MASTERS IN MANAGEMENT STUDIES

Project Report on Fire Insurance Policy

Submitted by:
AMIT KAMRA & GROUP

Name of Coordinator: Prof. V. N. Mani

Mumbai Institute of Management and Research

(Approved by AICTE & Affiliated to University of Mumbai)

September 2010

Fire Insurance Policy Page 1

 DECLARATION

I hereby declare that the Project Report submitted on Fire Insurance Policy, As the Partial
Fulfillment of the MMS Degree Program (Affiliated to University of Mumbai) is the
original work of me and my group members.

Group Members:
1.) Amit Kamra
2.) Nikhil Kesarkar
3.) Wasim Shaikh
4.) Prasahnt Shirshekar
5.) Sonal Ranka
6.) Maya Kamath
7.) Shivangi Bhatt
8.) Nikita Shah
9.) Dayanand Palankar
10.) Sachin Shintre
11.) Hazra Sheikh
12.) Prashant Kolekar

Place: Mumbai

Date: 29-09-2010

Prof. V.N. Mani Amit Kamra

Guest Faculty MIMR Group Leader

 ACKNOWLEDGEMENT

I wish to express my gratitude to Prof. V. S. Mani Guest Faculty MIMR Wadala for giving
me and my group members an opportunity to work on the project entitled “Fire insurance
Policy”.

I wish to express my thanks to Mr. Bhagwan Patil, Asst Manager ( Marketing) and Mrs.
Anjali P. Karve Admn. Officer of The New India Assurance Co. Ltd.

I wish to thank Mr. Venkata N. Malladi, Head Account & Finance, M/S Anandji Haridas
& Co. Pvt. Ltd. for giving us the valuable time and information required for the project

Place: Mumbai
Date: 12 October , 2010

Group Leader
( Amit Kamra )
 Fire Insurance policy

Definition:
Property insured described in the said schedule or any part of such property be destroyed or
damaged by any of the perils specified here under during the period of insurance named in
the said schedule or of any subsequent period in respect of which the insured shall have
paid and the company shall have accepted the premium required for the renewal of policy,
the company shall pay to the insured the value of the property at the time of the happening
of its destruction or the amount of such damage or at its auction reinstate or replace such
property or any part thereof.

Fire insurance is a contract by which the insurance company agrees on payment of

premium to indemnify the insured, up to an agreed amount, against financial loss by fire
which may arise during a particular period to the subject matter. It is a contract of
indemnity which is usually in the form of policy. The fire insurance contract is for a period
of one year and often is cancel able by either party before the term has expired. Fire
insurance company not only grants protection to policy holders against the fire risk but also
renders valuable part in the reduction of fire waste. They spend money on fire prevention
techniques and conduct research in order to find out means for minimizing the chances of
losses.

Characteristics of Fire Insurance

1. Fire insurance is a contract of indemnity. The insurer is liable only to the extent of
the actual loss suffered. If there is no loss there is no liability even if there is a fire.
2. Fire insurance is a contract of good faith. The policy-holder and the insurer must
disclose all the material facts known to them.
3. Fire insurance policy is usually made for one year only. The policy can be renewed
according to the terms of the policy.
4. The contract of insurance is embodied in a policy called the fire policy. Such
policies usually cover specific properties for a specified period.
5. Insurable Interest: A fire policy is valid only if the policy-holder has an insurable
interest in the property covered. Such interest must exist at the time when the loss
occurs. In English cases it has been held that the following persons have insurable
interest for the purposes of fire insurance- owner; tenants, bailees, including
carriers; mortgages and charge-holders.
6. In case of several policies for the same property, each insurer is entitled to
contribution from the others. After a loss occurs and payment is made, the insurer is
subrogated to the rights and interests of the policy-holder. An insurer can reinsure a
part of the risk.
 7. Fire policies cover losses caused proximately by fire. The term loss by fire is
interpreted liberally. Example: A women hid her jewellery under the coal in her
fireplace. Later on she forgot about the jewellery and lit the fire. The jewellery was
damaged. Held, she could recover under the fire policy.
8. Nothing can be recovered under a fire policy if the fire is caused by a deliberate act
of policy-holder. In such cases the policy-holder is liable to criminal prosecution.
9. Fire policies generally contain a condition that the insurer will not be liable if the
fire is caused by riot, civil disturbances, war and explosions. In the absence of any
specific expectation the insurer is liable for all losses caused by fire, whatever may
be the causes of the fire.
10. Assignment: According to English law a policy of fire insurance can be assigned
only with the consent of the insurer. In India such consent is not necessary and the
policy can be assigned as a chose-in-action under the Transfer of Property Act. The
insurer is bound when notice is given to him. But the assignee cannot be recovering
damages unless he has an insurable interest in the property at the time when the loss
occurs. A stranger cannot sue on a fire policy.
11. Payment of Claims: Fire policies generally contain a clause providing that upon
the occurrence of fire the insurer shall be immediately notified so that the insurer
can take steps to salvage the remainder of the property and can also determine the
extent of the loss. Insurance companies keep experts on their staff of value the loss.
If in a policy there is an international over valuation of the property by the policy-
holder, the policy may be avoided on the ground of fraud.

