Final Project Fire Insurance

7/30/2019 Final Project Fire Insurance

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INDEX

Chapter

no

Name Page no

1. Introduction of assurance

2. New India Assurance co

3. Products

4. Various Products & plans

5. Analysis & Review

6. Questions & conclusion


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THE NEW INDIA ASSURANCE CO.

Introduction-

Assurance industry has always been a growth-oriented industry

globally. On the Indian scene too, the assurance industry has always

recorded noticeable growth vis--vis other Indian industries.

The new India assurance Co. Ltd. was the first general assurance

company to be established in India in 1850, which was a wholly British-

owned company. The new India assurance company to be set up by an

Indian was Indian Mercantile assurance Co. Ltd., which was established in

1907. There emerged many a assurance player on the Indian scene

thereafter. The general assurance business was nationalized after the

promulgation of General Insurance Business (Nationalization) Act, 1972.

The post-nationalization general assurance business was undertaken by the

assurance Corporation of India (GIC) and its 3 subsidiaries:

1. New India Assurance Company Limited

2. National Insurance Company Limited

3. United India Insurance Company Limited

Towards the end of 2000, the relation ceased to exist and the four

companies are, at present, operating as independent companies.

The Life assurance Corporation (AIC) was established on 01.09.1956 and

had been the sole corporation to write the life assurance business in India.


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The Indian assurance industry saw a new sun when the assurance

Development Authority invited the applications for registration as assurors

in August, 2000. With the liberalization and opening up of the sector to

private players, the industry has presented promising prospects for the

coming future. The transition has also resulted into introduction of ample

opportunities for the professionals including Chartered Accountants.

The Indian assurance industry is featured by the attributes:

Low market penetration;

Ever-growing middle class component in population.

Growth of consumer

Movement with an increasing demand for better assurance products;

Inadequate application of information technology for business.

Adequate

Fillip from the Government in the form of tax incentives to the assured,

etc.

The industry formations need to keep vigil on these characteristics of

the Indian market and formulate their strategies to entail maximum

contribution to the output of the sector.

The Indian life and non-life assurance business accounted for merely

0.42 percent of the world's life and non-life business in 1997. The figures of

the basic parameters of the industry's performance viz. assurance Density

and assurance Penetration also are evident of the hitherto existing low-yield

Indian market conditions.

The term "assurance Penetration" broadly measures the contribution of

the assurance industry in relation to a nation's entire economic productivity.

The figure of premium vis--vis the GDP of 1999 stood at 0.54 percent for


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non-life assurance business and 1.39 percent for the life assurance business.

The term "assurance Density" reflects the assurance purchasing power.

The premium per capita in India amounted to US $ 2.40 for assurance and

US $ 6.10 for life assurance in 1999 but with the deregulation of the sector, a

sea change in the scene is most likely.

The assurance sector in India has come a full circle from being an open

competitive market to Nationalization and back to a liberalized market

again. Tracing the developments in the Indian assurance sector reveals the

360- degree turn witnessed over a period of almost two centuries.

STRUCTURE OF THE ASSURANCE INDUSTRY

The structure of the assurance industry comprises of the Operating

department, Administrative department and the finance department. The

Operating Department generally performs the basic functions pertaining to

the designing of products, marketing thereof, servicing the insured, the

insured, management of portfolio, etc.

The Administrative Department looks after the day-to-day affairs of

the company. The Finance Department backs the operations and

administration of the company by accounting for the transactions,

streamlining the flow of funds, materializing the management decisions, etc.

The Administration Department as well as the Finance Department,

usually, functions through in-house setup. The Finance Department

functions in the areas of accounting, financial and management reporting,

budgeting and controlling, etc. and thus renders enormous scope for finance


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professionals. The new entrants in the assurance sector are likely to call for

the services of the Chartered Accountants for their financial setup

requirements. The Chartered Accountants have engaged themselves in the

audit of assurance Companies since long. With the transition in the

insurance sector, the horizons for their contribution have broadened.

Contributions have broadened.

There has, emerged a king-size pool of opportunities that the

Chartered Accountants can explore and apply their professional wisdom and

experience to.

BASIC FUNCTIONS OF THE ASSURANCE INDUSTRY

1. Risk Perception and Evaluation:

The fundamental function of an insurer is to provide a cover against

the detriment caused to the insured due to the happening of certain specified

and agreed events. Thus, prior to providing such umbrella through a product,

the insurer has to assess the risk involved in the transaction. The insurer has

to identify the element of risk prevalent in the concerned industry or a

particular unit. The perception of risk requires the study of variables through

various methods including the application of scientific and statistical

techniques and correlation thereof with the industry or unit under study in

light of their basic environmental and infra-structural characteristics.

