IC-57, Fire Insurance One Liner Chapter 8 : CLAIMS – Procedural Aspects
Insurance exams offered by the Insurance Institute of India (III), consist of various papers either in Life or Non Life or Combined. Here we are providing ONE LINER IC 57, Fire Insurance Chapter 8 “LAIMS – Procedural Aspects” for para 13.2 and III exam . These questions will be very helpful for upcoming promotional exam in 2020.
IC 57 / Fire Insurance is a very important topic in insurance promotional exam. This IC 57 / Fire Insurance paper comes in all GIPSA exams which makes it very important.
♦Chapter 8 “LAIMS – Procedural Aspects”
- Procedural aspects related to a claim-Verification
On receipt of claim intimation the first step is to verify that:
- The policy is in force.
- The perils under which the loss is reported are perils covered under the policy.
- The items of properties affected and the location involved are the same as covered in the policy.
- Registration of a claim and allotment of claim number
After claims verification, the claim is registered and a claim number is allotted. This number is used in all claims correspondence for easy reference. The claim register contains the details of:
- Claim number,
- Date of loss or damage(fire or other insured peril),
- Policy number,
- Name of the Insured,
- Situation of risk when the loss took place,
- Sum insured,
- Claim form
After registration of the claim, a Claim Form is issued to the insured for completion and return. The claim form elicits the following information:
- Name of the insured, policy number and address.
- Date, time, cause and circumstances of the fire or the occurrence of other insured peril.
- Details of damaged property
- Appointment of Surveyor and Loss Assessor-If the loss is known or expected to be large, then licensed independent loss surveyors and assessors are assigned the job of investigation and report on, inter alia, the cause and extent of loss
- Surveyor report
(a) Preliminary report- After completing his initial investigation, the surveyor submits a preliminary
report which would indicate briefly:
- The date of loss;
- The location at which the loss occurred and the details of the occupancy at that time.
(b) Final report-Thereafter, a final report is submitted giving full details of the adjustment of the loss and the surveyor’s opinion on the question of liability under the policy.
- Condition 15: Pro-rata premium for the unexpired period- The settlement of any loss under the policy, pro-rata premium for the unexpired period from the date of such loss to the expiry period of insurance for the amount of such loss shall be payable by the insured. This additional premium is deducted from the net claim payable under the policy.
- Discharge voucher and cheque settlement- The discharge voucher is to be signed by all the persons named in the policy as “The Insured”, and the cheque is drawn in favour of all parties mentioned in the policy.
- Payment of ‘on account settlements’- In very large losses, the insured desires and the surveyors recommend, payment of ‘on account settlements’ where the insured has already spent or is in the course of spending, on repairs, replacement, etc. of damaged property
- Co-insurance- When the insurance is on a co-insurance basis, the surveyor is appointed by the lead insurer. Each co-insurer is sent a preliminary advice of the claim followed by a copy of the final survey report which would indicate the apportionment of the loss among the co-insurers who would send the cheque for their share of the loss directly to the claimant.
- Outstanding claims– The claims which are paid will be reflected in the accounts which are prepared at the time of closing.
- Surveyor’s duties-The surveyor’s primary duties are given in Rule 13(1) of Insurance Surveyors and Loss Assessors Regulations, 2000 to:
- investigate into the cause of loss;
- ascertain the extent of loss;
- advise the insured on loss minimisation measures and protection of salvage
- Reinstatement claims-In reinstatement claims, specific confirmation as to verification of the physical reinstatement of the damaged property has to be given. It is to be confirmed that physical reinstatement of the affected property has been carried out within 12 months from the date of loss or such extended period duly approved by Insurer.
- Business interruption claims-In business interruption claims, the surveyor gets into the role of MD of insured and advises the insured as to: how they can restart the operations quickly, and can cut down the period of interruption and also reduce the shortage in output /turnover.
- Comparison of actual property with property stated in the policy-This familarisation with the policy particulars in advance helps the surveyor immediately, on inspection of the scene of loss, to identify the property and compare it with the description and location stated in the policy.
