Professional Documents
Culture Documents
Fire Ins
Fire Ins
Fire Ins
November 8, 2010
AGENDA
• PURPOSE OF FIRE INSURANCE
• PROPERTY COVERED
• PERILS COVERED
• EXCLUSIONS/ CONDITIONS
• TARIFF RATING SYSTEM
• SPECIAL POLICIES /CLAUSES
• FIRE LOP/IAR POLICIES
November 8, 2010
FIRE INSURANCE
PURPOSE
TO PROVIDE FINANCIAL PROTECTION
AGAINST LOSS(OR) DAMAGE TO
PROPERTY BY FIRE & OTHER
SPECIFIED PERILS
PRICE
GOVERNED BY TARIFF TILL 31/12/2006,
PRESENTLY DE-TARIFFED ONLY AS FAR AS
RATING
November 8, 2010
PROPERTY COVERED
a) BUILDING –
INCLUDING
ELECTRICAL INSTALLATION, PIPELINES ETC.
b) CONTENTS
i) PLANT & MACHINERY,
EQUIPMENTS, ACCESSORIES
ii) FURNITURE ,FIXTURES AND
FITTINGS
iii)STOCK
•RAW MATERIAL
•STOCK IN PROCESS
•SEMI FINISHED GOODS
•FINISHED GOODS
November 8, 2010
VALUATION ASPECTS IN
FIRE
• CURRENT NEW REINSTATEMENT/
REPLACEMENT VALUE—CNRV
• MARKET VALUE=CNRV--
DEPRECIATION
• PURCHASE VALUE
• WRITTEN DOWN VALUE=PURCHASE
VALUE-DEPRECIATION
November 8, 2010
STANDARD FIRE AND SPECIAL
PERILS POLICY-COVERAGE
1. FIRE
-EXCLUDING SPONTANEOUS COMBUSITON
/BURNING BY PUBLIC AUTHORITY…
(S/COMBUSTION CAN BE COVERED AT
EXTRA PREMIUM)
2. LIGHTNING
3. EXPLOSION/IMPLOSION
- EXCLUDING DAMAGE TO BOILERS etc. OR
THEIR CONTENTS DUE TO
CENTRIFUGAL FORCES
4. AIRCRAFT DAMAGE
November 8, 2010
PERILS COVERED contd...
November 8, 2010
PERILS COVERED…. contd.
• 10.MISSILE TESTING
OPERATIONS
• 11. LEAKAGE FROM AUTOMATIC
SPRINKLER INSTALLATION
• 12. BUSH FIRE
• ---EXCLUDING FOREST FIRE
November 8, 2010
GENERAL EXCLUSIONS
November 8, 2010
GENERAL EXCLUSIONS
contd..
4. POLLUTION OR CONTAMINATION UNLESS
RESULTING FROM OR RESULTING IN INSURED
PERIL
5.LOSS TO BULLION,UNSET PRECIOUS
STONES,CURIOS, WORKS OF ART
(exceedingRs10000value),SECURITIES,STAMPS,
CURRENCY,BOOKS, COMPUTER RECORDS,
EXPLOSIVES unless specifically insured
November 8, 2010
GENERAL EXCLUSIONS contd..
November 8, 2010
GENERAL EXCLUSIONS contd..
11.ELECTRICAL FITTINGS, ELECTRONIC
MACHINES DUE TO OVER RUNNING,
EXCESSIVE PRESSURE, SHORT CIRCUITING ,
LEAKAGE OF ELECTRICITY AND ARCING
12.THEFT DURING OR AFTER THE OCCURANCE OF
FIRE
13.PROPERTY REMOVED FROM THE INSURED
PREMISES(EXCEPT MACHINERY FOR REPAIRS
etc. UPTO 60 DAYS)
November 8, 2010
GENERAL CONDITIONS
- 1. NON-DISCLOSURE OR MISREPRESENTATION
OF MATERIAL FACT WILL RENDER THE
CONTRACT NULL AND VOID- BREACH OF
UTMOST GOOD FAITH
2. INSURANCE CEASES AFTER 7 DAYS FROM THE
DATE OF FALL (OR) DISPLACEMENT OF
BUILDING (OR) PART OF BUILDING,IF SUCH
FALL IS NOT DUE TO AN INSURED PERIL.