Essentials of fire insurance contract:

1. Disclosure of material facts

The insured must disclose all material facts in respect of the subject matter. The contract
shall be voidable in the event of misrepresentation or non disclosing of an necessary facts.

2. Insurable interest

It is the essential for the insured to have insurable interest in the subject matter of both
when the policy is affected and when the loss takes place.

3. Contract of indemnity

The principle of the contract of indemnity is applicable to fire insurance. The amount can
be claimed only after the loss has taken place during the stated period. If there is no loss no
claim will be accepted.

4. Personal contract
Fire insurance is a personal contract between the insured and insurer. The policyholder
cannot assign or transfer it without the perior consent of the insurance company.

5. Duration

A fire policy is issued for a period of 10 days to 12 months but it can be renewed after the
expiry of their period.

6. General conditions

There must be an agreement in the prescribed form. The concerned parties must be
competent to contract. The object must be legal and not against the public interest.

7. Personal Right

The person, whose name has been mentioned in the contract, is entitled to receive the
insured sum from the insurer at the event of loss by fire on insured property.

8. Claim Limit

The actual market value of the goods or property destroyed by fire can be claimed only by
the insurer. In such type of contract there is no profit motive.

9. The premium and Consideration

The contract is based on the consideration which means the granting of protection by the
insurer in exchange for the payment of premium by the insured. The policy must mention
the sum of insurance and the rate of premium.

10. Description of the subject matter

It is essential part of the contract that the policy must describe the: location of the property.
It helps the insurer to determine the rate of premium.

11. Scope of protection

The insurance company may grant the protection against all direct loss by fire lightning and
other perils. The contract must specify the description of loss in order to consider the
approximate cause.
12. Termination of the contract

The contract of fire insurance may be terminated due to three events:

• (i) Violations of the rules

• (ii) Cancellation
• (iii) Expiration of the term without renewal.

13. Subrogation

Under this principle the insurer after paying a loss has ful1 right and privileges against
third party in respect of loss so paid for. These rights may be justified, The problem of
subrogation arises when a fire is caused by the negligence of the third party, for which
negligence the party whose property is destroyed by fire may recover under rules.

14. Suspension of the policy

The insurance company is empowered to suspend the insurance due to some reasons. The
insurer shall not be liable for loss happening if the chances of risk increase by any means
within the control of the policy holder.

15. Notice of loss

The policy holder must serve immediate notice in writing to the concerned insurance
company of any loss. It enables him to take action to reduce the loss, to investigate the
reason of fire and to determine his liability.

16. Adjustment of loss

On receiving the notice; the insurer makes arrangement to adjust the loss. The company or
its representatives with considerable authority may enter and take possession of the
damaged property.
Properties that are covered:
All moveable/ immoveable properties of the proposer on land (excluding those in transit)
broadly categorised as follows :
• Building (including plinth and foundations, if required):
Whether completed or in course of construction (excluding the value of land).
Interiors, Partitions and Electricals.

• Plant & Machinery, Equipments & Accessories (including foundations, if required)

Bought Second hand.
Bought New
Obsolete Machinery

• Stocks:
Raw Material
Finished Goods
In process
In trade belonging to Wholesaler, Manufacturer and Retailer.

