I am an Associate Member of Insurance Institute of India besides F.C.A and A.I.I.I.S.L.A.
GENERAL INSURANCE & THE ROLE OF CHARTERED ACCOUNTANTS:
A Chartered Accountant is well equipped to play different roles in General Insurance Industry.
1. CA Sri N. Rangachary was the first chairman of The Insurance Regulatory & Development Authority. Under his able stewardship, I.R.D.A. formulated regulations for the insurers, regulations for protection of policyholders, regulations for Surveyors etc., and made a mark of reforms in the liberalized era as distinguished from the controller of insurance administration of public sector general insurance companies formed after Nationalization on 13th May 1971 w.e.f. 1st January 1973.
2. President of Institute of Chartered Accountants of India is an ex-officio member of the I.R.D.A.
3. A CA can discharge different functions in an Insurance Company viz., Finance, Audit, Underwriting, administration and other departments.
Eg: The Chairman cum Managing Director of the Oriental Insurance Company Limited is a CA.
CA Sri Hari Hara Sarma is Divisional Manager of the Oriental Insurance Company Limited, Gudivada Divisional Office.
There are more than one CA in the Machilipatnam Divisional Office of Life Insurance Corporation of India.
(Insured Property (building) is insured by the insured (LIC). LIC insured its building with OIC. Here, LIC is the insured. Building is the property insured. OIC insured the LIC building.)
4. A CA discharge his duties as Internal Auditor and Statutory Auditor of Insurance Companies.
5. A CA can act as Surveyor (for which ICAI gave general permission to practicing CA’s to act as Surveyors and to become members of Indian Institute Insurance Surveyors and Loss Assessors), Investigator, Salvor, Loss Preventor, Actuary.
6. A CA can act as Insurance Intermediaries viz., Agent, Broker, Third Party Administrator.
7. A CA can act as Arbitrator between the Insurance Company and the policyholders to resolve disputes about the quantum of loss.
8. Last but not the least, a CA in practice can advise his clients and similarly CAs in Industry can advise their managements regarding selection of policy, need for insurance, legal requirement of insurance, adequacy of insurance, scope of risks to be covered, limitations of policies, measures for improvement of both physical hazards and moral hazards in order to minimize the loss occurrence and to earn resultant savings, discounts on premiums particularly he can draw cost benefit analysis under different plans of different polices of different companies more particularly in the detarif age effective from 1st January 2007.
In a nutshell, a CA can give VALUE ADDITION to his clients.
In order to help a CA to advise his clients, all related important information, in brief, given in the following Annexures:
Annexure No. Description Page No.s
1 Origin, Development and Present Status of Insurance 3
2 Risk & Theory of probability 4,5
3 Fundamental principles of Insurance:
(a) Utmost Good Faith
(b) Proximate Cause
(c) Insurable Interest
(d) Indemnity
(e) Subrogation
(f) Contribution 6-12
4 Rules of Construction 13-14
5 Important Terms:
(a) Without Prejudice
(b) Arbitration Condition in a Policy
(c) Agreed Bank Clause in a Policy
(d) Actual total loss Vs. Constructive total loss 15-17
6 Special Policies
(a) Reinstatement value policies
(b) Declaration policies
(c) Floating policy
(d) Omission to Insure Additions, etc., clause
(e) Contract Price Clause 18,19
7 Insurance Regulatory and Development Authority Regulations 2002
(Protection of policyholders interest)
(a) Regulation 3 - Point of sale
(b) Regulation 4 – Proposal for Insurance
(c) Regulation 7 – Contents of a General Insurance Policy
(d) Regulation 9 – Claim Procedure
(e) Regulation 10 – Policyholders servicing
(f) General Regulation 20-24
8 CA as a Surveyor 25
9 Final Survey Report on Fire Losses 25-27
10 The Standard consequential Loss (Fire Policy) 28-31
11 Laws relating to Insurance Business 32
12 Insurance Websites 33,34
13 Reference Books 35
Annexure – 1: Origin, Development and Present Status of Insurance:
Insurance as a method of sharing of the losses of few by all existed in the early civilization. In India, during the Aryan Civilization loss of profits, in Crafts Industry, was insured against by the village co-operatives.
Marine Insurance:
Insurance understood as a technique providing protection against the fortuitous events for a consideration had its origin in the “bottomry bonds” which were issued by the Mediterranean merchants as early as in the fourth century B.C.
References to similar practices are also found in “Manab Dharma Shastra” (Code of Manu) which contained rules a for “sea-form” contracts which were observed by the traders from Broach and Surat who set sail in Indian-built ships laden with Indian merchandise to Lanka, Egypt and Greece.
However, the earliest transactions of insurance as practiced today can be traced to the beginning of the fourteenth century in Northern Italy. The Italian merchants, who were engaged in the Mediterranean trade with India viz Constantinople and with the European Countries by land, originated the practice of breaking up the bottomry bonds into two instruments covering separate transactions – the advance of money which was to be repaid on safe arrival of the ship and a policy of assurance which paid the amount stated, in the event of loss at sea. This, then, was the beginning of marine insurance.
This practice of marine insurance gradually spread northwards to the Netherlands and thence to London, where in the sixteenth century, it got firmly established in the mercantile transactions of Lombard Street which was a centre for commerce.
In 1575, a Chamber of Assurance was established to register policies and settle disputes and the Chamber devised a policy form whose wording is the basis of the modern marine policy.
Fire Insurance:
Fire Insurance was transacted under Municipal, Auspicious in Germany in Private Charity in England. Attempts to organize Fire Insurance in the modern form were made only after the great fire of London in 1666. In 1708, an Office was established to insure Goods & Merchandise.
Misc. Insurance:
England Insurers opened Offices in Unites States, The Colonies and Europe in the second half of nineteenth century including Accident Insurance which is known as Misc. Insurance to cover the conditions created by the Industrial Revolution.
Annexure – 2: Risk & Theory of Probability:
THE CONCEPT OF RISK:
Risk is the exposure to events which cannot be predicted with absolute certainty. Dictionary definition of risk is “Hazard, chance of bad consequences, exposure to mischance, etc.,” Risk may also be defined as “ Future uncertainty as regards financial loss”.
There is uncertainty in life, business, commerce, industry.
CATEGORISATION OF RISKS:
A) Business Risks: Also known as speculative risks, because, their outcome may be a loss or a profit. Closely related to speculative risks are dynamic risks viz.,
1) Technical Risks: New Technology
2) Social Risks: Consumer behavior, industrial unrest.
3) Economic Risks: Inflation, Tax policy, competition.
4) Political Risks: War, Nationalization.
Business risks normally benefit society and the economy in the long run, but, they are less predictable because, they do not occur with any precise degree of regularity and hence, they are generally, UNINSURABLE. These lists are managed by strategies and techniques other than insurance.
B) Pure Risks: Also known as static risks. Pure risk denotes those situations where the occurrence of the event results in a loss, viz.,
1) Chemical: Fire, explosion
2) Natural: Cyclone, Flood, Earthquake
3) Social: Riot, Strike, Theft, Fraud, Negligence
4) Technical: Machinery breakdown.