INSURED MUST INFORM INSURERS WITHIN 7
DAYS OF SUCH FALL OR DISPLACEMENT IN
WHICH CASE INSURANCE MAY BE CONTINUED
SUBJECT TO REVISED RATES,TERMS AND
CONDITIONS IF REQUIRED BY THE INSURER.
November 8, 2010
GENERAL CONDITIONS contd..
November 8, 2010
GENERAL CONDITIONS contd..
4.IF THERE IS A MARINE POLICY COVERING
THE SAME RISK , FIRE POLICY WILL PAY
ONLY OVER AND ABOVE THE CLAIM UNDER
MARINE POLICY.
5. CANCELLATION - POLICY MAY BE
CANCELLED BY EITHER OF THE PARTIES --
i) IF INSURED CANCELS---REFUND ON
SHORT PERIOD BASIS
ii)IF INSURER CANCELS---REFUND ON
PRORATA BASIS
November 8, 2010
For a period not exceeding 15 days 10% of the Annual rate
November 8, 2010
GENERAL CONDITIONS contd..
6.CLAIMS PROCEDURE-
PART I -DEALS WITH THE DUTIES OF THE
INSURED ON THE HAPPENING OF THE LOSS
i. INSURED TO GIVE NOTICE OF
LOSS
ii) CLAIM FORM TO BE SUBMITTED
WITH IN 15 DAYS OF DATE OF LOSS
PART II-DEALS WITH TIME BAR AND SUIT BAR
OF CLAIMS
November 8, 2010
GENERAL CONDITIONS contd..
7. RIGHTS OF THE INSURER-
WHEN THERE IS A CLAIM,THE INSURER
HAS THE RIGHT-
• TO TAKE POSSESSION OF PREMISES (OR)
BUILDING(OR) PROPERTY
•TO REMOVE, SORT AND SALVAGE THE
PROPERTY
•TO SELL (OR) DISPOSE OFF THE
PROPERTY IN THE INTEREST OF ALL
CONCERNED.
November 8, 2010
GENERAL CONDITIONS contd..
8.FRAUD-
THE INSURED IS NOT ENTITLED TO ANY
BENEFITS UNDER THE POLICY IF-
I) THE INSURED CAUSES LOSS TO THE
PROPERTY WILLFULLY (or)
ii) PRODUCES FALSE EVIDENCE FOR THE
SETTLEMENT OF THE CLAIM (or)
iii) THE CLAIM IS FRAUDULENT
November 8, 2010
GENERAL CONDITIONS contd...
9. INSURER’S OPTION TO
REINSTATE OR REPLACE THE
DAMAGED PROPERTY OR REPAIR OR PAY
BY CASH 10.
CONDITION OF AVERAGE:-IF THE SUM
INSURED IS LESS THAN THE VALUE OF
PROPERTY ON THE DATE OF LOSS,THE
INSURED HAS TO BEAR A PROPORTION OF
THE LOSS.AMOUNT PAYABLE WILL BE = S/I
X LOSS
M/V
November 8, 2010
GENERAL CONDITIONS contd..
11. CONTRIBUTION:- ALL CONCERNED
INSURERS FOR THE SAME PERIL/PROPERTY
WILL SHARE THE LOSS PROPORTIONATELY
12.SUBROGATION:- THE INSURED IS
TO GIVE ALL ASSISTANCE TO THE
INSURER TO RECOVER LOSS FROM
THIRD PARTY
13. ARBITRATION :- DISPUTE IN AMOUNT OF
CLAIM PAYABLE MAY BE REFERRED TO
ARBITRATION
November 8, 2010
GENERAL CONDITIONS contd..
14. NOTICE (or) OTHER COMMUNICATION TO
THE INSURER MUST BE IN WRITING
15.AUTOMATIC REINSTATEMENT OF SUM
INSURED-THE S/I MUST BE MAINTAINED AT THE
SAME LEVEL THROUGHOUT THE POLICY PERIOD.
