A guide on how to professionally handle fire insurance claims

1. FIRE CLAIMS :
PROFESSIONAL APPROACH
Vimal Goyal
FIII, ACII (London),
Chartered Insurance Broker
vg@smcindiaonline.com
vkgnia@hotmail.com
Cell +919899699304

2. Tips
To avoid
Disputes
Claim
Process :
Major stages
Claim
Process :
Documentation
How to
Speed up
Process
Introduction
Case
Studies
Areas of
Dispute

3. INTRODUCTION :
Significance of claims
 Delivery of promise
 Displays attitude :
 You are with insured or take it as a burden
 You help at each step or do just postman’s job & leave to
mercy of surveyor and insurance co.
 Test of underwriting precautions, add-on covers
 Shows competence to service the insurance portfolio
 Trust of client in insurer
 Faith in the intermediary
 Can strengthen or demolish long term relationship
with the insurer and intermediary
 Publicity through word of mouth

4. CLAIM PROCESS :
Major stages in life cycle of a claim
 Intimation of claim
 Deputation of surveyor by insurance co.
 First visit of surveyor and on-site verifications
 Go ahead for repairs/ demolition / removal
 Letter of requirements from surveyor
 Compliance for processing on account payment
 Submission of documents, discussions, response to
queries of surveyor
 Reinstatement / repairs, its verification by surveyor
 Sharing of assessment by surveyor and consent
 Submission of survey report to insurance co.
 Processing by insurance co., addressing their queries
 Approval, discharge, NOC, Subrogation, Payment

5. CLAIM PROCESS :
Documentation for Fire claim
General (List is not exhaustive)
 A copy of the written intimation letter to insurer
 A copy of the insurance policies involved
 Profile of the Company, nature of business, turnover,
products, locations
 A brief write up about the affected premises : date of
start of operation, turnover, nature of activities, no.
of workers, working hours, capacities, turnover,
bankers, statutory returns filed, past claims.
 Balance sheet of the company : with unit-wise details
of Fixed Assets Schedule
 Occurrence report & Statement of eye witnesses
 Details of damaged and undamaged items
 Itemwise claim within 15 days from date of loss

6. CLAIM PROCESS :
Documentation for Fire claim
General
 Manufacturing process, flow chart, raw materials
 Copy of the intimation of the loss to Police, Fire
Brigade, factories inspector and any other authority
 Fire Brigade report / Meteorological deptt. report (in
case of flood, cyclone etc.)
 Daily Diary report / FIR issued by the Police
 News paper clips
 Claim form and Claim bill
 Photographs, Video, CCTV footage
 Copy of the license for the operation / factory from
the relevant local authority.
 Copy of NOC from Fire Brigade Department from the
past three years

7. CLAIM PROCESS :
Documentation for Fire claim
General
 Drawing layout of the Fire hydrant points and fire
fighting equipment
 Fixed asset register since inception
 Documents to establish adequacy of insurance : how
sum insured arrived at, valuation report, what is
reinstatement / replacement value
 Identify the items insured damaged in the FAR
 Purchase ledger for building, P&M, Electricals, FFF,
Office Equipment Computers.
 Purchase invoices of all items above certain amt.
 Estimated quantities for salvage items
 Salvage offer
 Bills of repairs / replacement with payment proof

8. CLAIM PROCESS :
Documentation for Fire claim
Building
 Complete dimensioned layout of the factory premises
marking the area affected by fire
 Layout of the factory premises passed by the
relevant authority for the construction of the factory
 Structural engineers inspection report along with
results of the tests conducted giving the condition of
affected building and repair methodology
 Item wise estimate of the repairs of the damaged
portion of the affected building giving the item name,
qty, rate & amount for the material and labour
(BOQ) separately for existing and new design.
 Quotation giving the reinstatement cost of the
damaged building
 Rent agreement/agreement with Principals TP

9. CLAIM PROCESS :
Documentation for Fire claim
P&M, Electricals, FFF, Office Equipments, IT Assets etc.
 Layout of the factory premises marking the
installation of the various machinery
 'Single Line Diagram (SLD)' showing the electrical
connections from the main to the end consumer P&M
 Service Engineer/OEM's Report with nature of
damage, cause of damage, method of restoration,
estimate of repairs
 Estimates/quotations of repairs and replacement
machine-wise with specifications duly supported with
copy of the original procurement invoice
 Quotation giving the restoration cost of line wise and
machine wise along with complete specifications
 Log Records of maintenance of machinery

10. CLAIM PROCESS :
Documentation for Fire claim
Stocks
 Testing report prior to loss, of the finished goods and stock in
process that are damaged
 Testing report after the loss with explanation on standard
parameters and deviations in test result
 Detailed statement giving the procurement date and
consumption of stock damaged in fire along with supporting
documents
 'Material Hazard Sheet' for all the types of stocks present in the
factory premises at the time of fire
 Write up on stock process, stock movement & accounting
system adopted : Purchase, process, PO, despatch,
methodology of tracking stock level
 Estimate of loss in respect of the damaged stock, along with
cost supporting documents giving costing of each article stage
wise duly certified by cost accountant, correlate the same with
the relevant purchase orders and cost supporting document

