Fire Insurance in India Quiz
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Questions and Answers

What is the main purpose of the rules laid down by the Tariff Advisory Committee?

  • To outline tax obligations for insurance policies
  • To provide guidelines for fire insurance business (correct)
  • To determine the profitability of insurance companies
  • To regulate the investment strategies of insurers

    • What significant change happened to the tariff regulations effective from 1st January, 2007?

  • The rating part of the tariffs was withdrawn (correct)
  • New tariffs were introduced for additional risks
  • All tariffs were completely abolished
  • The policy wording became optional

    • Which section of the fire tariff deals specifically with hotels and shops?

  • Section IV
  • Section II
  • Section I
  • Section III (correct)

    • According to the structure of the tariff, what is included in the annexure?

    <p>Specimen copy of clauses</p> Signup and view all the answers

    Which of the following does NOT pertain to the standard fire and special perils policy?

    <p>Annualized premiums</p> Signup and view all the answers

    What does a breach of the tariff imply for insurers under the Insurance Act, 1938?

    <p>It constitutes a breach of the Act</p> Signup and view all the answers

    In which section would you find regulations for tank farms or gas holders?

    <p>Section VII</p> Signup and view all the answers

    Which statement regarding the rates provided in the Study Text is true?

    <p>They are illustrative and subject to change</p> Signup and view all the answers

    What must be maintained throughout the currency of a fire insurance policy?

    <p>The full sum insured</p> Signup and view all the answers

    What happens to the sum insured if the insured chooses not to reinstate it after a loss?

    <p>It is reduced by the amount of the loss</p> Signup and view all the answers

    What principle ensures that claims are settled fairly in fire insurance?

    <p>Principle of Indemnity</p> Signup and view all the answers

    What does over-insurance in a fire policy imply?

    <p>No benefit to the insured in case of claim</p> Signup and view all the answers

    Which of the following is a feature of the sum insured in fire insurance policies?

    <p>It should represent the actual value of the insured property</p> Signup and view all the answers

    What does the All India Fire Tariff regulate?

    <p>Rules and rates for fire insurance business</p> Signup and view all the answers

    Which of the following statements is true regarding cold storage damage in fire policies?

    <p>Generally excluded but may be covered by add-ons</p> Signup and view all the answers

    Which principle is NOT commonly associated with fire insurance contracts?

    <p>Discount for non-claims</p> Signup and view all the answers

    What type of property damage is excluded when spontaneous combustion occurs?

    <p>Only the property directly affected by spontaneous combustion</p> Signup and view all the answers

    Which of the following losses is payable under fire insurance?

    <p>Damage from smoke following a fire</p> Signup and view all the answers

    What type of damage caused by fire brigade efforts is covered under fire policy?

    <p>Damage caused by using water to put out the fire</p> Signup and view all the answers

    What type of damage is defined as 'concussion damage'?

    <p>Damage caused by a sudden violent burst</p> Signup and view all the answers

    What is covered under the insurance policy regarding lightning?

    <p>All damages caused by lightning, fire or not</p> Signup and view all the answers

    Which of the following is excluded from coverage due to explosion or implosion?

    <p>Damage to economisers and steam-generating vessels</p> Signup and view all the answers

    What scenario allows for coverage of property removed from a fire?

    <p>When removal is made to prevent weather exposure</p> Signup and view all the answers

    What distinguishes implosion from explosion according to definitions?

    <p>Explosion results in shattering outward</p> Signup and view all the answers

    What is the basis of settlement for partial damage to a building or machinery?

    <p>Cost of repair without considering depreciation</p> Signup and view all the answers

    What is the maximum time allowed for the insured to complete reinstatement after damage?

    <p>12 months</p> Signup and view all the answers

    What happens if the insured does not inform the insurer of the intention to replace damaged property within 6 months?

    <p>Loss is settled on normal indemnity basis</p> Signup and view all the answers

    What is the liability of the insurance company until reinstatement is completed?

    <p>Normal indemnity basis is applicable</p> Signup and view all the answers

    What triggers the application of pro-rata average in reinstatement?

    <p>Cost of reinstatement exceeds the sum insured</p> Signup and view all the answers

    What is emphasized by the third proviso regarding reinstatement?

    <p>Adequate sum insured considering future costs</p> Signup and view all the answers

    Which of the following is NOT a circumstance where reinstatement basis of settlement applies?

    <p>Insured is uncontactable</p> Signup and view all the answers

    What is the implication of reinstatement taking place at a different site?

    <p>Liability of the company is not increased</p> Signup and view all the answers

    What is the minimum duration of supply failure for a loss to be covered by the policy?

    <p>24 hours</p> Signup and view all the answers

    What type of loss is not covered by the company due to actions of governmental authorities?

    <p>Loss caused by supply rationing not related to damage</p> Signup and view all the answers

    What percentage of the claim amount does the basic fire policy cover for architects' fees?

    <p>3%</p> Signup and view all the answers

    What is the maximum percentage of the claim amount the policy allows for expenses related to architects' fees with the Add-on?