PRO-RATA PREMIUM ON THE AMOUNT OF LOSS
RELATING TO THE UNEXPIRED PERIOD OF THE
POLICY WILL BE DEDUCTED FROM THE CLAIM
PAYABLE, UNLESS INSURED DESIRES OTHERWISE .
November 8, 2010
SECTIONS OF THE FIRE TARIFF
TOTAL NO.OF SECTIONS ARE EIGHT
SECTION I - GENERAL RULES &
REGULATION
SECTION II- STANDARD FIRE & SPECIAL
PERILS POLICY (SF &SP)
SECTION III – RATING OF
DWELLINGS/SHOPS etc-SIMPLE RISKS
-
November 8, 2010
SECTIONS OF THE FIRE TARIFF…
contd
November 8, 2010
SECTIONS OF THE FIRE TARIFF…
contd
November 8, 2010
SECTIONS OF THE FIRE TARIFF…
contd
SECTION VII –RATING OF TANK
FARMS/GAS HOLDERS OUTSIDE THE
COMPOUND OF INDUSTRIAL/
MANUFACTURING RISK
- STORAGE OF LIQUAFIED GAS
- LIQUIDS/CHEMICALS /OIL
- INFLAMMABLE LIQUID/ GAS
November 8, 2010
SECTIONS OF THE FIRE TARIFF…
contd
SECTION VIII -
- ADD-ON COVERS AND RATING FOR
EARTHQUAKE PERIL
RATES DEPEND ON EARTHQUAKE ZONE
ZONE I - 1.00
ZONE II- 0.50
ZONE III-0.20
ZONE IV 0.10
November 8, 2010
SECTIONS OF THE FIRE TARIFF…
contd
• ADD-ON COVERS:
• ARCHITECTS/SURVEYERS FEES IN EXCESS
OF 3% OF CLAIM UPTO MAX. 7.5% OF
ADJUSTED LOSS
• REMOVAL OF DEBRIS IN EXCESS OF 1% OF
CLAIM UPTO MAX.10%OF TOTAL S/I
• DOS IN COLD STORAGE PREMISES DUE TO:
• 1)FAILURE OF ELECTRIC SUPPLY ARISING FROM
DAMAGE CAUSED BY ID./ PERILTO PROPERTY ON
ID. PREMISES/ELECTRIC SUBSTATION
• 2)DAMAGE TO REFRIGERATION MACHINERY DUE
TO ID./PERIL
November 8, 2010
SECTIONS OF THE FIRE TARIFF…contd
• FOREST FIRE
• IMPACT DAMAGE DUE TO INSURED’S OWN
VEHICLES/FORKLIFTS/CRANES/STACKERS etc.
AND ARTICLES DROPPED THEREFROM
• SPONTANEOUS COMBUSTION/NATURAL
HEATING/OWN FERMENTATION
• OMISSION TO INSURE
ADDITIONS/ALTERATIONS/EXTENSIONS UPTO
MAX.5%OF S/I BY EACH ITEM
• SPOILAGE MATERIAL DAMAGE COVER DUE TO
PERILS OF THE STANDARD FIRE AND SPECIAL
PERILS POLICY
November 8, 2010
SECTIONS OF THE FIRE TARIFF…contd
November 8, 2010
SECTIONS OF THE FIRE TARIFF…
contd
• ADDITIONAL EXPENSES OF RENT FOR ALTERNATIVE
ACCOMODATION (NON-MANUFACTURING RISKS
ONLY)—MAX. INDEMNITY PERIOD WILL BE THREE
YEARS:
• For Tenant:-A/E=NEW RENT- ORIGINAL RENT(if he is
not obliged to pay rent for protecting tenancy rights)
• A/E=NEW RENT(if he is obliged to pay rent for
protecting tenancy rights)
• For Owner-Occupant :-
• A/E=NEW RENT –STANDARD RENT
• MOLTEN MATERIAL DAMAGE
• START-UP EXPENSES
November 8, 2010
Floater Policy
• Some times, an Insured is not able to keep day to
day account of his stocks in various godowns. He
can give only the total value of all his stocks lying
in various locations / godowns. To cater to such
clients a floater policy is issued.