5) Personal: Death, Disablement, sickness.
The problem of pure risk can be minimized to some extent but it cannot be eliminated altogether. Human ingenuity found the answer in insurance system to deal with the financial consequences of a pure risk.
In the insurance context, the term risk has to other meanings. 1) It is used to refer to a peril or a loss-producing event. Eg. The fire policy covers the risk of fire, explosion etc., 2) It is also used to refer to the subject-matter of insurance. Eg. A timber constructed building is a bad risk for fire insurance.
INSURANCE SYSTEM - BASIC CONCEPTS:
1) Transfer or shifting of a risk from an individual to a group;
2) Sharing of losses, on some equitable basis, by all members of the group.
“Few” insureds who suffer losses are paid out of premiums paid by the “Many”. Thus spreading of risks or puling of risks is the basis of insurance operations.
The individual does not know whether he will suffer a loss or not. Thus, at the individual level there is uncertainty. But, the group knows, from the past experience that there will be loss. Thus, at the group level, there is certainty.
Insurance may be describe as a method or a technique which provides for collection of small amounts of premium from many individuals and firms out of which losses suffered by the few are paid. The individual insured, who is exposed to a large but uncertain loss is able to by protection through the payment a small but definite cost viz., the premium.
THEORY OF PROBABILITY:
The law of probability which is also called as “the law of large numbers” or “the law of averages” provides a good basis for forecasting future events. According to this law the great the number of instances considered and longer the period examined, the more probable it will be that past experience will be repeated in the future.
The probability of a “head” on a coin toss can be expressed as ½ or 50 % or 0.5 as in a large number tosses, a coin can be expected to come up “heads” as often as it comes up “tails”
The rate of premium is arrived at on the basis of past loss experience. To fix rates, it is necessary to give a “Mathematical value” to be risks. Eg. L i.e., Loss experience. Out of 1000 cycles, in say, 10 years, 50 cycles are stolen. V i.e., Value of a Motor cycle Rs.50,000/-.
On an average, 5 cycles became total losses due to theft every year. Applying the formula:
L 50,000 X 5 2,50,000
-- X 100 = ----------------- X 100 = --------------- X 100 = ½%
V 50,000 x 1000 5,00,00,000
Annexure – 3: Fundamental Principles of Insurance:
The contract of insurance is based on the fundamental principles of (1) Utmost Good Faith (2) Proximate Cause (3) Insurable Interest (4) Indemnity (5) Subrogation and (6) Contribution.
Annexure 3(a): Utmost Good Faith:
In ordinary commercial contracts, the seller cannot deliberately mislead the buyer but he has no duty to disclose any information about the subject-matter of contract. It is the duty of the buyer to examine the goods to see if there are any defects. The rule observed is known as “let the buyer beware” (caveat emptor).
Every contract of insurance is a contract “uberrimae fidei” i.e., one which requires utmost good faith on the part of both the insurer and the assured. By good faith, we meant absence of fraud or deceit. Utmost good faith can be defined as “a positive duty to voluntarily disclose, accurately and fully, all facts material to the risk being proposed, whether asked for them or not”.
Representations and Warranties: -
Representations are written or oral statements made during the negotiations for a contract. Representations which are material must be substantially true or true to the best of knowledge or belief of the proposer. Representations fall into three categories: viz., (a) Material fact, (b) fact and (c) expectation are belief.
Warranty, in ordinary commercial contracts, is a promise, subsidiary to the main contract, a breach of which would leave the aggrieve party with the right to sue for damages.
Warranties in Insurance contracts are fundamental conditions which go to the route of the contract, and allow the aggrieved party to repudiate the contract. A warranty is a promise by the assured to the underwriter that something shall or shall not be done or that a certain state of affairs does or does not exist. Warranties are of two types viz; (a) Express warranties and (b) Implied warranties.
Breach of Warranty: -
Breach of warranty may be excused at the discretion of the insurers. It is excused by the statute where by reason of a change of circumstances, the warranty ceases to be applicable to the circumstances of the contract, or when compliance with the warranty is rendered unlawful by any law subsequently enacted. Subject to this, a warranty must be literally fulfilled, whether material to the risk or not.
Proposal forms are designed to obtain all material information about the subject-matter of insurance and the proposer. It contains a declaration to the effect that all answers are true and correct and that the proposal and the declaration shall be the basis of the contract. The legal effect of this declaration is that insurers can avoid the contract if any answer is inaccurate or incorrect, even if the answer is not material to the risk. In other words, representations are converted into warranties. This is called the contractual duty of utmost good faith which is far stricter than the common law duty.
Breach of Utmost good faith:
(a) Non-disclosure: Non-disclosure may arise out of silence or evasive answers. The intentional suppression of a material fact is regarded as concealment. Concealment is suggestive of an intent to deceive.
(b) Misrepresentation: Misrepresentation may be innocent or fraudulent.
The insurance contract becomes void if there is concealment or fraudulent misrepresentation. The other breaches of utmost good faith render the contract voidable by the aggrieved party
Annexure 3(b): Proximate Cause:
Causa proxima non remota spectatur (the immediate cause not the remote or distant one should be regarded). The time lag between the cause and effect may be long or short but this does not affect issue, so long as the relationship of cause and effect is established. In Leyland Shipping Co., Vs. Norwich union (1918) the Judge observed as follows:
“to treat proximate cause as if it was the cause which is proximate in time is out of the question. The cause, which is truly proximate, is that which is proximate in efficiency.
“Causation is not a chain but a net. At each point influences, forces, events meet and the radiation from each point extends infinitely. At the point where these influences meet it is for the judge as upon a matter of fact to declare which of the clauses thus, joined at the point of effect was the proximate and which was the remote cause”.
A classic definition of proximate cause is available in the English case of PAWSEY Vs. SCOTTISH and National Insurance Company (1907) as follows:
“The active efficient cause that sets in motion a train of events which bring about a result, without the intervention of any force started and working actively from a new and independent source”.
The following rules are helpful as general guidelines:
(a) If there is a single cause which is an insured peril, clearly it is the proximate cause and there is liability under the policy.
Eg: Insured property burn by accidental fire
(b) If there are concurrent causes, i.e., causes happening together with no excluded perils involved, there is liability under the policy if one of the causes is an insured peril and the other cause may be ignored.
Ex: A man with heart disease sustains an accident which, coupled with his weak heart, leads to death. The proximate cause of death is the accident although a man with a normal heart would have recovered.
(c) If there are concurrent causes with an excepted peril involved, i.e., when an insured peril and an excepted peril operate together to produce the loss, the claim will be out side scope of the policy.
Eg: There is no liability in respect of claims for property stolen by rioters under a burglary policy with the policy excludes riot risks.
(d) However, the exception will not operate the results of the operation of insured peril can be clearly separated from the effects of the excepted peril.