2. Designing the Insurance Product:


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On the basis of the risks perceived, the insurer develops a product to cover

the stipulated risks. While designing an insurance product, an insurer

decides its cost to be charged from the insured in the form of premium,

reduction thereof in certain cases like not lodging any claim during the

previous covered period(s), suggesting the implementation of risk-mitigating

measures, etc.

3. Marketing of the Product:

The core function of the marketing force of an insurance company is

to generate awareness about the insurance products among the target market.But in the Indian scenario, where the insurance penetration is too low as

compared to the other nations, the marketing force needs to perform the pro-

active role in developing an insurance culture. It is through the efficiency of

the sales force of an insurance company that the desirability and the success

of a product are determined.

Adequate knowledge of the insurance industry, products and the

modalities attached therewith. Further, the marketing personnel should be

adequately backed by the back-office setup.

4. Selling of the Products:

The term selling in the context of Assurance industry connotes theissuance of policies to the applicant proposer. The Assurance basically

embodies the covenant between the insurer and the insured wherein the

former agrees to indemnify the latter for the loss caused to him on the

happening of the certain agreed events up to a specified limit. The life


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insurance policy generally contains the agreement whereby the insurer

agrees to pay to the insured or the beneficiary of the policy an agreed

amount on the expiry of the term of the policy or in the event of the death of

the insured respectively. The additional benefits in the shape of Riders viz.

Accidental Death Benefit, Double Sum Assured, Critical Illness benefits;

Waiver of Premiums, etc. can also be appended with the policy on the

payment of an additional premium.

5. Management of Portfolio:

The management of the portfolio includes the assessment ofrequirement of funds, identification of various sources of finance, the

evaluation of the sources in the light of their cost, availability, timing, etc.,

reconciling the features of various sources with the needs of the company

and the selection of appropriate conjunction of sources. The insurer

possesses huge amount of funds, which need proper management. The

management of the portfolio of an insurance company requires the

identification of investment avenues, evaluation thereof and the selection of

the most appropriate mix of alternatives where the funds of the company can

be invested. The selection requires the knowledge of finance related

functions and techniques apart from the in-depth know of the patterns of

requirement of funds in the company as well as in the industry as a whole.


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ABOUT US

New India is a leading global insurance group, with offices and

branches throughout India and various countries abroad. The companyservices the Indian subcontinent with a network of 1068 offices, comprising

26 Regional offices, 393 Divisional offices and 648 branches. With

approximately 21000 employees, New India has the largest number of

specialist and technically qualified personnel at all levels of management,

who are empowered to underwrite and settle claims of high magnitude.

New India has been rated "A-" (Excellent) by A.M.Best Co., making it the

only Indian insurance company to have been rated by an international rating

agency. Rating based on following factors:

Superior Capital Position Strong Operating Performance Only Company to develop significant International operations, long

record of successful trading outside Indi


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PROFILE

History Present Position

International Presence

Our Strengths

Pioneers

Citizens' Charter

History

Incorporated on July 23rd, 1919 Founded by the House of Tata Founder

member - Sir Dorab Tata. Nationalised in 1973 with merger of Indian

companies.

Present Position

Gross Premium (in India) of Rs. 5017.20 crores in the year 2006-2007, as

against Rs. 4791.49crores in the year 2005-2006. 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.
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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. Pre

Our Strengths

Largest number of Offices - In India and Abroad Trained and technically

qualified staff 1068 fully computerised offices across India. "A-" (Excellent)

rating by A.M.Best & Co (Europe) First domestic company to be rated by an

International Rating Agency Rating based upon following factors: Superior

capital position Strong operating performance Strong market position Onlycompany to develop significant International operations, long record of

successful trading outside India.

Pioneers

First company to set up an Aviation Insurance Department in 1946. First company to handle the Hull Insurance requirements of the Indian

Shipping Fleet.

First company to establish its own Training School. First company to introduce the concept of 'Model Office Training'. First company to create department in Engineering insurance.


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Pioneer in Satellite insurance.

Citizens Charter

Our Mission

To develop general insurance business in the best interest of thecommunity.

To provide financial security to individuals, trade, commerce and allother segments of the society by offering insurance products and

services of high quality at affordable cost

Our Values

Highest priority to customer needs. High standards of public conduct. Transparency in operations.

Our Commitment to the citizens

We will respond to all commercially viable general insurancerequirements of the citizens, including products for weaker sections of

the society at affordable price within three months from the date on

which such a requirement is received.

We will ensure issuance of 100% of documents within a period ofseven days.


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We will ensure that prospectus of the various insurance products areprovided to the customers and the extent of coverage is explained for

his choosing the appropriate product. A written proposal will be

obtained from the insured wherever necessary and accordingly the

policy will be prepared.