• The floater policy covers in one sum insured ,
stocks stored in different godowns/locations
• The policy can be granted only on stocks. The
address of each location/godown must be
declared by the insured.
• The highest rate applicable is charged with a
loading of 10%
November 8, 2010
Declaration Policy
• Many insured may have stocks which frequently
fluctuate in value. To take care of such fluctuation in
quantity/ value , a declaration policy is issued.
• The sum insured will be the maximum possible value
at any point of time during the policy period. The
minimum sum insured will be Rs. 1 cr. in one or more
locations and shall not be less than Rs.25 lacs in
atleast one of these locations.
• Monthly declarations based on
a) The average of the values at risk on each day of
the month or
b) The highest value at risk during the month.
must be submitted by the insured before the end of
the succeeding month.
November 8, 2010
Declaration Policy …
• If declaration contd
is not received for a
particular month, the sum insured will be
treated as the declaration for the month.
• Reduction in sum insured is not allowed.
Increase in sum insured can be done with
prior agreement.
• Refund of premium on adjustment basis
on the declarations / cancellations shall
not exceed 50% of the total premium.
• Basis of value for declaration will be the
market value.
• Declaration policy cannot be issued for
stock in process/ retail stores /short period
insurance.
November 8, 2010
Floater Declaration
Policy
• Floater Declaration policy can be issued
subject to a minimum sum insured of Rs. 2
crs. and compliance with rules for floater
and declaration policy.
• Minimum retention of premium on the
expiry of the policy will be 80% of the
annual premium.
November 8, 2010
Reinstatement Value
Policy
• This policy can be issued for Building, Plant and
Machinery, Furniture Fixture & Fittings only.After
the World Wars, when inflation was high, the
indemnity on market value basis was grossly
inadequate to rebuild the factories/ plants.Hence
this policy was launched on public demand
• The Standard Fire & Special Perils policy is
issued with the reinstatement value clause
attached thereon.
• The policy indemnifies the cost of reinstatement
of building/ replacement of machinery to a
condition equal to but not better or more
extensive than its condition when new. Hence
this policy is new for old
November 8, 2010
Reinstatement Value Policy
..contd.
• Any technical improvements will go to the account of the
insured.
• Reinstatement must be carried out by the insured in order to
obtain the benefits of the special basis of settlement.
• The work of reinstatement must be completed within 12
months from the date of loss, failing which the claim will be
settled on market value basis.
• The sum insured must be equal to the cost of reinstatement of
the entire property on the date of reinstatement, otherwise
underinsurance will apply.
• The RIV basis of settlement will not apply if the insured fails to
intimates within 6 months from the date of loss, his intention
to replace / reinstate the damaged property.
November 8, 2010
LOCAL AUTHORITIES
CLAUSE
• RIV policy may be extended to cover additional cost of
reinstatement incurred solely by reason of the necessity
to comply with the regulations of the local authority.
• No additional premium is charged for inclusion of this
clause in the policy. However sum insured must include
such additional cost.
• The clause excludes any tax, duty, development or other
charges arising out of capital appreciation of the
property.
November 8, 2010
REMOVAL OF DEBRIS CLAUSE
• Removal of debris is covered upto 1% of the
admissible claim amount under the Standard Fire &
Special Perils policy.
• The indemnity applies to removal of debris from the
premises and dismantling / demolishing / shoring or
propping up in case of loss damage to Building/
Plant & Machinery.
• This tantamounts to a supplementary contract
between the insured and insurer and no additional
premium is charged for the same.
• By charging additional premium, removal of debris
may be covered in excess of 1% of claim amount
November 8, 2010
ESCALATION CLAUSE
• Escalation clause is attached to the Standard
Fire and Special Perils policy to take care of the
escalation of the value of building / plant and
machinery during the policy period.
