PARA 13.2|IC 57, Fire Insurance|ONE LINER|CHAPTER 4

PARA 13.2|IC 57, Fire Insurance|ONE LINER|CHAPTER 4

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 4 “Erstwhile Traiff-Rules and Rating” 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.

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♦Chapter 4 “Erstwhile Traiff-Rules and Rating”

1. Policy- Only Standard Fire and Special Perils Policy with the permitted “Add-on” covers if any, can be issued.
2. Policies should be read together with the proposal form, schedule, specification, endorsements, warranties and clauses for which suitable formats may be devised by insurers.

3.Policies covering buildings and / or contents shall show block wise separate amounts on:

• Building
• Machinery and Accessories
• Stock and Stock-in-Process
• Furniture and other contents

4.The policy has an option to exclude RSMD and / or STFI perils since inception.

5. Valued Policies-These policies are issued only for items for which market value cannot be ascertained.

6. Long-term policies-These policies are issued for 36 months or more for house/ flat owners.
7. Partial Insurance– It is not permissible to issue a policy.
8. It is permissible for each owner to insure separately.
9. Mid-Term Cover-Generally, it is not permissible to grant mid-term cover for STFI and / or RSMTD perils.
10. Mid-term increase in sum insured is allowed on pro-rata basis, while decrease in Sum insured is permitted on short period.
11. Risks in Multiple Occupancy Industrial Estates shall be rated “Per Se”.
12. “Per Se” rating means each risk will be charged as its own merits at applicable rate of premium.
13. Rates are provided for factories where no manufacturing / storage activities are carried out or factories which go silent for 30 days or more.
14. Claims experience discount can be granted on the basis of incurred claims ratio.
15. Fire Extinguishing Appliances discount can be granted, as per scale, Subject.
16. System shall be erected and tested as per the relevant regulations.
17. 17. Certificate from Professionals/ Professional Agencies confirming the efficiency of the system and its compliance with the Rules shall be submitted by the Insured.
18. fire extinguishing appliances and extra premium is charged for Kutcha construction of the building for individual risk though belonging to the same group.
19. Godowns are subdivided into classes depending upon the type of goods stored –non-hazardous, hazardous, extra hazardous etc.
20. The building rate is applicable to pump-houses, garages, compound walls, computers including computer system records and ancillary equipment and /or other utilities.
21. This Stocks belonging to the insured stored in the open area adjacent to the insured’s premises are held covered.
22. Incidental operations such as grinding of lenses in optical frame shops, polishing and/ or varnishing in furniture shops, occasional repairs etc are permitted.
23. Industrial / Manufacturing Risks -Rates are provided for about 205 industrial / manufacturing risks arranged in alphabetical order.
24. One risk One rate-The rates under this Section shall be uniformly applicable to the entire insured property in the same industrial compound i.e., all process areas, storage areas, utilities, miscellaneous blocks, pipelines, roads, compound wall, cables, street light etc.
25. Plastic bottle manufacturing incidental to Aerated water manufacturing shall carry the rate applicable to “Aerated Water Factories”.
26. Spray painting incidental to Automobile Manufacturing shall carry the rate applicable to “Automobile Manufacturing”.

27.Manufacturing of Acid/ Plastics for internal consumption in Explosive factories shall be rateable under “Explosive Factories”.

28. Utilities (Section V) -This Section provides rates for utilities located outside the industrial / manufacturing risks.
29. Storage Risks (Section VI) Rates are provided in this Section for different types of goods stored in godowns / silos or in the open outside the compound of industrial / manufacturing risks.
30. Classification of goods / materials: For the purpose of differential rating, materials / goods are classified into three generic categories on the basis of their hazard evaluation.
31. Category I

• Solids which are moderately or slightly combustible
• Flammable liquids having flash points above 65°C
• Inert and non-combustible gases
• Highly toxic materials
• Waste of non-hazardous materials

