B.Com-II Sem(Group-A&B) - PowerPoint Presentation

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B.Com-II Sem(Group-A&B)Insurance Management

Unit-I

Meaning and Scope of Fire Insurance

Fire insurance has gained tremendous importance in the world of modern business. It is a device to compensate the insured against all losses caused by fire to the assets or property of the insured in consideration of premium paid by the insured to the insurer.

Fire insurance does not have a long history. It came into existence when there was a huge fire in London in 1960. This fire lasted for 4 days and 4 nights, burnt over 436 acres land and destroyed over 13000 houses. This was the most disastrous fire in the history and a loss of then 10

crores

pounds was estimated. This great fire gave birth to fire

insurance.Keeping

in view this loss, a firm called ‘Sun Fire House’ was established in 1710 to cover the losses of fire.

All those who are exposed to fire hazards pool their premium, out of which the actual victims of fire are compensated. So the burden of fire losses is spread over a large number of persons who have taken fire insurance policies.According to V.R.Bhushan

and Prof.

R.S.Sharma

, “a fire insurance may be defined as an agreement whereby one party, in return for a consideration, undertakes to indemnify the other party against financial loss which he may sustain, by reason of certain defined subject-matter being damaged or destroyed by fire or other defined perils up to an agreed amount.”

The main characteristics of fire insurance are as follows:1. Loss by fire

: Fire means hostile/ accidental fire which is destructive in nature but not the friendly/ intentional fire which is used for cooking food or for fun. Hostile fire is generally uncontrollable, it generates. heat and light both.

2.

Loss by Lightening of Clouds

: Lightening of clouds is the discharge of atmospheric electricity when clouds pass speedily with lot of sound generation. But the damage caused by lightening is not loss by fire and not included in fire insurance.

3.

Fire should be Accidental

: If goods are destroyed by fire accidently without controlling during the course of cooking the loss is treated as unintentional and is not covered under the policy.

Scope of Fire Insurance: U/S 2 of the Insurance Act, 1938, the fire insurance may be divided into two parts:-#

Ordinary scope of fire insurance

: Fire insurance policy ordinarily includes the losses caused by fire only. As such, under the fire insurance contracts, the claim for loss by fire must fulfill two basic conditions-

a. There must be actual fire/ ignition.

b

. The fire must be accidental, not intentional/ friendly.

The property insured must be damaged/ burnt/ destroyed by fire. If the

property is damaged or destroyed by heat/ smoke without ignition, the same shall not be compensated/ indemnified under the fire insurance policies, i.e.,

1. loss caused by fire

2. lightening

3. Explosion of gas used for cooking and domestic purposes4. aircraft damage5. riot, strike and terrorism risks/ damage

6. storm, cyclone, typhoon, hurricane, etc.

7. missile testing operations

8. bursting or overflowing of water tanks, etc.

9. impact damage/ loss by any rail/ road vehicle caused to the property insured

10. bush fire (excluding loss/ destruction/ damage caused by forest fire).

#

Special Scope of Fire Insurance

: By paying extra premium, the insured can include the special kind of risks in the fire insurance policy. Such as-

1. the fees paid to the architect, surveyor or consultant engineer, if such fees exceeds more than 3% of the claim money.

2. The expenses incurred in connection with removal of wastages from the construction site, if that amount exceeds more than 1% of the claim money.3. loss to the goods

kept in the cold storage due to fluctuations in electricity power.

4. loss arising out of earthquake fire, or combustion (the process of burning).

5. loss due to falling the goods from own vehicle of the insured, etc.

6. loss due to spontaneous combustion.

Issue of Fire Insurance PolicyWhenever a person wants to get his property insured, he has to undergo the following procedure:

1. Proposal Form

2. Proof of Respectability

3. Assessing of the

Proposal Form

4. Acceptance of Proposal Form

5. Issuance of Cover Note

6. Issuance of Insurance Policy