• Other Contents such as

Furniture, Fixtures and Fittings
Cables, Pipings
Spares, Tools and Stores
Household goods etc.

Specific Items such as bullion, unset precious stones, curios, work of arts, manuscripts,
plans, drawings, securities, obligations or documents, stamps, coins or paper money,
cheques, books of accounts, computer system records, explosives.
STANDARD FIRE AND SPECIAL PERILS POLICY
(MATERIAL DAMAGE)
IN CONSIDERATION OF the isured named in the schedule hereto having paid to the The
New India Assurance company Limited (hereinafter called the company) the premium
mentioned in the said schedule ,The company Agrees,(Subject to the condition and
Exclusions contained herein or endorsed or otherwise expressed hereon) that if after
payment of the premium the Property insured described in the said Schedule or any part of
such Property be destroyed or damaged by any of the perils specified hereunder during the
period of insurance named in the said schedule or of any subsequent period in respect of
which the insured shall have paid and the Company shall have accepted the premium
required for the renewal of the policy, the company shall pay to the Insured the value of the
Property at the time of the happening of its destruction or the amount of such damage or at
its option reinstate or replace such property or any part thereof:

Fire
Excluding destruction or damage caused to the property by
a) i) its own fermentation, natural heating or spontaneous combustion.
ii) its undergoing any heating or drying process.
b) burning of property insured by order of any public Authority

Lightning
Explosion/Implosion
Excluding destruction or damage caused to the boilers (other the domestics
boilers),economizers or other vessels in which steam is generated,machinery or apparatus
subject to centrifugal force by its own explosion/implosion

Aircraft Damage
Destruction or damage caused by Aircraft, other aerial or space devices and articles and
articles dropped therefrom excluding those caused by pressure waves

Riot, Strike, Malicious Damage

a) total or partial cessation of work or the retarding or interruption or cessation,
commandeering,requisitng,requisition or destruisition or destruction or omissions of any
kind.

b) permanent or temporary dispossession resulting from confiscation, commandeering ,

requisition or destruction by order of the Government or any lawfully constituted Authority
.
c) Permanent or temporary dispossession of any building or plant or unit or machinery
resulting from the unlawful occupation by any person of such building or plant or unit or
machinery resulting from the unlawful occupation by any person of such building or plant
or unit or machinery or prevention of access to the same.
d) burglary , housebreaking, theft ,larceny or any such attempt or any omission of any kind
of any person (whether or not act is committed in the course of a disturbance or public
peace) in any malicious act.
Storm, cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and lnundation
Loss, destruction or damage directly caused by storm , cyclone, typhoon, tempest,
hurricane, tornado, flood or inuding those resulting from earthquake, volcanic eruption or
other convulsions of nature .

Impact damage
Loss of or visible physical damage or destruction caused to the property insured due to
impact by any rail/road vehicle or animal by direct contact not belonging to or owned by
a) The insured or any occupier of the premises
b) their employees while acting in the course of their employment

Subsidence and landslide including rock slide

a) the normal cracking , settlement or bedding down of new structure
B) the settlement or movement of made up ground
c) coastal or river erosion
d) defective design or workmanship or use of defective materials
e) demolition, construction, structural alterations or repair of any property or groundworks
or excavations.

Bursting and overflowing of water tanks, apparatus and pipes

Missile testing operation

Leakage from automatic sprinkler installations

a) Repairs or alterations to the building or premises
b) Repairs, removal or extension of the sprinkler installation
c) defects in construction know to the insured.

Bush fire
Provided that the liability of the company shall in no case exceed in respect of each terms
sum expressed in the said schedule to be insured thereon or in the whole the total sum or
sums as may be substituted therefor by memorandum hereon or attached hereto signed by
or on behalf of the company.

Special types of Policies available for Stocks:

Declaration Policy :
• To care care of frequent fluctuations in Stocks/ Stock Values
• Minimum Sum Insured Rs. 1 crore per location.
Monthly declaration on any one of the following basis to be submitted before the last day
of the succeeding month
1.) average of the highest values at risk on each day (or)
2.) highest value on any day of the month.