32. Category II

• Pyrotechnic materials.
• Flammable liquids having flash point between 32°C and 65°C.
• Moderate Oxidising Agents and Oxygen.
• Materials which evolve combustible gases in contact with water.
• Waste of Category I materials

33. Category III

• Materials which are self ignitable.
• Flammable liquids having flash point below 32°C.
• Strong Oxidising Agents.
• Combustible gases.
• Waste of Category II and III materials

34. The rates vary according to the type of goods as per classification already explained and that higher rates apply if the materials are stored in the open.
35. The presence of hazardous goods of higher category not exceeding 5% of the total value of the stock may be allowed i.e., without charging the higher rate.
36. Incidental open storage up to 2% of sum insured on stocks can be allowed when the risk is rated under “materials stored in godown”.
37. Incidental operations such as packing / selecting / assorting / mending / stitching / battery charging and the like which do not materially alter the nature of risk are allowed to be carried out in the premises
38. Tanks / Gas Holders (Section VII): This section provides representative rates for gas holders and tanks located outside the compound of industrial/ manufacturing risks.
39. The general rules and regulations prescribed in Section 1 of the erstwhile tariff are applicable to all sections of the Tariff. These rules are now observed by insurers as good practice.
40. Valued policies are issued only for items for which market value cannot be ascertained.
41. Long-term policies are issued for 36 months or more for house flat owners.
42. Policies for a period of less than 12 months must be issued at the short period scale of rates.
43. If insurance is cancelled at the option of

• The insured: Retention of premium shall be at short period scale.
• The insurer: Refund of premium shall be on pro-rata basis.

44. Pro-rata refund of premium may be allowed if a policy is cancelled

• On account of a Government order, or
• On completion of a “Building in course of construction, or
• Where building is demolished

45. Generally, it is not permissible to grant mid-term cover for STFI and/ or RSMTD perils. However, where such covers are granted mid-term, the following provisions shall apply:

• Insurers must receive specific advice from the insured accompanied by payment of additional premium in cash or by a demand draft.
• The cover shall be granted for the entire property under one or more policies.
• Cover shall commence 15 days after the receipt of premium.
• Premium rates shall be charged on short period scale on full sum insured for the balance period i.e., up to the expiry of the policy.

46. Mid-term increase in sum insured is allowed on pro-rata basis, while decrease in Sum insured is permitted on short period basis.
47. Risks in Multiple Occupancy Industrial Estate shall be rated “Per Se”.
48. “Per Se” rating means each risk will be charged as its own merits at applicable rate of premium.
49. Fire insurance premium rating is based on certain basic principles.

• Firstly, the rate of premium must be commensurate with the physical hazards involved.
• Secondly, classification of risks, based on hazards evaluation, into homogeneous groups, is adopted. Each group comprises risks exposed to more or less, the same degree of exposure.
• Thirdly, the rate of premium is based on the past loss experience of each group.
• Fourthly, the principle of discrimination differentiates individual risks within a group taking into account favourable and unfavourable features Thus, discounts in the premium are granted.

50. In Simple risks (Section III), of the Tariff prescribes rates for 4 types of simple occupancies. Some examples are:

• Dwellings, Offices, Colleges, Hospitals, Showrooms where goods are kept for display and no sales are carried out.
• Restaurants, Hotels.
• Shops (non-hazardous goods), Laundries, Amusement Parks.
• Shops (hazardous goods).

51. In Industrial / Manufacturing risks (Section IV) Rates are provided for about 205 industrial / manufacturing risks arranged in alphabetical order. The rates under this Section shall be uniformly applicable to the entire insured property in the same industrial compound. This is known as ‘One risk one rate’.
52. The Utilities (Section V) provides rates for utilities located outside the industrial/ manufacturing risks (Stand Alones).
53. Rates are provided in Storage risks (Section VI) for different types of goods stored in godowns / silos or in the open outside the compound of industrial/ manufacturing risks.
54. The Tank / Gas Holders (Section VII) section provides representative rates for gas holders and tanks located outside the compound of industrial /manufacturing risks.

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