- Furnishing copy of policy- The surveyor is provided with copies of policies before proceeding for survey. In serious or large losses, he may even proceed immediately to the scene of loss with only brief particulars of the insurance, because in such cases, time is of the essence.
16.Simple and small losses- The surveyor should make an inspection of the premises involved and the surroundings in which the loss has occurred. In simple and small losses, the surveyor would inspect the damaged property or its remains, determine the cause and extent of loss and submit his report.
- Large complicated losses- In large losses, the process of inspection will be elaborate and comprehensive. The first step is to take or recommend measures directed at minimisation of loss and protection of salvage.
- Stocks- As regards stocks, it is necessary to separate the damaged merchandise from the undamaged. Undamaged property may have to be removed to place/s of safety. Wet merchandise requires separation and drying.
- Examination at early stage-An important purpose of survey is to determine the cause of loss. A thorough examination at an early stage of undisturbed salvage/scrap may reveal the real, or indicate the most probable cause of fire.
- Pattern of fire- This examination will also enable the surveyor to observe the pattern of fire travel and fire spread, rate of fire growth, degree of burning etc.
- Involvement of technical experts- Investigation into the cause of loss requires common sense, imagination and technical knowledge of building construction, electrical installation, materials and processes of manufacture involved.
- Explosion damage is evidenced by shattered glass, broken or displaced machinery, splintered timbers and widely scattered debris.
- Unknown origin- With his experience and expert knowledge, the surveyor should be able to develop several plausible theories and by careful sifting of the evidence and through the process of elimination, arrive at a conclusion.
- Features of the property- The last mentioned aspect, namely, the features of the property that contributed to the occurrence of the loss or to the nature and size of the loss is important, from the point of view of avoidance of a recurrence of the loss.
- Determination of value of property and amount of loss suffered-One of the most important functions of survey is to determine the value of property covered by insurance and the amount of loss that it has suffered. This value is estimated and fixed, when the property is in evidence, by inspection and examination.
- Records-Another reliable evidence of value is provided by records which may show quantities, costs, age, history or condition. These records furnish more or less acceptable basis for fixing value of loss.
- Original records- If the building totally destroyed was new, the original records of the cost of construction may be available from which the cost of re-construction may be built up.
- Simple structures- If such plans are not available, the surveyor will have to estimate the cost of re-construction based on the measurements of the area of the building, the height of the building, the materials used in the structure.
- Complex buildings- For complex modern buildings, estimates will have to be prepared by architects and contractors, but the surveyor still carries the responsibility to examine such estimates both as regards description of the damage as well as the cost of reinstatement.
- Determination of depreciation- Whether the loss is total or partial, depreciation or betterment has to be determined.
- If the machinery is simple and the damage is minor, loss assessment is not difficult. The cost of repairs or replacement of the whole machine or its components may be easily determined.
- Loss assessment for complex machinery- Where the machinery is complex or damage is extensive, loss assessment procedure becomes more elaborate. A detailed inventory of the damage to the machines and their parts taken and manufacturers’ specifications, designs, original blue prints
- Dismantling of machinery-Detailed photographs may have to be taken. In some cases, machinery may have to be dismantled to decide on repair or replacement of parts.
- Estimate of repairs-If repairs are possible, a comprehensive estimate of repairs is obtained from the engineers, repairers or manufacturers.
- Depreciation and betterment- As the surveyor has to take into account factors of depreciation and betterment, the damaged machinery will have to be carefully examined, to ascertain its precise condition before the loss.
- Determination of values based on physical indications- The physical indications like volumetric analysis of the stock, both damaged and undamaged will help the surveyor to determine the values.
- Determination of probable quantities of stock that existed- From the examination of the salvage and the entire premises and the places of storage or display the surveyor may be able to determine the probable quantities of stock that existed prior to the loss.
- Totally destroyed stock- If the stock is totally destroyed, then reliance will have to be placed on books of account and other records and the values therein become the basis of adjustment.
- Reconditioning- If the stock is damaged but can be reconditioned for sale, then the basis of settlement will be cost of reconditioning plus any reduction in its sale price because of the reconditioned nature of the goods.
