2. Division of Insurance Sector
INSURANCE
GENERAL INSURANCE
FIRE
INSURANCE
MARINE
INSURANCE
MEDICLAIM
MOTOR
VEHICLE
LIFE
INSURANCE
3. PRINCIPLES OF INSURANCE
Utmost Good Faith
• Insured must disclosed all relevant fact to the insurer
Indemnity
• Underwriter agree to indemnity the insured against losses to the extent of amount
insured
Insurable interest
• The insurable interest must exist both at the time of effecting the insurance as well
as at the time of the loss
Subrogation
• The insurer after paying compensation to insured , become entitled to claim all
the right of the insured against Third party
Causa Proxima
• Losses resulting from fire , margin or some other related cause, being the
proximate cause of losses are covered
4. INTRODUCTION TO FIRE INSURANE
In strict sense, a fire insurance contract is one:
• Whose principle object is insured against loss or damage
occasioned by fire.
• The extent of insurer's liability being limited by the sum
assured and not necessarily by the extent of loss or
damage sustained by the insured.
• The insurer having no interest in the safety or
destruction of the insured property apart from the
liability undertaken under the contract.
5. Rights of insurer
1. Right to avoid the policy.
• Utmost good faith is an implied condition in an insurance contract and places upon
the insured a duty to deal honestly with the insurer when a claim arises. Fraud will
avoid the policy, so also will full fire caused by the insured or with his connivance.
2. Right of entry and control over the property.
• On the happening of any loss or damage to any of the property insured, the
insurance company may enter and take and keep possession of the building or
premises where the loss or damage has happened. These rights are necessary for
the insurer to ascertain the cause and extent of loss or damage, to minimize the
damage and to protect the salvage.
3. Right of reinstatement.
• The insurance company may at its option reinstate or replace the property
damaged or destroyed instead of paying the amount of the loss or damage in
money. The insured has no tight to claim reinstatement. The main object of this
right is to have some protection against unreasonable or exaggerated claims.
4.Right to salvage.
• After a fire has occurred, it is the duty of the assured to hand over the salvage to
the insurer. The insurers are entitled to the salvage for whatever it is worth. Where
the insurer pays for a loss in full, he is entitled by way of salvage to all that remains
of the thing insured. The insurer becomes owner of the salvage as from the date of
the fire.
6. 5. Right to subrogation.
• After the payment of the policy money, the insurer is entitled to all the rights
and remedies which may be possessed by the insured in respect of the
subject-matter of insurance. This right of the insurer whereby he steps into
the shoes of the assured is called the right of subrogation. The insurer must
first pay under the policy of insurance before he can claim the right of
subrogation. But the insurers are usually enabled to exercise the right of
subrogation even before the payment, by an appropriate policy condition.
6.Right of contribution.
• Where a person has taken out more than one policy, against the same risk with
several insurers, the payment of the full amount of the insured’s loss by one or
more of the insurers will discharge the other insurers from their liability. The
insurers who have paid are entitled to call upon the others to contribute
proportionately towards the loss. This is called the right of contribution amongst
the co-insurers.
7. SCOPE OF FIRE INSURANCE
FIRE INSURANCE BUSINESS:
Loss Due To Fire, Lightening, Explosion, Implosion,,
Riots & Strikes, Impact By Rail, Aircraft Damage,
Earth Quake, Flood, Storm, Tempest, Tornado,
Typhoon, Cyclones & Land Slide.
8. Insurable object in Fire
Insurance
• Building
• Electrical installation in buildings
• Machinery, Plant and equipment
• Goods ( raw materials, stocks in process, semi finished,
finished etc ) in factories
• Godowns, Goods in open
• Contents in dwellings
• Shops, Hotels etc.
• Furniture, fixture and fittings, pipelines located inside or
outside the compound etc.
10. VALUED POLICY
• It is usually taken where it is not easy to ascertain the value of
the property.
• In this policy the indemnity is a fixed amount agreed upon at
the time of signing the contract.
• The insured is benefited when the market value of the
property declines , but suffer loss when the market value
appreciates.
• The valued insurance policy is usually offered for such items
like jewellery, furs, or paintings, which value is difficult to
estimate once they are damaged or destroyed by fire.
11. FLOATING POLICY
• It is taken to cover loss on goods, which are lying in different places
and the stock of which is almost continuously fluctuating.
• It is taken out for those goods which are frequently changing in a
warehouse.
• Floating policies are suitable to those traders or products whose
raw-materials or merchandise are lying at different localities or
godowns.
• For example:-Some of the goods of other trader are kept in one
godown, and few kept in another godown, some kept in the railway
godown or some at the sea port open.
12. DECLARATION POLICY
• This policy is taken in respect of stock of inventory of the
policyholder.
• Since the level of stock which are subject to frequent
fluctuations in value the businessman takes a policy for a
maximum amount considered to be at risk and the premium is
paid accordingly.
• On a fixed date of every month the policyholder declares the
amount of stock covered under the policy to the insurance
company.
13. ADJUSTABLE POLICy
• It is issued for existing stock.
• In this policy, premium rate shall be adjusted according to
increase or decrease in the value of stock, this change will be
notified to the insurer by the insured.
• In case of loss by fire, the amount notified by the insured at
the maturity of the policy is taken as final and indemnified
up to that limit.
• It is a contract limited to merchandise or stock in trade other
than farming stock.
14. SPECIFIC POLICY
A specific policy is a type of policy in which the property
is insured for a specific sum irrespective of its value.
If there is loss, the stated amount will have to be paid to
the policyholder.
The actual value of the subject matter is not considered
in this respect.
For example: If a property is insured for Rs. 10000
though its actual value is Rs. 20000. In the event of
loss to property, not more than Rs. 10000 can be
recovered.
15. AVERAGE POLICY
• Where a property is insured for a sum which is less than its
value, the policy contain a clause that the insurer shall not be
liable to pay the full loss but only that proportion of the loss
which the amount insured for, bears to the full value of the
property.
• For example: A value of the property is Rs.1,00,000. It is
insured for Rs.60,000 (60% of the total value)
The amount of loss is Rs 60,000.The insurance
company will not pay Rs.60,000 to the policyholder but will
pay Rs.36,000 (60% of Rs.60,000).