• An additional premium @ 50% of the applicable
premium rate is charged on the escalation sum
insured.
• The selected percentage increase shall not
exceed 25% of the sum insured.
• The indemnity is provided by increasing the sum
insured by 1 / 365th ( for each day ) of the
specified percentage increase per annum.
November 8, 2010
Architects, Surveyor’s And
Engineers’ Fees Clause
• The Standard Fire & Special Perils policy
covers the above fees upto 3% of the
adjusted loss amount.
• The indemnity will not include the cost in
connection with the preparation of the
insured’s claim / estimate of loss due to the
operation of the insured’s perils.
• By payment of additional premium, the
Architects etc. fees may be paid upto 7.5%
of the adjusted loss.
November 8, 2010
CONTRACT PRICE
•
CLAUSE
This clause is applicable in case of insurance
of imported goods only which are sold under a
contract which may be cancelled either wholly
or to the extent of loss or damage due to the
operation of insured perils
• The indemnity will apply to goods sold but not
delivered and for which the insured is
responsible
• The company’s liability will be on the basis of
the contract price i.e. this is an agreed value
policy and not a pure indemnity policy.
November 8, 2010
DESIGNATION OF PROPERTY
CLAUSE
• Sometimes, following a loss it is found that a
particular item is capitalized by the insured
under a heading which may or may not be
acceptable to the insurer. e.g. Compound
wall may be capitalized as plant or air
conditioner may be classified as machinery
and not electrical installation.
• To avoid disputes, the insurers agree to
accept the designation under which the
property has been entered in the insured’s
books of accounts.
November 8, 2010
AGREED BANK CLAUSE
• All policies in which a bank/ financial
institutions has insurable interest will be issued
in the name of Bank/ Financial Institutions and
owner / mortgagor.
• The insurer will pay the claim amount to the
Bank whose receipt shall be complete
discharge and shall be binding on all the
parties to the insurers contract.
• The interest of the Bank will not be prejudiced
in case the insured commits a breach of
Condition 3 (Alteration Condition) of the
Standard Fire & Special Perils Policy.
• Any notice under the policy is sufficient if given
by or to the Bank.
November 8, 2010
OMISSION TO INSURE ADDITIONS,
ALTERATIONS & EXTENSIONS CLAUSE
• This clause must be incorporated
• at the time of issuing policy.
• Indemnity is provided against building / plant
and machinery which the insured may erect
or acquire or for which they may become
responsible during the course of the policy.
• The liability will not exceed 5% of the sum
insured by each item under the policy.
• All additions/alterations/ extensions during
the currency of the policy must be declared
at the end of the year and additional
premium paid on pro-rata basis from the date
of completion till the policy expiry.
November 8, 2010
INDUSTRIAL ALL RISK
POLICY
November 8, 2010
IAR - Industrial All Risk Policy
BI
(Fire) Machinery
Fire BI (MB)
Insurance
Insurance
November 8, 2010
Scope & Structure of IAR Policy
Section I – Material Damage including
(a) Fire & All special perils
(b) Burglary
(C) Machinery Breakdown
(d) Boiler Explosion
(e) Electronic Equipment Insurance
Salient Features –
Comprehensive, convenient and cost effective policy
Package policy of All Risk Nature.
Not a named peril policy
All perils covered except certain specific exclusions.
Presently wording is governed by Tariff
Eligibility – Industrial Risks having overall Sum
Insured in excess of of Rs. 100 Cr. at one or more
locations.
November 8, 2010
Salient Features of IAR Cont….
Single Document Policy
Losses (MD as well as BI) due to Burglary covered.
Transit Risk inside industrial compound covered
Considerable premium saving possible due to lower
rates (especially for MB cover) .
Underinsurance up to 15 % is ignored
No depreciation deducted from MB loss (Total or
Partial) for Limited Life Equipments.
Handsome discount available for opting higher
deductibles as well as good claims experience
November 8, 2010
Salient Features of IAR Cont….
BI due to Fire & Allied perils - Compulsory.
