Bajaj Allianz General Insurance Company Limited

Bajaj Allianz General Insurance Company Limited
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What is Insurance ?
Legal Definition :
Insurance is a contractual arrangement whereby one party
agrees to compensate another party for losses
Insurance is a branch of Contract Law.
Financial Definition :
Insurance is a financial arrangement that redistributes the costs
of unexpected losses.
Insurance Pool
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Risk !
Risk is the exposure to the chance of loss or injury

Uncertainty about the outcome – more than one outcome
If a loss is certain : there is no risk
Possibility that the outcome may be unfavorable
At least one of the possible outcomes should be undesirable
Ex : Parachute
Investment in a capital asset
Physical depreciation is certain
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Peril and Hazard
Peril
Is cause of loss
Hazard
Is a condition that may create or increase the chance of a loss
arising from a given peril
It increases the frequency and / or severity of the peril
• Physical Hazard
• Moral Hazard
• Morale Hazard
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•Unconditional
•Meeting of Minds •The value
exchanged between
Elements of a Valid Contract
the parties to the
Contract
Offer and
Acceptance Consideration
Insurance Agents while Insured :

soliciting new business legally •Premium
•LegalareCapacity to enter
not offering into
to sell ••An
Promise
end ortointention
follow the
a Contract
insurance. They are only provisions and by
permitted stipulations
law in
inviting the insured to make an •the insurance
Anti-social contract
purpose
offer. areInsurer
legally:
“Invitation to Treat” Contingent Promise
unenforceable
Capacity Legal Purpose
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Policies are not transferable
automatically to new owners Exception :
•Life, PA
Insurance Contracts •Reinstatement Policies
Distinguishing Characteristics •Valued Policies
More than one party may
Principle of Indemnity have Personal Contract
an insurable interest
The Policy and Proposal forms and other
in the same property
documents filed at the time of insurance
forms one single contract Actual Cash Value :
Insurable Interest Utmost Goodfaith
Replacement value -
Parties to the contract know in Depreciation
advance that the monies they will
exchangeActual
will Cash Value
be unequal Entire and Undivisible
Contra proferentum
Doctrine of Adhesion Aleatory Concept

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Property Triangle
 Movable / Immovable
 Animals / Insects / Birds / Fish
 Crop / Plantation
 On Land
 Off Shore
 In Course of Construction / Installation  In Space
 While kept / Installed / Stored
 In Transit by Rail / Road / Water / Air 8
 Mechanically propelled Land Vehicle not on Rail © Copyright 2005

PROPERTY INSURANCE Project Insurance
FIRE MARINE
FLOP DSU
ENGINEERING
CAR EAR CPM MB EEI BPV
ALOP MLOP
Project Insurance
CECR DOS 9
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Fire Policy
Is Location Specific
Is a Named Perils Policy
Cause of Fire is immaterial
Covers certain Non-Fire Damages
Spirit is to indemnify Direct Loss / Damage
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FIRE INSURANCE
WHO
WHAT
IS IS
WHERE COVERED INDEMNIFIED
WHEN
HOW MUCH 12
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SUM INSURED
It is always fixed by the proposer

It is the limit of insurer’s liability under the policy
It is the amount on which the rate is applied to determine the
premium payable for the insurance
It should represent Actual Value at Risk of the property to be
insured
Over insurance results in higher premium outgo with no extra
benefits
Under Insurance results in application of Condition of
Average
Declaration of Block-wise / Item-wise Sum Insured offers best
results
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How to Fix Sum Insured ?

Buildings, Plant & Machinery
 Book Value
 Market Value
 Replacement Value /
Reinstatement Value
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How to Fix Sum Insured ?

Stocks
Raw Materials :
Net Cost at which the materials are available to the insured on the date of and at
the place of loss
Insured’s own expenses of storage, interest and such other “HOLDING
CHARGES” NOT to be included
Finished Goods :
Net Manufacturing Cost including Factory Overheads
In other words, the Manufacturer’s Ex-Factory Price less Administrative / Sales
Overheads and Net Profit
Goods in Bonded Warehouse :
Sum Insured to include Excise Duty
Imported Goods :
Contract Price
Stock-in-process :
Cost of Raw Materials + other inputs and processing costs at any given time
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Structure of a Fire Policy
Preamble or Recital Clause

Operative Clause
12 Perils covered
13 General Exclusions
15 General Conditions
14 Add-on Covers
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• FIRE
• LIGHTNING
• EXPLOSION
• AIRCRAFT DAMAGE
FLEXA
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• RIOT
• STRIKE
• MALICIOUS DAMAGE
• TERRORISM DAMAGE
RSMTD 19
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• STORM
• TEMPEST
• FLOOD
• INUDATION
STFI
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OTHERS
 IMPACT DAMAGE
 SUBSIDENCE, LANDSLIDE
 BURSTING and/or overflowing of
water tanks, apparatus & pipes
 Missile testing operations
 Leakage from automatic sprinkler
installations
 Bush fire
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Meaning Of FIRE
To be understood in its ordinary popular sense
There should be actual ignition of insured property