Eg: A Personal Accident policy will cover death in an accident although the insured was suffering at the time from a disease excluded under the policy.
(e) Where a number of causes operate one after the other and the original cause happens to be an insured peril, there is liability under the policy.
Eg: A scratch may cause septic infection and ultimately cause death.
(f) However, if the direct chain of events can be traced to an excepted peril, there is no liability.
Eg: If earthquake causes a fire which spreads to other property in the natural course of events, all such fire damage is deemed to be caused by the excepted peril.
(g) If the chain of events is broken by the intervention of a new and independent cause, the liability will depend upon whether the new cause is an insured peril or an excepted peril.
The practical effect of the doctrine of proximate cause to keep the scope of the insurance within the limits intended by the parties. In the absence of this rule, theoretically speaking every loss could be claimed by the insured and every loss could be rejected by the insurers. Thus, it helps in maintaining a balance between the rights of the insureds and insurers. It allows for the application of commonsense to the interpretation of insurance contract to the mutual advantage of the parties.
Annexure – 3(c): Insurable Interest:
The principle of Insurable Interest is of fundamental importance and leads to other principles such as Indemnity, Subrogation, Contribution.
A simple definition is as follows:
The legal right to insure arising out of a financial relationship under law, between the insured and the subject matter of insurance.
A statutory definition of insurable interest is given in section 7(2) of the Marine Insurance Act, 1963, as follows:
“A person is interested in Marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof”.
Essentials of Insurable Interest:
(a) There must be some property, right, interest, life or potential liability capable of being insured.
(b) It is this property, right, etc, which must be the subject-matter of insurance.
(c) Insured must stand benefited from it safety and would be prejudiced by its loss.
(d) The relationship between the insured and the subject-matter of insurance be recognized at law.
Insurable interest is required to support the contract of insurance in order to make it enforceable at law. In the absence of insurable interest, no contract of insurance can come into existence. In other words, lack of insurable interest will render the contract void. It is this principle which distinguishes insurance contract from a wager or gambling transactions.
Kinds of Insurable interest:
(a) In Marine Insurance, a “defeasible interest” is one which can be brought to an end during the currency of the insurance by the occurrence of some event other than maritime perils.
(b) A “contingent interest” is an interest that attaches during the currency of voyage on the happening of a contingency. Eg: Sellers interest contingency insurance.
When insurable interest must attach:
In Marine Insurance, an assured is not required to have an insurable interest when the insurance is effected but, he must (a) have a reasonable expectation of acquiring such interest and (b) he must have an interest at time of loss.
In Property Insurance, insurable interest is require both at the inception of the contract and at the time of loss i.e., throughout the currency of the policy.
Annexure 3(d): Indemnity:
Insurance is Indemnity. Indemnity was the controlling principle in insurance law.
Indemnity literally means security or protection against loss or damage. Insurance contracts promise “to make good the loss or damage”. Principle of indemnity requires that the loss must be made good in such a manner that financially the insured is neither better off nor verse off as the result of the loss and the effect of the principle is prevent the insure from making a profit out of loss and it arises out of public interest because insurance is based on the principle of sharing of losses out of a common premium fund.
The principle of indemnity is lucidly expressed by Lord Justice Brett in the English case of castellain vs. preston (1893) in the following words:
“The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy (and that equally applies to accident policies) is a contract of indemnity and of indemnity only, and that this contract means that the Assured, in a case of loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. That is the fundamental principle of insurance and if ever a proposition is brought forward which is at variance with it, that is to say, which either will prevent the Assured from obtaining a full indemnity, or which will give the Assured more than a full indemnity, that proposition must certainly be wrong.”
In Insurances of liability, the principle of indemnity strictly observed.
Modifications of Indemnity principle:
The principle of indemnity is modified in its application as follows:
(a) Fire Insurance - Reinstatement Value Policies on buildings & machinery: The basis of indemnity is the cost of reinstatement or replacement of damaged or destroyed property by new property but of the same type.
(b) In Marine Insurance, the principle of indemnity is applied “in manner and to the extent agreed” by the parties to the contract as allowed by the act (Valued policies). In Marine Cargo and Marine Hull insurance a commercial, instead of a pure indemnity is provided. The ship policy allows for a fair value to the ship owner and the cargo policy allows the merchant to insure his profit as well as the actual price of the goods.
(c) In motor insurance, the insured’s declared value (IDV) is deemed to be the sum insured. The motor tariff allows issue of “agreed value” policies on vintage cars i.e., cars manufacture prior to 31.12.1940.
(d) In Misc. Insurance – Baggage insurance policy provides indemnity to the extent of intrinsic value subject to sum insured.
- All risks insurance on jewellery, valuables etc., may be insured on agreed value.
(e) In Personal Accident Insurances, the principle of indemnity as a rule is not applicable. However, in practice the spirit of principle of indemnity is preserved by restricting the sum insured, weekly benefits for disablement in line with the insured’s normal earning capacity.
Annexure 3(e): Subrogation:
Subrogation may be defined as the transfer of rights and remedies of the insured to the insurer who has indemnified the insured in respect of the loss.
Subrogation applies where the contract is one of indemnity and the authority for this is found in the case of Castellain Vs. Preston (1883):
The doctrine of subrogation does not arise upon any terms of the contract of Insurance: it is only another proposition which has been adopted for the purpose of carrying out the fundamental rule i.e., indemnity which I (the judge) have mentioned, and it is a doctrine in favour of the underwriters or insurers in order to prevent the assured from recovering more than a full indemnity; it has been adopted solely for that reason.
The doctrine may be illustrated by the following examples:
(a) Insured property may be destroyed by fire caused by the negligence of a third party who is at law responsible to make good the loss. The insurer having indemnified the insured is entitled to the insured’s right of recovery against the third party.
(b) If cargo is damaged due to the negligence of a carrier (e.g., faulty stowage by a steamship company) who has an obligation under contract of affreightment to make good the loss of the insured, the benefit of this obligation passes to the insurer.
(c) Under products liability policies, if a retailer is indemnified in respect of a claim preferred against him for a defective product, the insurer can recover from the wholesaler or manufacturer who supplied the product, if liability can be established against him.
(d) Under a fidelity guarantee policy, the insurer after payment of the loss, is entitled to claim reimbursement from the defaulting employee.
It will be seen from the above examples that subrogation rights may arise through (i) torts i.e., wrongful acts of a third party, or (ii) contracts.
Subrogation may also arise through “salvage”. On settlement of a claim under burglary insurance the insurer is entitled to take over the stolen goods when they are subsequently traced.
The right of subrogation is implied in all contracts of indemnity. In other words its application to contracts of indemnity is automatic without any express condition in the contract. It arises, however, only after payment of a loss with some exception in Fire and some Misc. Policies.
Annexure 3(f): Contribution:
Contribution may be defined as the right of an insurer who has paid a loss under a policy to recover a proportionate amount from other insurers who are liable for the loss.