Refund of premium, on expiry of policy, based on the average declaration upto 50% of the
provisional premium.

Floating policy: This policy is subject to the ‘average clause’. The extent of coverage
expands to different properties belonging to the Policy holder under the same contract and
one premium. The policy may also provide protection to goods kept at two different stores.

Risks Not Covered:

• First 5% of AOG Perils/Rs.10,000.

• Theft during or after the occurrence of any insured risks
• War or nuclear perils
• Electrical breakdowns
• Ordered burning by a public authority
• Subterranean fire.
• Loss or damage to property moved to a different location (except machinery and
equipment for cleaning, repairs or renovation for more than 60 days)
• Loss or damage to bullion, precious stones, curios (value more than Rs.10000),
plans, drawings, money, securities, cheque books, computer records except if they
are categorically included.
•

Add on covers

In addition to the perils/ expenses covered, the proposer can opt to seek cover in respect of
the following perils/ expenses at inception or during currency of the policy on payment of
additional premium :

Perils:

Loss/ damage/ destruction of the property caused by

• Deterioration of Stocks in Cold Storage premises due to power failure following

damage due to an insured peril
• Forest Fire
• Impact Damage due to Insured's own Vehicles, Fork lifts and the like and articles
dropped therefrom
• Spontaneous Combustion
 • Omission to insure additions, alterations or extensions
• Earthquake (Fire and Shock).
• Spoilage material damage cover.
• Leakage and contamination cover.
• Temporary removal of stocks.

Expenses :

• Architects , Surveyors and Consulting Engineer's Fees (in excess of 3% claim

amount)
• Debris Removal (in excess of 1% of claim amount)
• Loss of rent.
• Insurance of additional expenses of rent for alternative accommodation.

Start up Expenses.

Documents required by insurer for processing the claim :

I. Common Documents for all claims under a Standard Fire and Special Perils Policy:

1. Certified True copy of the policy along with schedule and

Endorsements/clauses.
2. Claim Form.
3. Newspaper reports on the incident, if any.
4. Photographs.
5. 5.Past claims experience

II. Fire Claims (additional documents)

1. Report of the Internal Committee constituted for the purpose of

investigating the cause of fire.
2. Fire Brigade Report.
3. First Information Report / Letter of intimation to the Police Station duly
endorsed / Police Panchnama.
4. Forensic Laboratory Report on samples collected at affected site.
5. Drug Inspector's Report on destruction of Drugs/ Pharmaceutical items (for
claim on pharma products only).
6. Final Investigation Report.
7. Action taken on the suggestion of TAC/ LPA on loss minimisation of
prevention.
III. Flood Claims (additional documents):

Meteorological Report

IV. Explosion Claims (additional documents):

Factory Inspector's Report or Report of Director of Industrial Safety and Welfare.

 COMPANIES VISITED

THE NEW INDIA ASSURANCE CO.LTD.

History
Incorporated on July 23rd, 1919 Founded by the House of Tata Founder member - Sir
Dorab Tata. Nationalised in 1973.

Present Position
Gross Premium (in India) of Rs. 5017.20 crores in the year 2006-2007, as against
Rs. 4791.49crores in the year2005-2006. Assets Rs. 27444.57crores as on 31st March
2007. Network of Offices-26 Regional Offices, 393 Divisional Offices, 614 Branches and
34 Direct Agent Branches. Rank No. 1 in the Indian market. Largest Non-Life insurer in
Afro-Asia excluding Japan. First Indian non-life company to cross Rs. 5000 crores Gross
Premium. Global Re-insurance facilities. Over-seas presence in countries like Japan, U.K,
Middle East, Fiji and Australia.

International Presence
Overseas operations commenced in 1920. Operations in 24 countries in the year 2004-05.
Network of 19 Branches, 12 Agencies, 2 Associate companies and 2 Subsidiary companies
in the year 2004-05. Overseas Premium of Rs. 892.35 crores in the year 2004-05, which
accounts for more than 80% of total overseas premium in India.