Which ought not to have been on fire
Under accidental circumstances as far as insured is

concerned
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The word Fire as used in the Fire Insurance

policy covers the following contingencies:
Smoke, Scorching, Heat, Toxic Gases, Ash

Water or other fire extinguishing appliances used in
putting out fire
Acts of Fire brigade in execution of its duties
Falling of wall as a result of fire
During removal from a burning building, caused by
exposure to weather, the removal being made to
mitigate the loss
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Other Limitations to “FIRE”
• Excludes destruction or damage caused to the

property insured by:
 Its own
 Fermentation
 Natural Heating
 Spontaneous Combustion
 Its undergoing any Heating or
Drying process
 Burning of property insured by
order of any Public Authority 26
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Limitations to Explosion / Implosion
Excludes destruction or damage caused to

Boilers
Economizers or
Other vessels in which steam is generated
by their own explosion / implosion
Machinery or apparatus subject to centrifugal force
• However, destruction or damage caused to

the domestic boilers by explosion / implosion
is covered 28
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Exclusions :
Policy Excess
Rs. 10,000 for each and every loss

In case of AOG PERILS :
5% of each and every loss subject to a minimum of Rs. 10,000
The excess shall apply per event per insured
However, for DWELLINGS : NO EXCESS
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Exclusions :
War group of perils
Nuclear perils
Pollution or Contamination :
Excluding :
• Resulting from insured peril
• Insured peril resulting from
pollution or contamination
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Exclusions :………
Stocks in Cold Storage premises caused by change in

temperature
Architects, surveyors fees exceeding 3% of claim
amount
Debris Removal expenses exceeding 1% of the claim
amount
Loss of earnings, loss by delay, loss of market and
other consequential and indirect losses
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Exclusions :………
Spoilage of materials caused by insured perils
Loss by theft during or after operation of insured
perils
Earthquake, Volcanic eruption or any other
convulsions of nature
Insured property removed from the insured
premises
Equipment temporarily removed for repairs, cleaning,
renovation or other similar purposes for a period of 60
days are covered
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Electrical Exclusion
Loss or damage to any electrical machine, apparatus, arising from

or occasioned by :
 over running excessive pressures,

 arcing,
 short circuiting,
 overloading,
 electrical surge etc.
this exclusion applies to the particular machine, apparatus
but not to other machines which may be destroyed by fire so

set up.
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Excluded Property
Unless specifically stated in the policy
Goods held in Trust,

Bullion, curios etc above Rs. 10,000
Manuscripts etc.,
Securities, documents,
Money,
Explosives
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General Conditions
Policy voidable in case of mis-representation,

mis-description or non-disclosure
Policy will expire after 7 days from the date of

fall of any building – if not caused by
insured peril.
If the insurer expressly agrees to cover :

the cover continues
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General Conditions…….
3. Under the following circumstances the
insurance ceases :
• Alteration of trade to increase the hazard
• Insured building unoccupied by for more
than 30 days
• Interest in the insured property passes
from the insured other than by will or
operation of law
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General Conditions…….
4. If Insured property is insured by marine policy,

Fire Insurance will cover the excess claimed
amount, if any, after marine policy pays
5. Cancellation
6. Notice in writing to the Company reporting the
loss within 15 days
Law of Limitation : 12 months
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General Conditions……
Company’s right to enter the premises, take

possession of the property
Fraud, willful act : policy void
Reinstatement option :
• as circumstances permit
• Reasonably sufficient manner
• Sum Insured is the Limit
• Because of any law, if the Reinstatement could not
be done, payment in money
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General Conditions……
 Average Clause
 Contribution
 Subrogation
 Arbitration
 All notices etc. in writing
 Reinstatement of Sum Insured
 after a loss
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Policies for Particular Considerations
Valued Policies
Floater Policies
Declaration Policies
Floater Declaration Policies
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General Regulations:
3. Long-term Policies : for ‘Dwellings’ only
4. Mid-term Cover : For STFI & RSMTD :

 Specific advice with payment of additional
premium in Cash or by Draft only
 Entire Property. No Selection
 Cover starts 15 days after receipt of Premium
 Premium on Short Period Scale
5. No Installment facility. Premium in full.
6. Minimum Premium : Rs. 100/-, Rs. 50/-

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7. Partial Insurance :
No policy for only certain portions of a
building
( excluding plinth and foundations )
No policy for only specified machinery, parts
of machinery ( except Boilers )
Note : In case of different interests : Full interest.