An insured may effect two or more insurances on the same subject-matter of insurance. If in the event of a loss, he recovers under each of these policies, the total amount recovered would be more than his actual loss. This would result in a profit to him and thereby the fundamental principle of indemnity will be infringed. The principle of contribution, therefore, supports the principle of indemnity.
The application of the principle of contribution is subject to the following pre-requisites:
(a) The subject-matter must be common to all policies. This does not mean that the whole subject-matter need be the same. It only means that all policies must cover the item in respect of which a claim is made, although, in addition, each policy may cover other items.
(b) The peril which causes the loss, must be common to all policies, although any or all the policies may cover other perils in addition.
(c) The interest covered under all the policies must be the same. The policies must be effected in favour of a common insured. Where the subject-matter is insured under two policies to cover different insurable interests, there cannot be contribution.
For example if property is covered under the policy by the mortgagor and under another policy by the mortgagee, each insurer may have to pay the full loss as the insured are not the same. In such circumstances, subrogation rights will arise with the result that only the insured suffering the ultimate loss will stand indemnified.
In practice, where separate interests are involved (e.g., where banks have advanced loans on property) the insurance is effected in the names of the insured and the bank with an Agreed Bank clause incorporated.
(d) The policies must be in force at the time of loss.
(e) The policies must be legally enforceable.
Annexure – 4: Rules of Construction:
Construction of Policies:
A Policy of insurance is a document intended to have legal effect. Disputes sometimes arise as to the interpretation or the construction of a policy.
The object of construction is to ascertain and apply the intention of the parties as expressed in the contract, for the contract is the final form in which the original intentions of the parties have been incorporated. Where the intention of the parties is clear, no rules of construction are necessary.
But in many cases the intention is not clear, and the Courts use as a guide certain rules of construction in deciding the legal effect of a document. The paramount task of the law is to ascertain the intention of the parties which must prevail. The rules are designed as necessary aids to that task.
Where there is any dispute as to the meaning of the words, phrases, etc., used in an insurance contract, the court adopts the following main rules:
a) The intention of the parties must prevail and the intention must be ascertained from the written agreement when the writing is not clear. It is clear, either party cannot say that the intentions were different from what is expressly stated in the agreement.
b) A written document must be construed as a whole and words and phrases must not be construed in isolation.
c) If a proposal is expressly incorporated in a policy by the terms of the policy, the two should be read together.
d) That which is written or typed, as showing the special intention of the parties, will override that which is printed. Thus, an endorsement may modify, or even contradict, the printed part of a policy form; if so, the endorsement will prevail.
e) An express term overrides an implied term where there is inconsistency. Certain conditions are implied in fire insurance contracts. It is an implied condition that the description of the subject-matter in the policy must be adequate to identify it beyond any reasonable doubt. But condition 1 of the policy provides: “This policy shall be voidable in the event of misrepresentation, mis-description or non-disclosure in any material particular”. Thus, the insurers may overlook certain unimportant mis-descriptions, etc.,
f) Words are assumed to have been used in their ordinary, popular sense, except for legal terms, which are construed according to their strict legal meaning. For example, if a condition provides that certain articles shall be “stored or kept”, this refers to habitual keeping in considerable quantities, and to the introduction for such purposes as warehousing or as stock in trade, and not to occassional or casual introduction, for a specific purpose, of a small quantity for domestic or similar use.
Where a technical term is used, it will be construed throughout in the technical meaning assigned to it. Where words have both a scientific and popular meaning the popular meaning will be preferred unless the wording of the policy makes it clear that the scientific meaning was intended.
g) A document will be construed strictly against the party who has drawn it up, that is, in the case of insurance policies, against the insurer. Thus, if there is an ambiguity in the wording of a policy, the interpretation less favourable to the insurer will be taken. In other words, the benefit of ambiguity will go to the Insured.
Again, where there is ambiguity, the reasonable interpretation is to be preferred. Since the words of the policy are normally the words of the insurers, their duty is to make their meaning clear. If they fail, the maxim – ‘the words of a document are to be enforced more strictly against him who put them forward’ applies, and the words will be construed against the insurers rather than in their favour. This is known as the ‘contra proferentem’ rule.
h) The ordinary rules of grammar and punctuation will apply. Errors in punctuation, and omission of commas, are frequent. It is therefore a common practice to minimise or even to omit the use of commas in a formal document such as a policy.
i) The ejusdem generis rules.
Ejusdem generis means “of the same kind”. Where general words follow specific words which have a quality in common, the general words are not given their full interpretation but are considered to refer merely to things of the same (or genus) as the specific words. Thus, in a reference to “jewellery, plate, silver, gold, or any articles”, the last three words would be construed as meaning “any articles of the same valuable kind as jewellery, plate, silver and gold” and not as meaning “any articles of any kind”.
ANNEXURE – 5: IMPORTANT TERMS:
Annexure 5(a): Without Prejudice:
Until liability for any loss under the policy is clearly established insurers deal with the claim “without prejudice”. By this approach, acceptance of liability is not admitted and the insurers can process the claim by survey of the loss, seeking more information, obtaining documents, etc., to eventually decide whether the loss is payable or not.
Correspondence with the insured relating to a claim is marked “Without Prejudice”. The words have the effect of leaving the question of ultimate liability under the policy open.
Thus, the following action taken by the insurers is without prejudice to their right to deny liability if they are legally entitled to do so:-
(a) Insurance of a claim form. In fact, the claim form incorporates a notice – “The issue of this form is not to be taken as an admission of liability on the part of the company.”
(b) Receipt of documents relating to cause of loss or amount of loss, seeking further information, etc.,
(c) Conduct of investigation to determine the cause of loss or amount of loss etc.,
Surveyors are also instructed to proceed with survey “without prejudice”, where there may be breach of warranty, disagreement as to facts of loss or amount of loss etc., Thus, the insured is made aware of this position.
The words “without prejudice” used in correspondence in a conspicuous manner, usually at the head of a letter, have special legal implications. The letter cannot be produced in a court of law except by agreement between the parties to the action.
When there are negotiations and terms are offered in settlement, the letter must be market “without prejudice”. If settlement of amount is offered as a compromise the letter if not market “without prejudice” will be taken as an admission of liability by the court which may consider the amount as the minimum amount to be considered in any dispute
Survey reports are issued, when liability is in doubt due to any reasons, with the statement that the report is issued, “without prejudice”, subject to the terms, conditions and warranties of the policy.
Some surveyors incorporate at the head of the report the words:-
“Privileged: For the consideration of Insurers and their Legal Advisers only”.
Annexure 5(b): Arbitration Conditions:
- Any dispute or difference as to the quantum to be paid under this policy shall, independently of all other questions, be referred to arbitration.
- No dispute or difference shall be referable to arbitration, if the company has disputed or not accepted liability under the policy.
- A sole arbitrator is to be appointed in writing by the parties.
- If the parties cannot agree upon a single arbitrator within 30 days of any party invoking arbitration the same shall be referred to a panel of three arbitrators, one to be appointed by each of the parties and the third arbitrator to be appointed by such two arbitrators.
