazardous substances if a third party is injured or his property is
damaged during the course of such handling. The names of hazardous substances
and the quantity of each, is listed in the 'Act’. The amount of compensation payable
per person is fixed as shown below.|Compensation payable|Col2|
|---|---|
|Fatal Accident|Rs. 25,000|
|Permanent Total Disability|Rs. 25,000|
|Permanent Partial Disability|% of Rs. 25,000 based on % of disability|
|Temporary Partial Disablement|Rs. 1000 per month, maximum 3 months|
|Actual Medical Expenses|Up to a maximum of Rs. 12,500|
|Actual damage to property up to|Rs. 6,000|The premium is based on the AOA (Any One Accident) limit and the turnover of the
client. A special feature of this policy is that the insured has to pay compulsorily an
amount equal to the premium as contribution to Environment Relief Fund. If large
numbers of third parties are affected and the total amount of relief payable exceeds
A.O.A. limit, the balance amount will be paid by the fund.**2.** **Public Liability Policy (Industrial/ Non-industrial Risks)**This type of policy covers liability arising out of fault/ negligence of the insured
causing third party personal injury or property destruction [TPPI OR TPPD].There are separate policies covering industrial risks as well as non-industrial risks
like those affecting hotels, cinema halls, auditoriums, residential premises, offices,
stadiums, godowns and shops. It covers the legal liability to pay compensation
including claimant’s costs, fees and expense according to Indian Law, in respect of
TPPI/ TPPD **.**The policy does not cover:a) Products liabilityb) Pollution liabilityc) Transportation andd) Injuries to workmen/ employees**3.** **Products Liability Policy**The demand for products liability insurance has arisen because of the wide variety
of products (e.g. canned food stuff, aerated waters, medicines and injections,56electrical appliances, mechanical equipment, chemicals etc.) that are today
manufactured and sold to the public. If a defect in the product causes death, bodily
injury or illness or even damage to the property of third parties, it could cause a
claim to arise. Product liability policies cover this liability of the insured.Cover is available for exports as well as domestic sales.4. **Lift (Third Party) Liability Insurance**The policy provides indemnity to owners of buildings in respect of liabilities arising
out of the use and operation of lifts. It covers legal liabilities for:a) Death/ bodily injury of any person (excluding employees of the insured)b) Damage to property (excluding insured’s own or employee’s property)The premium rates depend upon the limit of indemnity, any one person, any one
accident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to
professional people against their legal liability to pay damages arising out of
negligence in the performance of their professional duties. Such covers are available
for doctors hospitals; engineers, architects; chartered accountants, financial
consultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility. They
may become liable to pay damages to shareholders, employees, creditors and other
stakeholders of the company, for wrongful acts committed by them in the
supervision and management of the affairs of the company. A policy has been
devised to cover such liability and is issued to the company covering all their
directors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to pay
compensation to his employees who sustain personal injury by accident or disease
arising out of and in the course of his employment. This is also called **Workman’s** | IC 38 -IA-Eng-Non-Life.md | l2 | Statutory liability | IC 38 -IA-Eng-Non-Life_033 | {
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accident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to
professional people against their legal liability to pay damages arising out of
negligence in the performance of their professional duties. Such covers are available
for doctors hospitals; engineers, architects; chartered accountants, financial
consultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility. They
may become liable to pay damages to shareholders, employees, creditors and other
stakeholders of the company, for wrongful acts committed by them in the
supervision and management of the affairs of the company. A policy has been
devised to cover such liability and is issued to the company covering all their
directors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to pay
compensation to his employees who sustain personal injury by accident or disease
arising out of and in the course of his employment. This is also called **Workman’s**
**Compensation Insurance.**Two forms of insurance are prevalent in the market:**a)** **Table A:** Indemnity against legal liability for accidents to employees underthe Employees Compensation Act, 1923, (Workman’s Compensation Act,
1923), Fatal Accident Act, 1855 & Common Law.**b)** **Table B** : Indemnity against legal liability under Fatal Accidents Act, 1855and Common law.The premium rate is applied on the estimated wages of employees as declared in
the proposal form.The policy may be extended to cover:i. Medical and hospital expenses incurred by the insured for treatment ofemployee injuries, up to specific amounts57ii. Liability for occupational diseases listed in the Actiii. Liability towards employees of contractors**Test Yourself 11**Under the Public Liability Insurance Act, 1991, how much is the compensation