We will settle all claims within a time schedule envisaged hereunder:A. Personal life insurance claims within 30 days on completion of all

requirements.

B. Property claims within 30 days on completion of all requirements.

C. Liability claims within 30 days on completion of process of law.

We will promote customer education in general insuranceproducts/services by holding workshops in various centers.

We will open a customer service cell in all ROs/DOs in addition to theexisting 'May I Help You' counters.

We will set up proper grievance redressal mechanism in everyoperating office and will educate the clients about the same including

the system of grievance redressal thorough ombudsman.

On request to the policy issuing office, we will make available to acustomer, the status of his claim and/or claim settlement details within

seven working days.

We will adhere to the IRDA guidelines in protecting thepolicyholders' interest.


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FINANCIAL RATING

For the sixth consecutive year, the Company has been rated as "A-"

(Excellent) by M/s. A.M. Best Europe Ltd. The rating reflects Company's

excellent risk adjusted capitalisation, prospective improvement in

underwriting performance and its leading business profile in the direct

insurance market in India. A partially off-setting factor is the Company's

reliance on investment income which counter balances underwriting losses.

But the outlook is stable. A.M. Best believes the Company's risk adjusted

capitalisation is excellent and anticipates that it will remain sufficient to

absorb the likely growth in the net premium. Further it also expects that

there will be a reduction in the combined ratio in the years to come. The

Company is likely to maintain its leading business position as the largest

direct insurer in India, despite increased competition from private players.
http://www.newindia.co.in/fin-rating.asphttp://www.newindia.co.in/fin-rating.asphttp://www.newindia.co.in/fin-rating.asphttp://www.newindia.co.in/fin-rating.asp


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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:-


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WORKFORCE

Employee Strength (as on 31.03.2012)

Category Total Number of

Employees

Function

Class I 5504 Supervisory

Class II 2574 Development Force

Class III 9032 Clerical/Secretarial

Class IV 2049 Substaff/Drivers

P. T. S. 389

TOTAL 19548


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PRODUCTS

PRODUCTS

PERSONAL

COMMERCIAL

INDUSTRIAL

SOCIAL


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Definition

Standard firepolicy that usually covers fire due to any cause, subject to some exceptions

which too may be covered with additional premium. These policies may be extended further

(by paying additional premium) to include collateral damages or losses such as loss of

income.

Fire Insurance Definition

Fire insurance means insurance against any loss caused by fire. Section 2(61 of theInsurance Act defines fire insurance as follows: Fire insurance business means the

business of effecting, otherwise than incidentally to some other class of business,contracts of insurance against loss by or incidental to fire or other occurrence customarilyincluded among the risks insured against in fire insurance policies.

What is Fire?

The term fire in a Fire Insurance Policy is interpreted in the literal and popular sense.There is fire when something burns. In English cases it has been held that there is no fireunless there is ignition. Stanley v. Western Insurance Co. Fire produces heat and light buteither o them alone is not fire. Lighting is not fire. But if lighting ignites something, thedamage may be covered by a fire-policy. The same is the case with electricity.

Characteristics of Fire Insurance

1. Fire insurance is a contract of indemnity. The insurer is liable only to the extent of theactual 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 mustdisclose all the material facts known to them.

3. Fire insurance policy is usually made for one year only. The policy can be renewedaccording to the terms of the policy.

4. The contract of insurance is embodied in a policy called the fire policy. Such policiesusually cover specific properties for a specified period.

5. Insurable Interest: A fire policy is valid only if the policy-holder has an insurable interestin 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 andcharge-holders.

6. In case of several policies for the same property, each insurer is entitled to contributionfrom 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 interpretedliberally. Example: A women hid her jewellery under the coal in her fireplace. Later on
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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 actofpolicy-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 iscaused 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 withthe 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 theoccurrence 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 policythere is an international over valuation of the property by the policy-holder, the policy

may be avoided on the ground of fraud.

Fire Insurance, Fire Insurance Policy

A fire insurance policy involves an insurance company agreeing to pay a

certain amount equivalent to the estimated loss caused by fire to the insured,

within the time specified in the contract. The indemnity is subject to change

depending upon the policy. One should confirm with the insurer about the

types of risks covered, since one cannot insure the property against all types

of risks of fire.

0

Insurance policies are legally binding contracts between an insurance

company and a policyholder that establishes the details of coverage,


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specifying the conditions or perils and compensation provided should they

occur. A fire insurance policy is a specific type of property insurance which

covers the insured in the event their home is lost or damaged during a fire. It

is a common investment and is often required and included as part of a

homeowners insurance policy when a mortgage is approved.

A fire insurance policy typically has four different coverage areas. The

dwelling portion refers directly to the home itself. The coverage for the

dwelling should always be enough to adequately replace the home.