- Arbitration shall be conducted under the provisions of the Arbitration and Conciliation Act, 1996.
- The award by arbitrator(s) shall be a condition precendent to any right of action or suit upon the policy.
- The object of this condition is to ensure that disputes are settled quickly. Arbitration procedure is less expensive than litigation. Arbitration is also a private process. Hence, it avoids undue publicity to the insurers of an adverse nature.
Annexure 5(c): AGREED BANK CLAUSE:
The salient features of the clause are:
- The claim is payable to the bank whose receipt shall be a complete discharge and binding on all parties insured.
- Any notice under the policy is sufficient if given by or to the bank.
- Any settlement, compromise etc., in relation to dispute if made with the bank shall be valid and binding on all parties insured.
- Breach of the condition which relates to notification of material alterations in the risk does not affect the interest of the bank unless breach is committed by the bank.
- Any alteration or increase in risk does not invalidate the insurance, provided the bank notifies the same as soon as it comes to its knowledge and pays additional premium.
- If the company pays a claim to the bank for which there is no liability to the mortgagor or owner, the company becomes legally subrogated to all the rights of the bank, to the extent of such payment, but not so as to prejudice the rights of the bank against the mortgagor or owner.
Annexure 5(d): A distinction between actual total loss and constructive total loss may drawn as follows:
Actual or Absolute Total Loss Constructive Total Loss
(a) Where, by a peril insured against, the assured is irretrievably deprived of the subject matter insured Where, by a peril insured against, the assured is deprived of the possession of the subject-matter and it is unlikely that he can recover it.
(b) Where the subject-matter is destroyed by a peril insured against. Where the assured is deprived of the possession of the subject-matter by a peril insured against and the cost of recovering it would exceed its value when recovered.
(c) Where, by a peril insured against, the subject-matter undergoes a physical charge of character or specie and ceases to be “a thing of the kind insured”. Where, the subject-matter is so damaged by a peril insured against that the cost of repairing the damage (together with incidental expenses) would exceed its value when repaired.
Annexure 6: Special Policies:
Annexure 6(a): Reinstatement Value Policies: (New for old)
A Reinstatement value policy is issued on the fire policy form with a reinstatement value clause incorporated therein.
This policy, which is issued only in respect building, plant & machinery, furniture, fixtures and fittings, differs from the fire policy in the basis of settlement of claims. Under the fire policy claims are settled on the basis of the market value of the insured property immediately before the fire. This value is arrived at strictly according to the principle of indemnity, i.e., by taking into account, depreciation, wear and tear, etc., but, the indemnity as such fell short for a insured to reacquire the property.
Under the reinstatement value policy the payment to be made is cost of reinstatement of the building etc., to a condition equal to (but not better or more extensive than) its condition when new. Thus, under this policy it is possible to recover not the depreciated value of building etc., but, the cost of replacement of the damaged property by new property but of the same kind.
Annexure 6(b): Declaration Policies:
Declaration policies cover stocks which are subject to frequent fluctuations in value or quantity.
The insured fixes a provisional sum insured which represents the highest value of stocks at any point of time during the policy period. The premium paid on this sum insured is provisional and is subject to adjustment on expiry of period of insurance.
Annexure 6(c): Floating Policies:
The Floating Policies cover under one single sum insured, stocks at various locations e.g: process blocks, godowns and / or in the open. The policy can also cover stocks stored in godowns at various specified locations in the same town, city, state or other states as well.
The special provision of this clause attached to the policy requires good internal audit and accounting procedure under which the total amount at risk and the locations can be established at any particular time, if required.
Annexure 6(d): Omission to Insure Additions, etc., clause:
Assessment and settlement of claims is subject to special provisions of the “Omission to insure Additions, Alterations or Extensions” clause which are as follows:
The extension covers buildings and / or machinery, plant, furniture and fittings (and not stocks) which the insured may erect or acquire or for which they may become responsible.
a) at the insured premises
b) for use as factories
- The insured shall notify each additional insurance as soon as it comes to their knowledge and pay appropriate premium from the date of inception.
- The liability under the extension shall not exceed 5 % on the sum insured by each item.
- Additional premium on 5% of sum insured is payable in advance at the inception of the policy.
- There is no liability under the extension if the property is otherwise insured.
Annexure 6(e): Contract Price Clause (Exception to Pure Indemnity)
This clause, inserted in the policy, applies to imported goods only (and not goods of local manufacture) sold but not delivered for which the insured is responsible.
If the Sale Contract under the conditions of sale, is cancelled either wholly or to the extent of loss or damage by perils covered under the policy, the liability under the policy is based on the contract price.
Annexure – 7: INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (I.R.D.A) REGULATIONS, 2002
(Protection of Policy holders’ Interests)
These Regulations are in addition to any other regulations made by the Authority, which may, inter alia, provide for protection of the interest of policyholders.
These Regulations apply to all insurers, insurance agents, insurance intermediaries and policyholders.
The provisions of the Regulation 3 in respect of Point of Sale are as follows:
(1) A prospectus of any insurance product shall clearly state the scope of benefits, the extent of insurance cover and in an explicit manner explain the warranties, exceptions and conditions of the insurance cover,
(2) An insurer or its agent or other intermediary shall provide all material information in respect of a proposed cover to the prospect to enable the prospect to decide on the best cover that would be in his or her interest.
(3) Where the prospect depends upon the advice of the insurer or his agent or an insurance intermediary, such a person must advice the prospect dispassionately.
(4) Where, for any reason, the proposal and other connected papers are not filled by the prospect, a certificate may be incorporated at the end of proposal form from the prospect that the contents of the form and documents have been fully explained to him and that he has fully understood the significance of the proposed contract.
(5) In the process of sale, the insurer or its agent or any intermediary shall act according to the code of conduct prescribed by:-
(i) the Authority (IRDA)
(ii) the Councils that have been established under section 64C of the Insurance Act, and
(iii) the recognized professional body or association of which the agent or intermediary or insurance intermediary is a member
Explanation – “Material” for the purpose of these regulations shall mean and include all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer.
(6) The provisions of Regulation 4 regarding proposal for insurance are as follows:
Proposal for Insurance – Except in cases of a marine insurance cover, where current market practices do not insist on a written proposal form, in all cases, a proposal for grant of a cover, either for life business or for general business, must be evidenced by a written document. It is the duty of an insurer to furnish to the insured free of charge, within 30 days of the acceptance of a proposal, a copy of the proposal form
Forms and documents used in the grant of cover may, depending upon the circumstances of each case, be made available in languages recognized under the Constitution of India.
Where a proposal form is not used, the insurer shall record the information obtained orally or in writing, and confirm it within a period of 15 days thereof with, the proposer and incorporate the information in its cover not or policy. The onus of proof shall rest with insurer in respect of any information not so recorded, where the insurer claims that the proposer suppressed any material information or provided misleading or false information on any matter material to the grant of a cover.