payable for actual medical expenses for non-fatal accidents?I. Rs. 6,250
II. Rs, 12,500
III. Rs. 25,000
IV. Rs. 50,000**Answers to Test Yourself****Answer 1** - The correct option is III.
**Answer 2** - The correct option is I.
**Answer 3** - The correct option is IV.
**Answer 4** - The correct option is II.
**Answer 5** - The correct option is I.
**Answer 6** - The correct option is IV.
**Answer 7** - The correct option is III.
**Answer 8** - The correct option is II.
**Answer 9** - The correct option is II.
**Answer 10** - The correct option is III.
**Answer 11** - The correct option is II.58## CHAPTER G-05## GENERAL INSURANCE CLAIMS**Chapter Introduction**At the core of any insurance contract is the promise made at the beginning i.e. to
indemnify the insured in the event of a loss. This chapter talks about the procedures
and documents involved, from the time loss takes place, making it easier to
comprehend the entire process of claims settlement. It also explains the method of
dealing with disputed claims either by insured or insurer.After studying this chapter, you should be able to:1. Argue the importance of claim settlement functions2. Describe the procedures for intimation of loss3. Appraise claim investigation and assessment4. Explain the importance of surveyors and loss assessors5. Illustrate the contents of claim forms6. Define claims adjustment and settlement59**A.** **Claims settlement process****1.** **Importance of settling claims**The most important function of an insurance company is to settle claims of
policyholders on the happening of a loss event. Insurer fulfils this promise by
providing prompt, fair and equitable service in either paying the policyholder or
paying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;
repudiate if you must” in its board room. That is the spirit of the noble business ofinsurance.**Settling claims professionally is regarded the biggest advertisement for an**
**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an
individual or whether the size of the loss is big or small is very important. It
must be understood that the insured needs insurance compensation as soon as
the possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance
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policyholders on the happening of a loss event. Insurer fulfils this promise by
providing prompt, fair and equitable service in either paying the policyholder or
paying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;
repudiate if you must” in its board room. That is the spirit of the noble business ofinsurance.**Settling claims professionally is regarded the biggest advertisement for an**
**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an
individual or whether the size of the loss is big or small is very important. It
must be understood that the insured needs insurance compensation as soon as
the possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance
company’s duty to pay the claim amount when insured needs it most – as early
as possible after the loss.b) **Professionalism**The insurance officials consider each and every claim on its merits and do not
apply prejudicial or pre-conceived notions to reject the claim without examining
all the documents that would answer the following questions.i. Did the loss really happen?ii. If so, did the loss making event really cause the damage?iii. The extent of damage out of this event.iv. What was the reason for the loss?v. Was the loss covered under the policy?vi. Is the claim payable as per the contract/ policy conditions?vii. If so, how much is payable?The answers to all these questions need to be found out by the insurance company.Processing claims is an important activity. All claims forms, procedures and
processes have been carefully designed by the company to ensure that all claims
‘payable’ under the policy are promptly paid and those that are not payable are not
paid.The agent, being the representative of the company known to the insured, has to
ensure that all the relevant forms are properly filled up with correct information,60all documents evidencing the loss are attached and all prescribed procedures are
followed in a timely manner and duly submitted to the company. The role of the
agent at the time of loss has already been discussed earlier.2. **Intimation or Notice of Loss**Policy conditions provide that the loss be intimated to the insurer immediately. The
purpose of an immediate notice is to allow the insurer to investigate a loss at its
early stages. Delays may result in loss of valuable information relating to the loss.