    <p>7.5%</p> Signup and view all the answers

    Which of the following causes of deterioration is covered by the policy?

    <p>Deterioration due to temperature change from damaged machinery</p> Signup and view all the answers

    Who bears the burden of proving that a loss or damage is covered by the policy?

    <p>The insured party</p> Signup and view all the answers

    What additional premium can be paid to extend coverage for expenses related to architects' fees?

    <p>It cannot exceed 7.50% of the claim amount</p> Signup and view all the answers

    In what scenario is the insurer liable for damage to stocks due to machinery failure?

    <p>If the damage to machinery is due to an insured peril</p> Signup and view all the answers

    Study Notes

    Fire Insurance in India

    • The Tariff Advisory Committee governs fire insurance in India under the Insurance Act of 1938.
    • The tariff is legally binding on all insurers.
    • The Insurance Regulatory and Development Authority of India (IRDA) withdrew the rating aspect of the tariffs, leaving other regulations in place.

    Fire Tariff Structure

    • The tariff is divided into eight sections covering different aspects of fire insurance and an annexure with sample clauses:
      • General rules and regulations
      • Standard fire and special perils policy
      • Dwellings, offices, hotels, shops, etc.
      • Industrial and manufacturing risks
      • Utilities located outside industrial/manufacturing risks
      • Storage risks outside the compound of industrial/manufacturing risks
      • Tank farms / gas holders outside the compound of industrial/manufacturing risks
      • Add-on covers

    Standard Fire and Special Perils Policy

    • The policy form includes:
      • Operative clause
      • General exclusions
      • General conditions

    Perils Covered Under the Fire Policy

    • Fire:
      • The policy covers damage directly resulting from fire, including smoke, scorching, and falling walls.
      • It also covers damage caused by fire brigades while minimizing loss, such as damage caused by water or blowing up the property.
      • Damage to property removed from a burning building due to weather exposure, provided the removal was made to mitigate the loss.
    • Lightning:
      • All damage caused by lightning, whether fire occurs or not, is covered.
    • Explosion/Implosion:
      • The policy covers explosions, defined as a sudden violent burst with a loud sound, except for damage to boilers, economizers, or vessels generating steam, machinery, or apparatus subject to centrifugal force by its own explosion/implosion.
      • Implosion, meaning bursting inward or collapse due to external pressure, is also excluded for boilers, economizers, etc. This risk can be covered under an engineering policy.

    Important Policy Provisions

    • Sum Insured: The full sum insured must be maintained throughout the policy period.
      • Upon settlement of a loss, a pro-rata premium from the date of loss to the date of expiry is payable by the insured.
      • The extra premium is deducted from the net claim payable.
    • Continuous Cover: Continuous cover to the full extent is available despite previous losses paid, regardless of whether the additional premium has been paid.
      • If the insured chooses not to reinstate the sum insured after a loss, the sum insured is reduced by the amount of the loss.

    Exclusions from the Fire Policy

    • The policy generally excludes damage to stocks in cold storage premises. This can be covered with an endorsement under "add-ons."
    • Cold Storage Premises:
      • Damage to machinery equipment or premises due to an insured peril is covered by the basic fire policy.
      • Damage to stocks arising from a change in temperature due to damage to the machinery is not covered, unless the duration of the failure exceeds 24 hours.
    • Government and Municipal Action:
      • The policy does not cover losses caused by deliberate action of government, municipal, or local authorities, unless these actions are undertaken solely for the purpose of safeguarding life or protecting the supply undertaking's system.
      • The policy also doesn't cover losses resulting from actions taken by authorities to withhold, restrict, or ration supply, unless it is solely due to damage to the supply undertaking's generating or supply equipment by an insured peril.
      • The policy doesn't cover losses unless the duration of the failure exceeds 24 hours.

    Architects, etc Fees

    • The fire policy covers Architects, Surveyors, and Consulting Engineers' fees up to 3% of the claim amount.
    • An "Add on cover" can extend this to 7.5% of the admitted loss.

    Reinstatement Clause

    • This clause allows the insured to rebuild or replace the damaged property.
    • Basis of Settlement:
      • If the insured chooses to reinstate, the settlement basis is the cost of repair without considering depreciation.
    • Provisos:
      • The insured must start and complete reinstatement within 12 months, otherwise the loss will be settled based on indemnity (market value).
      • Until reinstatement is done, the company's liability is limited to normal indemnity basis.
      • If the cost of reinstatement exceeds the sum insured, the insured bears a pro-rata portion of the loss.
      • Reinstatement will not apply if the insured fails to inform the insurer of their intention to replace the damaged property within 6 months or if they are unable or unwilling to replace the property.

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    Description

    Test your knowledge on fire insurance regulations and tariffs in India. This quiz covers topics such as the role of the Tariff Advisory Committee, the structure of fire insurance tariffs, and standard fire and special perils policies. Dive into the details of how fire insurance operates within the framework of Indian law.

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