Proposals shall be processed by the insurer with speed and efficiency and all decisions thereof shall be communicated by it in writing within a reasonable period not exceeding 15 days from receipt of proposals by the insurer.
Note: “Proposal form” means a form to be filled in by the proposer for insurance, for furnishing all material information required by the insurer in respect of a risk, in order to enable the insurer to decide whether to accept or decline, to undertake the risk, and in the event of acceptance of the risk, to determine the rates, terms and conditions of a cover to be granted.
Grievance redressal procedure – Every insurer shall have in place proper procedures and effective mechanism to address complaints and grievances of policyholders efficiently and with speed and the same alongwith the information in respect of Insurance Ombudsman shall be communicated to the policyholder alongwith the policy document and as may be found necessary.
Annexure – 7 (c): CONTENTS OF A GENERAL INSURANCE POLICY:
Regulation 7 provides that
(1) A general insurance policy shall clearly state
(a) the name(s) and address(es) of the insured and of any bank(s) or any other person having financial interest in the subject-matter of insurance;
(b) full description of the property or interest insured
(c) the location or locations of the property or interest insured under the policy and where appropriate, with respective insured values
(d) period of insurance;
(e) sums insured;
(f) perils covered and not covered;
(g) any franchise or deductible applicable;
(h) premium payable and where the premium is provisional subject to adjustment, the basis of adjustment of premium be stated;
(i) policy terms, conditions and warranties;
(j) action to be taken by the insured upon occurrence of a contingency likely to give rise to a claim under the policy;
(k) the obligations of the insured in relation to the subject-matter of insurance upon occurrence of an event giving rise to a claim and the rights of the insurer in the circumstances;
(l) any special conditions attaching to the policy
(m) provision for cancellation of the policy on grounds of misrepresentation, fraud, non-disclosure of material facts or non-cooperation of the insured;
(n) the address of the insurer to which all communications in respect of the insurance contract should be sent;
(o) the details of the riders attaching to the main policy;
(p) proforma of any communication the insurer may seek from the policyholders to service the policy.
(2) Every insurer shall inform and keep informed periodically the insured on the requirements to be fulfilled by the insured regarding lodging of a claim arising in terms of the policy and the procedures to be followed by him to enable the insurer to settle a claim early.
Annexure 7(d): Claim procedure in respect of a general insurance policy is prescribed by Regulation 9 as follows:
(1) An insured or the claimant shall give notice to the insurer of any loss arising under contract of insurance at the earliest or within such extended time as may be allowed by the insurer.
On receipt of such a communication, a general insurer shall respond immediately and give clear indication to the insured on the procedures that he should follows. In cases where a surveyor has to be appointed for assessing a loss/claim, it shall be so done within 72 hours of the receipt of intimation from the insured.
(2) Where the insured is unable to furnish all the particulars required by the surveyor or where the surveyor does not receive the full cooperation of the insured, the insurer or the surveyor as the case may be, shall inform in writing the insured about the delay that may result in the assessment of the claim.
The surveyor shall be subjected to the code of conduct laid down by the Authority while assessing the loss, and shall communicate his findings to the insurer within 30 days of his appointment with a copy of the report being furnished to the insured, if he so desires.
Where, in special circumstances of the case, either due to its special and complicated nature, the surveyor shall under intimation to the insured, seek an extension from the insurer for submission of his report. In no case shall a surveyor take more than six months from the date of his appointment to furnish his report.
(3) If an insurer, on the receipt of a survey report, finds that it is incomplete in any respect, he shall require the surveyor under intimation to the insured, to furnish an additional report on certain specific issues as may be required by the insurer. Such a request may be made by the insurer within 15 days of the receipt of the original survey report.
Provided that the facility of calling for an additional report by the insurer shall not be resorted to more than once in the case of a claim.
(4) The surveyor on receipt of this communication shall furnish an additional report within three weeks of the date of receipt of communication from the insurer.
(5) On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 30 days offer a settlement of the claim to the insured.
If the insurer, for any reasons to be recorded in writing and communicated to the insured, decides to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the survey report or the additional survey report, as the case may be
(6) Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made within 7 days from the date of acceptance of the offer by the insured. In the cases of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2 % above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it.
Annexure 7(e): The Various aspects of Policyholders Servicing are dealt with by Regulation 10 as follows:
(1) An insurer carrying on life or general business, as the case may be, shall at all times, respond within 10 days of the receipt of any communication from its policyholders in all matters, such as :-
n recording change of address;
n issuance of duplicate policy
n issuance of an endorsement under the policy; noting a change of interest or sum assured or perils insured, financial interest of a bank and other interests; and
n guidance on the procedure for registering a claim and early settlement thereof.
Annexure 7(f): The final regulation under the heading General provides as follows:
(1) The requirements of disclosure of “material information” regarding a proposal or policy apply, under these regulations, both to the insurer and the insured.
(2) The policyholders shall assist the insurer, if the latter so requires, in the prosecution of a proceeding or in the matter of recovery of claims which the insurer has against third parties.
(3) The policyholder shall furnish all information that is sought from him by the insurer and also any other information which the insurer considers as having a bearing on the risk to enable the later to assess properly the risk sought to be covered by a policy.
(4) Any breaches of the obligations cast on an insurer or insurance agent or insurance intermediary in terms of these regulations may enable the Authority to initiate action against each or all of them, jointly or severally, under the Act and / or the Insurance Regulatory and Development Authority Act, 1999.
Annexure 8: CA SURVEYOR:
A CA surveyor can assess the loss with his professional knowledge and training, with reference to books of account, more accurately than his Engineering counter parts in the following policy claims:
(1) Fire – Fire Loss of Profits and Engineering Loss of Profits policy which are also called as consequential loss insurances. A CA Surveyor is the most appropriate and ideal person to assess the loss.
(2) Fire Policy – Loss or damage to stocks and other assets.
(3) Marine Cargo Policies – Covering inland Transports, Exports, Imports and on FOB basis or CIF basis
(4) Misc. Insurances – Covering
(a) Money in transit
(b) Cash in safe
(c) Fidelity guarantee insurance –
(i) Commercial guarantee – individual, collective or floating
(ii) Court bonds – administration bonds, liquidators and recovership bonds
(iii) Govt. bonds – Customs & Excise bonds
(d) Workmen’s compensation (Employers liability) insurance
(e) Missing documents indemnity
(f) Bankers indemnity insurance
(g) Jewellers block insurance
(5) Reinstatement value clause attached policies
Annexure – 9: Final Survey Report on Fire Losses:
There is no standardized report form and each surveyor uses his own format. However, the report would include all the finding the surveyor obtained during the survey process supplemented by additional information relevant to the loss.
The contents of the survey report may be outlined as follows:
Privileged: For the consideration of Insurers concerned and their Legal Advisers only.