It would also enable the insurer to suggest measures to minimise the loss and to
take steps to protect salvage. The notice of loss is to be given as soon as reasonably
possible.After this initial check/ scrutiny, the claim is allotted a number and entered in the
claims register, with details like policy number, name of insured, estimate of
amount of loss, date of loss, the claim is now ready to be processed.**Under certain types of policies (e.g. Burglary) notice is also to be given to police**
**authorities. Under cargo rail transit policies, notice has to be served on the**
**Railways.**3. **Investigation and assessment****a)** **Overview**On receipt of the claim form, from the insured, the insurers decide about
investigation and assessment of the loss. If the claim amount is small, the
investigation to determine the cause and extent of loss is done, by an officer of theinsurers.**The investigation** of other claims is entrusted to independent licensed professional
surveyors who are specialists in loss assessment. The assessment of loss by
independent surveyors is based on the principle that since both the insurers and
insured are interested parties, the unbiased opinion of an independent professional
person should be acceptable to both the parties as well as to a court of law in the
event of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with supporting
documents. Where necessary Police report/ fire Brigade report, Investigator’s
report are also obtained. For personal accident claims, the insured is required to
submit a report from the attending doctor specifying the cause of accident or the
nature of illness as the case may be, and the duration of disablement.Under policy conditions, the insurers reserve the right to arrange an independent
medical examination. Medical evidence is also required in support of “Workmen’s
Compensation” claims. Livestock and cattle claims are assessed on the basis of the | IC 38 -IA-Eng-Non-Life.md | null | Settling claims professionally is regarded the biggest advertisement for an | IC 38 -IA-Eng-Non-Life_035 | {
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investigation to determine the cause and extent of loss is done, by an officer of theinsurers.**The investigation** of other claims is entrusted to independent licensed professional
surveyors who are specialists in loss assessment. The assessment of loss by
independent surveyors is based on the principle that since both the insurers and
insured are interested parties, the unbiased opinion of an independent professional
person should be acceptable to both the parties as well as to a court of law in the
event of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with supporting
documents. Where necessary Police report/ fire Brigade report, Investigator’s
report are also obtained. For personal accident claims, the insured is required to
submit a report from the attending doctor specifying the cause of accident or the
nature of illness as the case may be, and the duration of disablement.Under policy conditions, the insurers reserve the right to arrange an independent
medical examination. Medical evidence is also required in support of “Workmen’s
Compensation” claims. Livestock and cattle claims are assessed on the basis of the
report of a veterinary doctor.61**Information**On receipt of intimation of loss or damage insurers check whether:1. The insurance policy is in force on the date of occurrence of the loss or damage2. The loss or damage is caused by an insured peril3. The property (subject matter of insurance) affected by the loss is the same asinsured under the policy4. Notice of loss has been received without delay.Motor third party claims involving death and personal injuries are assessed on the
basis of doctor’s report. These claims are dealt by Motor Accident Claims Tribunal
and the amount to be paid is decided by factors like the age and income of theclaimant.Claims involving third party property damage are assessed on the basis of a surveyreport. Motor own damage claim is assessed on the basis of surveyors report. It may require police report if third party damage is involved.**Information**Investigation is different from the assessment of loss. Investigation is done to ensure
that a valid claim has been made and verify the important details and doubts like
absence of insurable interest, suppression or misrepresentation of material facts,
deliberately creating the loss, etc. are ruled out.Insurance surveyors undertake the work of investigation also. It helps if a surveyor
gets on to the job as early as possible. Therefore, the practice is to appoint the
surveyor, as soon as possible after the intimation of the claim is received.**B.** **Role of Surveyors and Loss Assessors****a)** **Surveyors**Surveyors are professionals licensed by IRDAI. They are experts in inspecting and
evaluating losses in specific areas. Surveyors are generally paid fees by the
insurance company, engaging them. Surveyors and loss assessors are hired by
general insurance companies normally, at the time of a claim. They inspect the
property in question, examine and verify the causes and circumstances of the loss.
They also estimate the quantum of the loss and submit reports to the insurancecompany.They also advise insurers, regarding appropriate measures to prevent further
losses. Surveyors are governed by provisions of the Insurance Act, 1938, Insurance
Rules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open Cover’
for exports, are assessed by the claims settling agents abroad named in the policy.
These agents may assess the loss and make payment, which is reimbursed by the62insurers along with their settling fees. Alternatively, all the claims papers are
collected by the insurance claim settling agents and submitted to the insurers,
along with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees
One lakh for other property damage, Insurers need to appoint surveyors for
assessment of such claims. For other claims Insurers may employ other persons (not
being a person disqualified for the time being for being employed as a surveyor or
loss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the
claim form is designed to get full information regarding the circumstances of the
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Rules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open Cover’
for exports, are assessed by the claims settling agents abroad named in the policy.