BI due to Machinery Breakdown / Boiler
Explosion / Electronic Equipment - Optional.
Compared to traditional policies, higher excess
is applicable
No declaration facility available
Insurance under IAR on Reinstatement value
basis only except Stocks. Stocks on Market
Value basis.
November 8, 2010
Salient Features of IAR Cont….
Excluded Causes in Section I (MD Section)
Faulty or defective design
Defective Material or Workmanship
Inherent vice / Latent defect
Gradual deterioration / deformation / distortion
Wear and tear
Interruption of water supply, gas, electricity, fuel
systems( Unless resulted directly by a cause not
excluded in the policy)
Collapse or cracking of buildings
November 8, 2010
Excluded Causes in Section I (MD) Cont..
Corrosion, rust, shrinkage, pollution etc.
( Unless resulted directly by a cause not excluded in the
policy)
Larceny
Acts of fraud or dishonesty
Inventory shortage, misplacement, unexplained
disappearance.
Coastal or River erosion
Normal Settlement of new structures
Willful act or negligence on part of insured
Cessation of work
November 8, 2010
Excluded Causes in Section I (MD) Cont..
Delay or loss of market and other indirect losses
War, Invasion act of foreign enemy, Civil war.
Permanent or temporary dispossession
resulting from nationalization commandeering
or unlawful occupation
Destruction of property by order of public
authority
Nuclear weapons
Ionizing radiations, contamination by
radioactivity from nuclear fuel.
Impact due to floating / waterborne objects
Act of Terrorism
November 8, 2010
Excluded Property under IAR
Unless specifically mentioned as insured -
Money, Cheques, Stamps, Bonds, Credit Cards,
Jewellery, Precious Stones, Precious Metals,
Curios, Works of Art
Goods held in trust, Documents/Manuscripts/Business Books
Computer Systems Records
Patterns / Models / Moulds
Plans, designs, explosives
Land, Road, Rail Lines
Dams, Reservoir, Canals, rigs, wells, tunnels, pipelines
Bridges, Docks, Jetties, Offshore Property etc.
November 8, 2010
Special Exclusions of Section II (BI)
Similar to normal BI (Fire) policy . In brief …..
IAR policy does not cover loss resulting from interruption due to
1. Any restriction on reconstruction or operation imposed by the
public authority
2. Insured’s lack of sufficient capital for reinstatement
3. Damage due to Mechanical / Electrical Breakdown
4. Damage to boilers, Turbines or any other pressure vessels
5. Damage to Electronic installation, computers etc.
6. Damage resulting from distortion or corruption of information
on computer system (Unless resulting from Fire & allied perils)
Note – If BI due to MB/Boiler Explosion/ Electronic Equipment is
opted, exclusions 3, 4, 5 and 6 are deleted.
November 8, 2010
Portfolio Discount for Good Claims
Ratio(Applicable after 2 years)
Claims ratio below 30 %
Discount
2 years 5%
3 years 10%
4 years 15%
5 years 20%
6 years & above
25%
November 8, 2010
CONSEQUENTIAL LOSS (FIRE)
INSURANCE POLICY
• FIRE INSURANCE COVERS MATERIAL DAMAGE TO
PROPERTY DUE TO THE PERILS INSURED i .e.
• IT DEALS WITH CAPITAL LOSS
• L.O.P.INSURANCE DEALS WITH LOSS OF EARNING
POWER COSEQUENT UPON DAMAGE/DESTRUCTION TO
THE CAPITAL ASSETS/STOCKS.THUS,SUBJECT MATTER
OF LOP INSURANCE IS THE BUSINESS OF THE INSURED
• ITEMS OF EXPENSES CAN BROADLY BE DIVIDED INTO-
1. 1)VARIABLE CHARGES- WHICH VARY IN PROPORTION
TO THE VOLUME OF BUSINESS
2. 2)STANDING CHARGES-WHICH ARE FIXED IN
NATURE,IRRESPECTIVE OF THE VOLUME OF BUSINESS
TRANSACTED
November 8, 2010
CONSEQUENTIAL LOSS (FIRE)
INSURANCE POLICY….contd.