Ref. No. Date:
Preamble:
Under instructions from ABC Insurance Co., ……. We the undersigned did proceed to …… for the purpose of surveying and assessing the loss and damage caused by a fire which occurred on ……. To Building, Machinery, Stock etc., (as may be applicable) belonging to and pertaining to or whilst lying in their factory / godown / open (as may be applicable) situated at……..
Insured : Name, address.
Insurable Interest: Name of the bank, financial institution, mortgagee etc., (The wording used in the policy is quoted)
Insurance: Policy Number - Period of Insurance – Perils covered – Property affected – Estimated Loss - Adjusted claim.
Introduction: A brief history of the Insured’s business, his standing, turnover, number of employees, etc., as deemed necessary.
Description of the Risk:
It is desirable that full 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.,
INSURABLE INTEREST:
In the majority of cases, insurable interest is evidenced by sole ownership or additional interest of a bank or a financial institution. In certain other cases the surveyor may have to report on –
- interest of others through assignment, etc.,
- interest of lessees, etc.,
CIRCUMSTANCES AND CAUSE OF LOSS:
In this section, information is given as to the time, place and cause of loss, who discovered the loss and when, who raised the alarm and when it was reported to the fire brigade and by whom.
DESCRIPTION OF DAMAGE:
In this section, the condition of the property separately for each item such as building, machinery, etc., immediately after the loss is described.
Photographs of the damage from various angles are provided.
LOSS MINIMISATION:
In this section, measures taken by the insured at the recommendation of the surveyor or otherwise to contain loss and to prevent further damage, are described.
(i) Buildings: - Temporary or permanent repairs to roofs or opening of walls, emergency shorting or propping up, etc.,
(ii) Machinery: - Removal of clogged material, covering with tarpaulins, wooden boards etc.,
(iii) Stocks: - Drying reconditioning, removal to places of safety, etc.,
AVERAGE:
If the sum insured under each item of property is adequate, a statement to that effect is made. If there is under-insurance, the calculation of pro-rata average is shown.
BREACH OF WARRANTY:
The surveyor is required to give full details of breach of warranties, breach of conditions, misdescription of the property, etc., If everything is in order, the surveyor would report that all warranties etc., are complied with by the insured.
RECOVERY FROM THEIRD PARTIES:
If the loss could be attributed to a third party, the surveyor should indicate the possibilities of recovery from the third party under subrogation proceedings.
FINAL ASSESSMENT OF LOSS:
In simple claims the surveyors would mention here the amount of loss originally claimed by the insured and the amount now recommended after discussion and negotiation with the insured. Reference to the salvage value, if any, is made and how it is disposed of, or how it is treated under the computation of the claim amount.
If the insurance is on a co-insurance basis, the tabulation would be as follows:-
Appointment
Insurance Sum Share Share of
Company Insured of Loss Expenses
X % Rs. Rs.
Y % Rs. Rs.
Total 100 %
This is followed by a recommendation to issue the cheque in the name of the insured, joint names of all the insured’s, the name of the bank or financial institution, etc.,
The final paragraph is devoted for surveyor’s general observations, recommendations, etc.,
(Note: When liability is in doubt, due to any reason e.g., coverage, breach of warranty, non-compliance with conditions etc., this is clearly mentioned in the report with the statement that the report is issued “without prejudice”, subject to the terms, conditions and warranties of the policy).
Annexure – 10: The Standard Consequential Loss (Fire) Policy:
IN CONSIDERATION OF the Insured named in the Schedule hereto having paid to THE …….. INSURANCE CO., LTD., (hereinafter called the Company) the premium mentioned in this Schedule, the Company agrees (subject to the Special Conditions and Exclusions contained herein or endorsed on otherwise expressed hereon and also to the Conditions and Exclusions contained in the FIRE POLICY covering the interest of the Insured in the property at the premises (hereinafter called FIRE POLICY)-
THAT if any building or other property or any part thereof used by the Insured at the Premises for the purpose of the Business, be destroyed or damaged by the periods covered under the FIRE POLICY (destruction or damage so caused being hereinafter termed Damage), and the Business carried on by the Insured at the Premises be in consequence thereof interrupted or interfered with, THEN THE COMPANY WILL PAY TO THE INSURED in respect of each item in the Schedule hereto the amount of loss resulting from such interruption or interference in accordance with Provisions contained therein: PROVIDED THAT
1) Such Damage is caused at any time after payment of the premium during the period of insurance named in the Schedule or of any subsequent period in respect of which the Insured shall have paid and the Company shall have accepted the premium required for the renewal of the policy,
2) At the time of the happening of the Damage there shall be in force a FIRE POLICY covering the interest of the Insured in the property at the premises against such Damage and that payment shall have been made or liability admitted thereunder. However, this Proviso shall not apply where payment is not made under FIRE POLICY, solely due to operation of a proviso in FIRE POLICY excluding liability for losses below a specified amount,
3) The liability of the Company shall in no case exceed in respect of each item the sum expressed in the said Schedule to be insured thereon in the whole the total sum insured hereby or such other sum or sums as may hereafter be substituted by memorandum duly signed by or on behalf of the Company.
THE SCHEDULE
Agency: .
The Insured:
Policy No.
Issued at:
Date:
The Business:
The Premises:
The Indemnity: The amount which the insured is entitled to recover under the provisions of the attached Specification which is declared to be incorporated in and to form part of this Schedule but not exceeding the total sum insured hereby.
Total Sum Insured:
Months
Period of Indemnity From: To:
Period of Insurance From: To:
PERILS COVERED RATE PREMIUM
Statistical Code No.
In witness whereof the undersigned being duly authorized by and on behalf of the Company has/have hereunto set his/their hand/s.
(Name of the Insurance Company)
DULY CONSTITUTED ATTORNEY(S)
CONSEQUENTIAL LOSS (FIRE) INSURANCE
Specification “A”
TURNOVER Basis
Item No. Sum Insured
1. On Gross Profit Rs.
2.
3.
----------------
Total Sum Insured Rs.
----------------
The Insurance under item No. 1 is limited to loss of Gross Profit due to (a) REDUCTION IN TURNOVER and (b) INCREASE IN COST OF WORKING AND THE AMOUNT PAYABLE AS INDEMNITY thereunder shall be:
(a) IN RESPECT OF REDUCTION IN TURNOVER: the sum produced by applying the Rate of Gross Profit to the amount by which the Turnover during the Indemnity Period shall, in consequence of the Damage, fall short of the Standard Turnover.
(b) IN RESPECT OF INCREASE IN COST OF WORKING: the additional expenditure (subject to the provisions of Memo 2) necessarily and reasonably incurred for the sold purpose of avoiding or diminishing the reduction in turnover which but for that expenditure would have taken place during the Indemnity period in consequence of the Damage but not exceeding the sum produced by applying the Rate of Gross Profit to the amount of the reduction thereby avoided.
Less any sum saved during the Indemnity Period in respect of such of the Insured Standing Charges as may cease or be reduced in consequence of the damage;
Provided that it the Sum Insured by this item be less than the sum produced by applying the Rate of Gross Profit to (where the Indemnity Period exceeds 12 months insert times as may be appropriate e.g., for 18 months insert one and a half times) the Annual Turnover, the amount payable shall be proportionately reduced.