- Salvage- If the damaged stock is to be taken over as salvage by the insurers, then the loss is assessed on the basis of sound value, i.e. replacement cost from the wholesaler or manufacturer.
- Finished goods- In regard to finished goods ready for sale, quantities destroyed or damaged have to be determined by visual inspection of salvage, storage space etc. and with reference to production records and other books of account.
- Final Survey Report-There is no standardised survey report form and each surveyor uses his own format for submitting report. However, the final survey report generally consists of the following items of information:
- Name of the insured,
- Address of the insured,
- Name of the Bank/Financer,
- Interest of a financial institution or other mortgagee
- Description of the Risk-It is desirable that the following information should be included in the survey report so that the loss is understood in the correct perspective, the proposal form and representations prior to acceptance are cross-checked and decision is taken regarding future acceptance of the risk, risk improvement etc.
- Construction- Number of storey’s physical condition, maintenance, etc.
- Occupancy- Which part was occupied by the insured, details of other occupancies? Whether the loss occurred in the other occupancy, etc.
- Type of property- tock-in-trade, raw materials, stock-in-process, finished goods, process of manufacture.
- Protection- Hydrants, sprinklers, distance from the fire brigade, water supply, etc.
- Exposure- Special vulnerability of the property to fire, explosion, flood, storm etc.
- Insurable Interest- In the majority of cases, insurable interest is evidenced by sole ownership or additional interest of a bank or a financial institution.
- The surveyor is also expected to give his comments on the spread of fire and aggravation of loss due to presence of combustible materials, openings in walls or floors, etc,
- Photographs of the damage are provided in addition to extracts from statements from police, fire brigade, Salvage Corps, Loss Prevention Association of India.
- Average-If the sum insured under each item of property is adequate, a statement to that effect is made. If there is under-insurance, then calculation of pro-rata average is shown. Where the amount of loss is small and the values of the total property covered are large, the surveyor may consider that it is not worthwhile to go into valuation of the property for purposes of application of average.
- Breach of Warranty- The surveyor is required to give full details of breach of warranties, breach of conditions, mis-description of the property, etc. If everything is in order, the surveyor would report that all warranties etc. are complied with by the insured.
- On receipt of claim intimation, the first step is to verify Policy Coverage.
- After verification, the claim is registered and a claim number is allotted.
- After registration of the claim, a claim form is issued to the insured for completion and return.
- If the loss is known or expected to be large, then licensed independent loss surveyors and assessors are assigned the job of investigation and report on, inter alia, the cause and extent of loss.
- After completing his initial investigation, the surveyor submits a preliminary report.
- Thereafter, a final report is submitted giving full details of the adjustment of the loss and the surveyor’s opinion on the question of liability under the policy.
- As per Condition 15 of the Fire Policy, upon the settlement of any loss under the policy, pro-rata premium for the unexpired period from the date of such loss to the expiry period of insurance for the amount of such loss shall be payable by the insured.
- The discharge voucher is to be signed by all the persons named in the policy as “The Insured”, and the cheque is drawn in favour of all parties mentioned in the policy.
- The claims which are paid will be reflected in the accounts which are prepared at the time of closing.
- The surveyor’s primary duties are given in Rule 13(1) of Insurance Surveyors and Loss Assessors (Licencing, Professional Requirements and Code of Conduct) Regulations, 2000.
- In reinstatement claims, specific confirmation as to verification of the physical reinstatement of the damaged property has to be given.
- In large complicated losses, the process of inspection will be elaborate and comprehensive. The first step is to take or recommend measures directed at minimisation of loss and protection of salvage.
- A thorough examination at an early stage of undisturbed salvage may reveal the real, or indicate the most probable cause of fire.
- One of the most important functions of survey is to determine the value of property covered by insurance and the amount of loss that it has suffered. This value is estimated and fixed, when the property is in evidence, by inspection and examination.
- There is no standardised final survey report form and each surveyor uses his own format for submitting report. However, the final survey report generally consists of the following items of information: Name of the insured, Address of the insured, Name of the bank, Interest of a financial institution or other mortgagee.
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