Rebuilding expenses are often determined based on the actual square footage

of the home in question. The portion referring to other structures includes

the coverage of garages or sheds that are not part of the dwelling itself andare considered a separate area.

Personal property is considered a separate coverage area as well and

includes the contents within the home that are not part of the dwelling itself,

for example furniture, electronics, computer equipment, clothing and

jewelry. Personal property items of considerable value should be specifically

listed as part of the fire insurance policy, items that are not explicitly valuedtend to be compensated with a standard amount.

The fourth coverage area relates to additional expenses that exceed the

insureds usual cost of living as a result of the fire damage. This can refer to

the expenditures of temporary housing among other things, all incurred

when forced to live away from your residence during the process of

rebuilding or repairing. These expenses need to be documented in order to

receive reimbursement later. Usually there is a limit set for additional

expenses claimed.


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When insurance companies pay losses on claims it is either based on actual

cash value or replacement value. Actual cash value commonly refers to the

fair market value of the home at the time the loss or damage is incurred.

Replacement value means the insured would be compensated for the entire

cost or replacing, repairing, or rebuilding the home. Actual cash value can beconsiderably less than the replacement value and is usually less preferable.

Most fire insurance policies also cover any water damage resulting from the

process of fighting the fire, such as that created from a fire hose or a broken

pipe. Some insurance policies also make stipulations for building code

upgrades, for example if current building codes require a specific material

but the home in question had a substandard quality of material, the

homeowner would be expected to account for the discrepancy in cost

relating to the repair process.

What is the extent of coverage under a Fire Insurance Policy?

Fire insurance provides protection for the estimated value of the physical

house. However, there are a number of exclusions to the same, for example

medical bills, loss of human life and pets, loss of personal belongings,

structures outside the property (including garages and gazebos), damage to

the landscape and expenses for accommodation for the time being. These

things can be covered under a package of extended property insurance.

What are the main types of Fire Insurance policies?

* Specific Policy: The insurer is liable to pay a set amount lesser than the

propertys real value. In this policy, the propertys actual value is not

considered to determine the indemnity. The average clause, which requires

the insured to bear the loss to some extent, does not play a role in this policy.

In case the insurer inserts the clause, the policy will be known as an average

policy.

* Comprehensive policy: This all-in-one policy indemnifies for loss

arising out of fire, burglary, theft and third party risks. The policyholder may


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also get paid for the loss of profits incurred due to fire till the time the

business remains shut.

* Valued policy: This policy is a departure from the standard contract of

indemnity. The amount of indemnity is fixed and the actual loss is not takeninto consideration.

* Floating policy: This policy is subject to the average clause. The

extent of coverage expands to different properties belonging to the

policyholder under the same contract and one premium. The policy may also

provide protection to goods kept at two different stores.

* Replacement or Re-instatement policy: This policy is subject to the re-

instatement clause, which requires the insurance company to pay for

replacing the damaged property. So, instead of giving out cash, the insurer

can re-instate the property as an alternative option.

Why does one need Fire Insurance?

Fire insurance is important because a disaster can occur at any time. There

could be many factors behind a fire, for example arson, natural elements,

faulty wiring, etc. Some facts that stress the importance of fire insurance

include:

* Fire contributes to the maximum number of deaths occurring in America

due to natural disasters.

* Eight out of ten fire deaths take place at home.

* A residential fire takes place after every 77 seconds.

* The major reason for a residential fire is unattended cooking


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Fire Insurance Claim Procedure:

Individuals/corporates must inform insurer as early as possible , in no case laterthan 24 hours.

Provide relevant information to the surveyor/claim representative appointed bythe insurer.

The surveyor then analyzes the extent/ value of loss or damage. The claim process takes anywhere between one to three weeks.

What is Covered in Fire & Special Perils Policy?

Accidental fires, lightning, explosion and implosion due to pressure vessels(usedfor domestic purposes)

By rioting mob, striking workers, malicious acts by third parties and damage byterrorists

Impact damage by any rail/road vehicle or animal by direct contact.

Commodities damaged by water used for extinguishing fire. Loss\damage caused by pulling down of adjacent buildings by the fire brigade to

prevent the flames from progressing. Breakage of commodities in the process of their removal from the premises where

fire is intense. Aircraft and other aerial and and/or space devices and/or articles dropped

therefrom, excluding destruction or damage occasioned by pressure waves causedby such devices

Payments made to people employed in extinguishing fire. Subsidence and landslide, including rock slide. Natural calamities like storm, cyclone, typhoon, hurricane, tornado, flood and

impact damage. Damages caused due to bursting or overflowing of water tanks, apparatus and

pipes Bush Fire

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Final Project Fire Insurance