Performance
New India Assurance Company is the largest non-life insurer in India. The financial
strength of the Company is reflected from the following figures:-
 Gross
Gross
Premium Net Premium Net Profit Total Assets Net Worth
Year Premium
(Outside (Global) (Global) (Global) (Global)
(in India)
India)
2007-2008 5276.91 874.55 4914.28 1401.13 31944.14 6972.80
2006-2007 5017.20 919.58 4751.76 1459.95 27444.57 5972.55
2005-2006 4791.49 884.05 4342.66 716.38 27025.58 4706.87
2004-2005 4210.81 892.35 3895.11 402.23 19827.19 4161.69
2003-2004 4045.68 875.79 3634.94 590.21 17510.44 3735.22
2002-2003 3921.24 891.55 3516.43 255.81 12984.75 3404.00
2001-2002 3512.33 685.73 3068.23 142.00 12273.02 3189.39
2000-2001 3041.17 451.88 2671.48 173.54 8292.00 3067.39
1999-2000 2979.53 327.00 2477.45 287.29 7664.71 2859.86
1998-1999 2729.48 288.16 2186.92 375.00 6727.72 2524.23
1997-1998 2433.73 254.04 1945.00 470.94 6071.67 1462.52

PERSON CONTACTED: Mr. Bhagwan Patil, Asst Manager ( Marketing) and Mrs.
Anjali P. Karve Admn. Officer Of The New India Assurance Co. Ltd.

SALES PROCESS:
Sales Process includes Contacting the client and doing analysis of the Risks client is
exposed to. After analysing a detailed presentation is prepared to show it to the client and
convey the client risks and policies which covers the risks the client is exposed to.

Who takes Fire insurance?

Generally Fire insurance is taken by companies which uses raw material which easily
catches fire. Companies which uses hard metals as raw materials do not wish to take fire
insurance.

How to sell Fire insurance?

Fire insurance Products are to cover the various risks to which a manufacturing firm is
exposed to. Selling procedure includes the survey of these risks and provide awareness to
the client about the risks.

Views on fire insurance:

Fire insurance an effective tool for any firm or Property owner to minimize the financial
loss in event of loss on his/her property. Insufficient Awareness of the policy among
people is the main constraint in making positive perception about the policy.
 ANANDJI HARIDAS & CO. PVT. LTD.

COMPANY:

Anandji Haridas & Co. Pvt. Ltd. (AHCPL) started in the year 1951, in Mumbai, India to
manufacture sheet metal pressed & fabricated components. AHCPL got its OEM supplier
status in the year 1957. Today, AHCPL has grown as a leading manufacturer of critical
sheet metal pressed, formed and fabricated components and spun sheet metal pulleys for
passenger cars, trucks, agricultural tractors, construction equipment and gensets in India.

AHCPL designs and manufactures components for the specific requirements of the
customers. AHCPL currently has manufacturing facilities at Mumbai & Pune. The
Company has a team of qualified personnel capable of in house DEVELOPMENT OF
PRODUCT DESIGNS AND TOOLING.

The Company is TIER I SUPPLIER to major Auto manufacturers in India which includes
world leading MNCs. 80% of the products are as SINGLE SOURCE SUPPLIES to our
esteemed customers.

The company has successfully participated in the localization and value engineering
programs of its customers and has also proposed and successfully implemented indigenous
product designs for them. This gives tremendous dexterity in development of any
challenging component in quick time.

Total turnover of the co. is Rs. 25cr. Per annum.

The employee strength is 150 – 200.

Products:

• Sheet Metal Spun Pulleys

• Deep Draws
• Tools and Dies
for sheet metal working
• Closed Tolerance
components
• Sheet Metal Stampings
• Stretch Draw Panels
Person contacted:

Mr. Venkata N. Malladi, Head Account & Finance, M/S Anandji Haridas & Co. Pvt. Ltd

Insurance Policies Taken:

1. Marine Cargo Policy (Bajaj Allianz General Insurance Co. Ltd.)
Total Sum Insured is Rs. 5,65,639
2. Standard Fire & Special Peril Policy (United India Insurance Co. Ltd.)
Total Sum Insured is 3 crore.

Claim Record:
There were no such claims by the Company.

Views & Experiences about Fire Insurance Policy:

• Policy is taken as it is compulsory.
• They renew the policy every year under the guidance of an Insurance Consultant.