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Practice of General Insurance (Motor Insurance & Personal Liability…
Practice of General Insurance
Policy Docs & Forms
Offer (Proposal), Acceptance (by insurance company), Consideration (premium), Other Terms, Contract Act
Policy (1 year validity)
Heading (Logo, Name, Address of Co.)
Preamble (recital clause, states proposal has been accepted)
Signature & Stamp (by ins. official to enforce legally)
Operative Clause (Scope of Policy, on what basis cover will be provided, which peril)
Exceptions (whats not covered/ situation under which will not pay cover)
Conditions
Expressed (clearly stated)
Implied
Smuggled goods cannot be insured
item must be in existence
principles of ins.
4 types
Precedent to contract (utmost good faith)
Subsequent to contract (when contract in force need to inform, keep ins. co updated about changes in risk, location)
Subsequent to liability
Provide doc. proof of loss
condition of arbitration (if dispute)
inform co, minimize loss
Precedent to liability
Schedule
Policy no.
Name, details of insured
premium charged
Different for diff. kinds of property insured
Interpretation of Policy
Legal (any change from legal def. of words must be clearly stated)
Contract Clarity
Construction (must be easily understood)
Written > Printed
Contra Proferentum (if contradictions to earlier statements in contract, decision in favor of insured, against policy maker)
paramount clause (overrides all contrary statements, used in marine ins.)
Policy > Proposal
Endorsement
Additional covers under policy, deletions, sum insured increased/decreased (change in risk)
Refund premium
Certificate
Motor (Motor Vehicle Act, 3rd party liability ins. compulsory)
Marine Ins (For marine open policy, mentions ins taken for particular cargo, details of cargo, required in exp/imp. where ins compulsory for cargo
Renewal Notice
Sent 45 days prior to expiration of contract
In motor ins, its at this time give no claim bonus
Cover Note
(provisional coverage, if rates need to be reworked or not having all details of risk), cannot be accepted as contract in court except for motor (3rd party), ex. when new vehicle but Reg. No. not known.
Proposal Form (used for retail ins. products ex. health, SMEs, Fire, except for marine & marine cargo)
Generic Ques (for all policies)
Name of insured
Contact info, business they're in
Period of ins, existing insurance history of property, loss/ claims history, if convicted of crime
Declaration (info to best of my knowledge)
Specific
Ex, for health age, medical records, health problems, height, weight (to determine exposure to risk and sum insured)
for motor, type, make, year of manufacture, cc, who'll drive vehicle
Claim Form
Policy, name, contact
Other insurance in force
date, time of loss (what happened? how happened? (location, circumstance)
Authorities involved?
Detailed list of loss (with value)
Declaration
Fire & Marine Insurance
Fire
Mainly covers fire, lightning (but now covers other perils - standard fire special perils policy)
Features:
Perils
Social (Fire, Riot, Malicious Damage)
Natural (Storms, Tempest, Cyclones)
Others (explosions except boilers, bursting, collision (impact), bush fire, missile testing
Specified peril
Properties insured
Fixed Asset (Building, Plant & Mach, Other Assets (F&F))
rolling goods (RM, WIP, FG)
Location based
Exclusions
Excess/Deductible
War & Nuclear
Earthquake, terrorism (Add on)
Valuables (small amounts), explosives requires special permissions
Spoilage, Electrical Fire
Condition
Condition of average (under-insurance)
Cancellation/Fraud
Arbitration
Written Communication
Specific
Fall/ Displacement of Building
Possession
Reinstate/ Replace property
Auto Reinstatement of SI
Add ons
startup expenses (to restart)
forest fires
Escalation (hike in value of building, not provided for), loss of rent
Spontaneous combustion (for those items that burn within themselves (ex. coal), cold storage stock (temperature increase due to no electricity)
Debris removal (1% inbuilt), architect fee (3% inbuilt but if wanna increase to 7.5 need to take add on
types of policy
Reinstatement Value (RIV) for Fixed assets (BMA)
For stocks
Floater (fixed sum insured across all location where stock lies)
Declaration (of stocks remaining each month, averaged out and premium decided)
Industrial All Risk (if property more than 50 cr.), In addition to general fire ins it also includes:
Fire & Burglary
Machinery Breakdown
Business Interruption due to fire
Biz interruption due to mach breakdown (optional)
Marine
Types:
Cargo
Types of marine cargo ins.