Clearly defined in the policy.
8. Short Period Scale

Extension of short period policies not permitted.
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9. Loading for ‘Kutcha’ Construction
Walls and / or Roofs of :

• Wooden planks
• Thatched leaves, Grass, Hay
• Bamboo
• Plastic cloth, Asphalt Cloth
• Canvas, Tarpaulin
Loading : Additional rate of 4.00%o
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10. Cancellation
At the option of the Insured :
• short period scale
If policy is replaced with same Insurer by new annual one with identical
property :
• Pro-rata on SI replaced
• Short Period on SI not replaced
Short Period Policies : applicable short period scale
If policy is cancelled on account of Govt. order, Building-in-course of
construction, Buildings demolished : pro-rata
At the option of the Insurer : Pro-rata
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11. Mid-term Increase in Sum Insured :

Increase in SI : Pro-rata
Decrease in SI : Short Period Scale
12. Escalation Clause :
Max. 25%
Additional Prem. : @50% of Tariff Rate
For Buildings, P&M only. Not for Stock
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16. Claims Experience Discount /Loading
Min. SI : Rs. 50 Cr. ( Sec. IV,V,VI,VII )

All property in one compound, one complex, one
location
Preceding 36 months excluding the expiring policy
period.
On renewal : either by existing or new insurer
When certified claims experience by respective insurers
is not available - Provisional loading of 15%.
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17. FEA Discount
For all detached or segregated blocks
Sections : III, IV, V, VI, VII
( except Floater / Floater Declaration policies )
19. Silent Risk : 30 days or more

Storage rate or 1.00%o whichever is higher
No Discounts for Silent risks
No Silent Rates if a risk goes silent following a loss
under the policy
20. Voluntary Deductible Scheme 52
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21. Computation of Rate
The following sequence shall be adopted for computation of rate :

 Basic Rate
 5% reduction for Sprinklered blocks if applicable (Sect. III, IV, V,
VI ).
 Reduction in rates for deletion of STFI & RSMTD if opted out
 Extra for ‘Kutcha’ construction ( on 1-2-3 )
 Discount / Loading for Claims experience ( 1-2-3-/+4 )
 FEA Discount on protected blocks (1-2-3-/+4 )
 Discount for voluntary deductibles on the total premium calculated on
the basis of final rate worked out as above
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FIRE Fuel
Combustible Material
TRIANGLE 56
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Flixborough 1974 58
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Risk is the exposure to the chance of loss or injury

Peril and Hazard

Insurance Agents while Insured :

Doctrine of Adhesion Aleatory Concept

 Mechanically propelled Land Vehicle not on Rail © Copyright 2005

PROPERTY INSURANCE Project Insurance

CAR EAR CPM MB EEI BPV

Is a Named Perils Policy

Cause of Fire is immaterial

Covers certain Non-Fire Damages

Spirit is to indemnify Direct Loss / Damage

It is always fixed by the proposer

How to Fix Sum Insured ?

How to Fix Sum Insured ?

Structure of a Fire Policy

Preamble or Recital Clause

To be understood in its ordinary popular sense

There should be actual ignition of insured property

Under accidental circumstances as far as insured is

The word Fire as used in the Fire Insurance

Smoke, Scorching, Heat, Toxic Gases, Ash

Other Limitations to “FIRE”

• Excludes destruction or damage caused to the

Limitations to Explosion / Implosion

Excludes destruction or damage caused to

• However, destruction or damage caused to

Rs. 10,000 for each and every loss

However, for DWELLINGS : NO EXCESS

Stocks in Cold Storage premises caused by change in

Loss or damage to any electrical machine, apparatus, arising from

 over running excessive pressures,

this exclusion applies to the particular machine, apparatus

but not to other machines which may be destroyed by fire so

Goods held in Trust,

Policy voidable in case of mis-representation,

Policy will expire after 7 days from the date of

If the insurer expressly agrees to cover :

4. If Insured property is insured by marine policy,

Company’s right to enter the premises, take

Policies for Particular Considerations

3. Long-term Policies : for ‘Dwellings’ only

4. Mid-term Cover : For STFI & RSMTD :

5. No Installment facility. Premium in full.

6. Minimum Premium : Rs. 100/-, Rs. 50/-

Note : In case of different interests : Full interest.

8. Short Period Scale

Walls and / or Roofs of :

11. Mid-term Increase in Sum Insured :

For Buildings, P&M only. Not for Stock

Min. SI : Rs. 50 Cr. ( Sec. IV,V,VI,VII )

19. Silent Risk : 30 days or more

The following sequence shall be adopted for computation of rate :

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