These agents may assess the loss and make payment, which is reimbursed by the62insurers along with their settling fees. Alternatively, all the claims papers are
collected by the insurance claim settling agents and submitted to the insurers,
along with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees
One lakh for other property damage, Insurers need to appoint surveyors for
assessment of such claims. For other claims Insurers may employ other persons (not
being a person disqualified for the time being for being employed as a surveyor or
loss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the
claim form is designed to get full information regarding the circumstances of the
loss, such as date of loss, time, cause of loss, extent of loss, etc. The other questions
vary from one class of insurance to another.**Example**An example of information sought in a fire claim form is given here under:i. Name of the insured, policy number and addressii. Date, time, cause and circumstances of the fireiii. Details of damaged propertyiv. Sound value of the property at the time of fire. Where the insurance consists ofseveral items under which the claim is made. [The claim must be based on actual
value of property at the place and time of occurrence after allowance for
depreciation, wear and tear (unless the policy in respect of building, plant and
machinery is on “reinstatement value” basis). It shall not include profit]v. Amount claimed after deduction of salvage valuevi. Situation and occupancy of the premises in which the fire occurredvii. Capacity in which the insured claims, whether as owner, mortgage or the likeviii. If any other person is interested in the property damagedix. If any other insurance is in force upon such property if so, details thereofThis is followed by the declaration as to the truth and accuracy of the statement of
in the form and signature of the insured and the date.The issuance of claim form by the insurance company does not imply or mean that
liability for the claim is admitted by insurers. Claim forms are issued with the
remark ‘without prejudice’.63**Supporting documents**In addition to the claim form, certain documents are required to be submitted by
the claimant or secured by the insurers to substantiate the claim.i. For fire claims, a report from the Fire Brigade would be necessary.ii. For cyclone damage, a report from the Meteorological office may be called foriii. In burglary claims, a report from the Police may be necessary.iv. For fatal accident claims, reports may be necessary from the Coroner and thePolice.v. For motor claims, the insurer may like to examine driving license, registrationbook, police report etc.vi. In marine cargo claims, the nature of documents varies according to the type ofloss i.e. total loss, particular average, inland or overseas transit claims etc.**Test Yourself 1**Which of the following activities is not considered as professional in settlement ofclaims?I. Seeking information relating to the cause of the lossII. Approaching the claim with a prejudiceIII. Ascertaining whether the loss was a result of an insured perilIV. Quantifying the amount payable under the claim**Test Yourself 2**Raj is involved in a car accident. His car is insured under a motor insurance
comprehensive policy. Which among the following is most appropriate for Raj to do?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage**Test Yourself 3**Which of the following statements about claims investigation and claims assessmentis correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether there
was any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the loss64IV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while | IC 38 -IA-Eng-Non-Life.md | e62 | Important | IC 38 -IA-Eng-Non-Life_037 | {
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comprehensive policy. Which among the following is most appropriate for Raj to do?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage**Test Yourself 3**Which of the following statements about claims investigation and claims assessmentis correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether there
was any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the loss64IV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while
examining a cyclone damage claim?I. Coroner’s reportII. Report from Fire BrigadeIII. Police reportIV. Report from Meteorological Department**Test Yourself 6**Under which principle can the insurer assume the rights of the insured in order to
recover from a third party the loss paid under a policy?I. ContributionII. DischargeIII. SubrogationIV. Indemnity**Test Yourself 7**If the insurer decides that a certain loss is not payable because it is not covered
under the policy then who decides on such matters?I. Insurer’s decision is finalII. UmpireIII. ArbitratorIV. Court of Law**Summary**a) Settling claims professionally is regarded as the biggest advertisement for aninsurance company.b) Policy conditions provide that the loss be intimated to the insurer immediately.65c) If the claim amount is small, the investigation to determine the cause and extentof loss is done by an officer of the insurer. But for other claims it is entrusted
to independent licensed professional surveyors who are specialists in lossassessment.d) In general the claim form is designed to get full information regarding thecircumstances of the loss, such as date of loss, time, cause of loss, extent of
loss, etc.e) Claims assessment is the process of determining whether the cause of the losssuffered by the insured was caused by an insured peril and whether there was
any breach of warranty. The quantum of loss suffered by the insured and the
insurer’s liability under the policy are assessed. This is done before payment ofthe claim.f) Settlement of the claim is made only after obtaining a discharge under thepolicy.**Key terms**a) Intimation of lossb) Investigation and Assessmentc) Surveyors and Loss Assessorsd) Claim formse) Adjustment and Settlement**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is I.**Answer 3** - The correct option is II.**Answer 4** - The correct option is III.**Answer 5** - The correct option is IV.**Answer 6** - The correct option is III.**Answer 7** - The correct option is IV.66## SECTION## ANNEXURES67## CHAPTER A-01## ANNEXURESThese annexures are provided so that the students get a better idea of proposal
forms used in general insurance.6869**Proposal Forms of Bharat Griha Raksha, Bharat Sookshma & Bharat Laghu Udyam**For a better understanding of standard products and their respective proposal
forms, i.e. Bharat Griha Raksha, Bharat Sookshma and Bharat Laghu Udyam, please
check the following link to the IRDAI website.https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/StandardProducts/Annex
ure-I-BharatGrihaRaksha.pdf70 | IC 38 -IA-Eng-Non-Life.md | s64 | ANNEXURESThese annexures are provided so that the students get a better idea of proposal | IC 38 -IA-Eng-Non-Life_038 | {
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