Open
If big co, many cons. in 1 day, difficult to take ins. for all. this solves that (one policy for all transits up to date (12 months), sum insured)
Duty (for imports)
to cover value of duty
Specific
particular cargo (Single transit), from where to where (state), ends after consignment complete
Increased value (profit policy)
amt insured: potential earning due to arbitrage (price differential)
Policy Wording
If local (use inland transit clause (itc))
itc b (c+ overturning, derailment, collusion, fall of bridge)
itc a (all except excl.)
itc c (fire & lightning)
no add on for war
If export/import (use institute (of london underwriter) cargo clause (icc)), internationally applicable, no change in interpretation of words, can include both local and intl transit (As continuation clause)
icc b = icc c + few other risk
earthquake, volcano, lightning, loading, unloading, conveyence,
icc a (comprehensive, all risk) except exclusions
includes malicious damage
icc (C) - cargo by sea
All marine perils, sinking, fire, piracy
Gen. avg (ex. jettison), salvage charges (rescuer ship claiming for bring distress ship to safety), collision liability
icc war, icc srcc (strikes, riots, civil commotion)
exclusions:
ordinary loss due to leakage
inherent delay
Willful misconduct
financial difficulty of carrier (not able to fulfill assignment
inadequate packing
Duration of clause
30 days after landing of aircraft
7 days after train reaches
60 days after unloading (ship)
warehouse to warehouse/ destination
Freight
Where freight paid on delivery
Hull (ships)
while being built
While sailing
while being destoyed
Institute (London underwriter) time clause
insurance for ship, machinery and all consumables on board for voyage (s)
Insurable interest at time of loss not while entering into contract (depends on contract of sale b/w buyer/seller)
Free on Board (seller agrees to package and load goods to ship for free). In such case needs ins for:
while goods lying in port
while being loaded on ship
Transit from warehouse to port
After that buyer takes (transit from port to port, to unloading, including freight)
Cost & freight
Ex works (buyer will arrange pick up, delivery from from sellers warehouse (so buyer needs to take ins.)
Cost insurance freight
buyer arranges for insure up to point buyer requires
Insurance taken by seller, shifts to buyer as resp. changes
Claims:
abandoned (hull, cargo), too costly to extract, damaged beyond value
general average
Total Loss (destruction)
particular avg (partial loss)
salvage loss (if goods deteriorate, auction it for less, insurance will pay for difference amt between actual & salvage value)
sue and labor (repackaging to ensure damage doesn't occur i.e loss minimization labor charges)
extra charges (survey, auction fee)
Motor Insurance & Personal Liability
Motor Ins. (compulsory to cover 3rd party, Motor Vehicles Act 1988, compensation depends either tppi (personal injury) - as awarded by court or tppd - property damage 6000)
Who is 3rd party?
Everyone except owner, his family, employees
Types of vehicle
commercial vehicle
Passenger carrying
goods carrying
trailers
special vehicles
motor trade
trade certificate/ driver cert. (Sent for demo/test drive)
internal (dealers storage)
Road (transit from manufacturers place to dealers)
2 wheeler
Private car
Types of policy
Comprehensive (Own Damage + Liability)
Perils
lightning, RSMD, Burglary, Theft
Accidental damage
Fire, self ignition
Also covers towing charges, emergency repairs, if 'commercial vehicle' damaged while towing other vehicle compensation is paid (for small amount)
Only damage within India covered (or permitted geographical area), could be city/state/ national permit
Liability Only
Damage to 3rd party life & property
Covers Personal Accident to owner/driver + PA to passengers (death or permanent disability)
Exceptions:
consequential loss not covered (ex. loss of income)
intoxication cases
use for racing or abnormal use of vehicle, driver not having license (if give son your car and then meets with accident only get 3rd party (PA) not own damage
carrying more than capacity (commercial vehicle)
Calculation of premium
Insured Declared Value (new price of vehicle, if new then invoice cost, if old invoice cost - depr.). it is max insured value
No claim bonus (entitled to discount on premium if don't claim) - starting from 20% after first year going until 50% of own damage prem.)
CC (Cu. Cap), Carrying cap, gross vehicle weight
Age (how old is car , Zone where car will be driven/ where registered)
Only for comprehensive policy
available only to owner, when transfer vehicle can transfer insurance policy to new owner but not NCB