11. CLAIM PROCESS :
Documentation for Fire claim
Stocks
 Copies of purchase orders in hand from buyers on date of loss
 Trading account from last audited balance sheet till date of loss
 Copy of VAT / GST returns along-with acknowledgements
 Copy of Excise returns (ER1) along-with acknowledgements
 Monthly Stock statement submitted with your Banks
 Itemized monthly purchase & sales ledgers for specified period
 Purchase invoices, import documents, stock registers etc. to
substantiate the claimed quantities and value. Purchase cost,
processing cost and carrying cost. (Excluding profit element)
 Volumetric analysis of stocks for each type of material : Floor
plan, item name and quantity stored in each area
 Details of damaged and undamaged items (Quantities and
value) : items identified as affected / damaged from remains,
items saved
 Ageing of stocks : to check obsoletion, if any.

12. CLAIM PROCESS :
How to speed up the process
 Maintain and provide standard formats to the insured
 Take the claim as a project and make someone from client side
as Project in-charge
 Joint meeting of all concerned on insured side, earmark and
assign documentations in three categories:
 Readily available internally
 Can be prepared internally
 To be sourced from outside agencies
 Assigning of duties to concerned persons : Name, time-line
 Mark and Prioritize documents for “Go ahead” for repairs and
for On account payment
 Review to take updates every week : speak to concerned
persons / assignee directly to clarify his concerns / issues
 Discuss and brain-storm difficult areas and decide / ask client to
decide to make the choice out of different options
 Scrutinize documents from surveyors and insurer’s perspective
 Review claim working : Market value Vs. RIV, Speed Vs. Amt.

13. CLAIM PROCESS :
How to speed up the process
 Don’t hesitate to provide documents to surveyor in piecemeal :
give surveyor opportunity to review documents received
 Persistent follow-up with client, surveyor, insurer at least on
weekly basis : Follow-up telephonic discussions by email
 Regularly discuss and maintain cordial relations with surveyor
and insurers : Do not create any ego issues on either side.
 Correspondence and discussions : polite, does not help to be
offensive. Present differing point of view as academic discussion
 Keep legal aspects in mind but never use legal words
 Don’t manipulate documents : Surveyors have means to know
through scrutiny.
 Presentation : easy to co-relate, qualitative, makes a lot of
difference.
 Grey Areas : After informal discussions, present the view point
in a logical and forceful manner.

14. CLAIM PROCESS :
Areas of dispute
 Claim not payable / liability is denied
 Policy coverage (Location misdescription, Property miscription / Items not
covered; peril not covered, falls in exclusion, Insurable interest, basement
storage, storage in open)
 Breach of condition : (Delay in intimation, fraudulent means, non-
submission of documents)
 Extraneous issues : Not valid but taken as ground by surveyor / insurance
co. (Fire safety approval, negligence, Remarks by Fire Brigade, Police)
 Claim file closed as NO CLAIM: Non-compliance of requirements
 Deduction from claim amount :
 A Part of claim is denied : Property held in trust, Purchase unpaid on DOL,
Not capitalized in insured’s books, Promotion material/samples, spares
 Deduction from actual loss : Underinsurance, Improvement, CTL Vs.
Repair, GP ratio, Obsoletion, Salvage, Testing
 Non-standard settlement of claim
 Breach of warranty : (FEA not maintained)
 Underwriting related breach (occupancy, premium rating)
 Inordinate Delay in settlement of claim
 By surveyor : Busy in other assignments, piecemeal, response time
 By insurance co. : Appointment of second surveyor, investigator, Queries in
piecemeal, Concerned officials on leave/tour/busy

15. Examples of disputes and :
Tips to avoid disputes
 Generic description of property covered
 Occupation : Actual vs. Tariff item
 Designation of property : Alignment with Fixed Assets headings
 Capital work in progress
 Working of Reinstatement value
 Property held in trust or on commission
 Perils : Add on covers or consider IAR
 Policy audit : RIV Clause, Stocks declaration clause
 Presentation
 Scrutiny of documents from surveyors and insurer’s angle
before submission
 Database of survey reports : working of adequacy and
deductions from claim amount
 Dealing person from intermediary should have practical working
experience of both underwriting and claims

16. CLAIM PROCESS :
Case studies
 Denial of claim : Fraudulent means
 Description of stock items covered : declared by bank (other
likewise goods)
 Electrical Exclusion / dynamo clause
 Smoke : No fire
 Sales cost Less Net profit or Gross Profit
 Purchase bills not available : considered 75% depreciation
 Fixed Assets register not available
 Machinery under installation / ACs not installed
 Part Market value part RIV
 Change of location within same complex
 Salvage treatment : Sorting, segregation, drying expenses : No
cover for loss control / minimization expenses
 Documents for issuance of stocks-in process

17. Any questions?

18. THANK YOU
Vimal Goyal
FIII, ACII (London),
Chartered Insurance Broker
vg@smcindiaonline.com
vkgnia@hotmail.com
Cell +919899699304