November 8, 2010
L.O.P.JARGON
Gross Profit
Turn Over
Rate of G.P.
Working Expenses
Time Exclusion
Indemnity Period
Standing Charges
Standard Turnover
Annual Turnover
November 8, 2010
INTEREST COVERED - LOP
or
Turnover
Working Gross
Expenses Profit
Standing Net
Charges Profit
November 8, 2010
COMPONENTS OF COVER
H
H
0,0 A B C D TIME
A - B TIME EXCLUSION
A - D INDEMNITY PERIOD (I.P)
A - C ACTUAL I.P.
F - G L.O.P (ACTUAL)
A OCCURANCE OF ACCIDENT
November 8, 2010
1990
JAN
APR
FINANCIAL YEAR
JULY
OCT
1991 JAN
APR STANDARD TURNOVER
JULY
OCT
1992 JAN ANNUAL TURNOVER
APR
JULY
OCT INTERUPTION PERIOD
1993 JAN
November 8, 2010
TYPICAL LIST OF STANDING
CHARGES
1. Employee Cost
2. Interest & Finance Charges
3. Depreciation
4. Repairs & Maintenance including Stores & Spare parts
utilised.
5. Minimum demand charges for utilities
6. Rent, Rates & Taxes
7. Insurance
8. Travelling & Conveyance
9. Communication expenses
10. Printing & Stationery
11. Advertisement & Publicity
12. Legal & Professional Charges
13. Auditors Remuneration & Expenses
14. Director`s Fees, Remuneration & Profit Commission
15. Sundry & Miscellaneous Expenses
November 8, 2010
SPECIFIED WORKING EXPENSES
November 8, 2010
Interruption Period - Indemnity
Period
LOSS
time
Int. P.
accident
I. P.
I.P.L.
INDEMNITY PERIOD ends, when actual T.O. reaches the same amount, as if no damage would d have occurred.
e.g. - restarting requires several days
November 8, 2010 - loss of market
Monthly Turnover
Annual Turnover
Trend
Reduction
in
T.O. Turnover
Reference
Period
Actual
1991 1991 1992 Turnover 1992 1993
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7
Interruption
Reference Period
Period Indemnity
Period
12 months before Indemnity Period Limited
Time
the accident Date of accident
November 8, 2010
100 $ p.a.
Costs
90 Turnover
}
80 Gross Profit
Net Profit
70
60
50 Break-Even Point
specified working
40 Net Loss
{ expenses Gross Profit
30
(variable costs ) ^
=
Sum Insured
20
10
standing charges (fixed costs)
1 2 3 4 5 6 7 8 9 10
November 8, 2010 units p.a.
Discounts
Fire & Allied Perils
• F.E.A discount for approved installation
• Claims experience discount
• Discount for higher excess
Breakdown risks
• Discounted flat rate
• Discount for higher excess
November 8, 2010
Deductibles
For material damage claims :
• 5 % of the claim amount subject to a
minimum of Rs. 5 lakhs and the
maximum is Rs. 50 lakhs
For business interruption claims:
• FLOP--three days gross profit subject to a
minimum of Rs. 5 lakhs and the maximum is Rs.
50 lakhs for Fire LOP claims.
• MLOP--Shall be as decided by TAC in case of
MLOP claims
November 8, 2010
Voluntary Deductibles
Material Damage Claims
5 % of claim amount with a
minimum of
Deductible Discount
Rs. 10 Lakhs 10 %
Rs. 15 Lakhs 15 %
Rs. 20 Lakhs 20 %
Rs. 25 Lakhs 25 %
November 8, 2010
Voluntary Deductibles
Business Interruption Claims
Deductible Discount
No.of Days Minimum
7 days Rs. 10 Lakhs 5%
14 days Rs. 15 Lakhs 10 %
21 days Rs. 20 Lakhs 15 %
28 days Rs. 25 Lakhs 20 %
35 days Rs. 30 Lakhs 25 %
Opting for higher deductibles entails still
higher discounts
November 8, 2010