DEFINITIONS
Gross Profit – The sum produced by adding to the Net Profit the amount of the Insured Standing Charges, or it there be no Net Profit the amount of the Insured Standing Charges less such a proportion of any net trading loss as the amount of the Insured Standing Charges bears to all the Standing Charges of the business.
Net Profit – The net trading profit (exclusive of all capital receipts and accretions and all outlay properly chargeable to capital) resulting from the business of the Insured at the premises after due provisions has been made for all Standing and other charges including depreciation, but before the deduction of any taxation chargeable on profits.
Insured Standing Charges – (Appropriate list to be inserted)
Turnover – The money paid or payable to the Insured for goods sold and delivered and for services rendered in course of the business at the premises.
Indemnity Period – The period beginning with the occurrence of the damage and ending not later than – months thereafter during which the results of the business shall be affected in consequence of the damage.
Rate of Gross Profit – The rate of Gross Profit earned on the turnover during the financial year immediately before the date of damage To which such adjustments shall be made as may be necessary to provide for the trend of the business and for variations in or special circumstances affecting the business either before or after the damage or which would have affected the business had the damage not occurred so that the figures thus adjusted shall represent as nearly as may be reasonably practicable the results which but for the damage would have been obtained during the relative period after the damage
Annual Turnover – The Turnover during the twelve months immediately before the date of damage
Standard Turnover – The Turnover during that period in the twelve months immediately before the date of the damage which corresponds with the Indemnity Period
Memo 1. If during the Indemnity Period goods shall be sold or services shall be rendered elsewhere than at the premises for the benefit of the business either by the Insured or by others on his behalf the money paid or payable in respect of such sales or services shall be brought into account in arriving at the Turnover during the Indemnity Period.
Memo 2. If any Standing Charges of the business be not insured by this Policy then in computing the amount recoverable hereunder as increase in Cost of Working that proportion only of the additional expenditure shall be brought into account which the sum of the Net Profit and the Insured Standing charges bears to the sum of the Net Profit and all the Standing Charges.
Annexure – 11: Laws relating to Insurance Business:
1 Insurance Act, 1938
2 Insurance Regulatory & Development Authority Act, 1999
3 Indian Contracts Act, 1872
4 Indian Penal Court
5 Consumer Protection Act, 1986
6 General Insurance Business (Nationalization) Act, 1972
7 Motor Vehicles Act, 1939
8 The Inland Steam – Vessels Act, 1917
9 The Marine Insurance Act, 1963
10 The Carriage of Goods By Sea Act, 1925
11 The Merchant Shipping Act, 1958
12 The Bill of Lading Act, 1855
13 The Indian Ports (Major Ports) Act, 1963
14 Indian Railways Act, 1989
15 The Carriers Act, 1865
16 The Indian Post Office Act, 1898
17 The Carriage By Air Act, 1972
18 Multi Model Transportation Act, 1993
19 Workmen’s Compensation Act, 1923
20 Employee’s State Insurance Act, 1948
21 Public Liability Insurance Act, 1991
a) Water (Prevention and Control of Pollution) Act, 1974
b) Air (Prevention and Control of Pollution) Act, 1981
c) The Environment (Protection) Act, 1986
d) The Factories Act, 1948
22 The Sale of Goods Act,
23 The Indian Stamp Act, 1899
24 Exchange Control Regulations of Reserve Bank of India
25 The Indian Ports Act, 1908
26 Indian Limitation Act,
27 Civil Procedure Court
28 The Gujarat Maritime Board Act, 1981
29 Customs Act, 1862
30 The Employers Liability (Compulsory Insurance) Act, 1969
31 Fatal Accidents Act, 1855
Annexure – 12: Insurance Websites:
1 Insurance Regulatory & Development Authority
Parishram Bhavan, 3rd Floor, Basheerbagh,
Hyderabad – 500 004
Phone: 040-66820964, 66789768, Fax: 66823334 www.irdaindia.org
2 Life Insurance Council www.lifeinscouncil.org
3 Insurance Ombudsman www.ombudsmanindia.org
4 General Insurance Corporation of India www.gicofindia.com
5 Tariff Advisory Committee www.tac.org.in
6 The New India Assurance Co., Ltd., www.niacl.com
7 National Insurance Co., Ltd www.nationalinsuranceindia.net
8 Oriental Insurance Co., Ltd www.orientalinsurance.co.in
9 United India Insurance Co., Ltd www.uiic.nic.in
10 Bajaj Allianz General Insurance Co., Ltd www.bajajllianz.co.in
11 Royal Sundaram Alliance Insurance Co., Ltd www.royalsundaram.com
12 ICICI Lombard General Insurance Co., Ltd www.iciilombard.com
13 Cholamandalam General Insurance Co., Ltd www.cholainsurance.com
14 Export Credit Guarantee Corp. of India www.ecgcindia.com
15 IFFCO Tokio General Insurance Co., www.iffco.nic.in
16 Allianz Bajaj Life Insurance Co., www.allianzbajaj.co.in
17 Life Insurance Corporation of India www.licindia.com
18 HDFC Standard Life Insurance Co., Ltd www.hdfcinsurance.com
19 ING Vysya Life Insurance www.ingvysyalife.com
20 Max Newyork Life Insurance www.maxnewyorklife.com
21 Birla Sunlife Insurance Co., Ltd www.birlasunlife.com
22 ICICI Prudential Life Insurance Co., Ltd www.ciciprulife.com
23 Aviva Life Insurance Co., Ltd., www.avivaindia.com
24 SBI Life Insurance Co., Ltd., www.sbilife.co.in
25 Metlife India Ins. Co., Ltd., www.metlifeindia.com
26 Om Kotak Mahindra Life Insurance Co., Ltd www.omkotakmahindra.com
27 Reliance Life Insurance www.reliancelife.co.in
28 Risk Management Association of India www.prigindia.com
29 Insurance Consumer Forum of India www.prigindia.com
30 Millian Dollar Round Table www.mdrt.com
31 Insurance Consumer Forum of India www.insuranceinstituteofindia.com
32 LIC Housing Finance www.lichfl.com
33 Acturial Society of India www.acturiesindia.com
34 National Insurance Academy www.niapune.com
35 Bimaonlife Insurance Portal www.bimaonline.com
36 Indian Institute of Bankers www.iib-online.com
37 Institute of Insurance Surveyor & Adjustors www.iisaindia.com
38 Insurance & Risk Management www.themanagementor.com/irm
39 Insurance Institute of India www.insuranceinstituteofindia.com
40 Indian Institute of Insurance Surveyors & Loss Assessors
Parishram Bhavan, 5th Floor
Basheerbagh, Hyderabad – 500 004
Ph: 040-66626466, 67 e.mail: iiisla@irdaonline.org
41 Office of Insurance Ombudsman (Bhima Lok Pal) Ap, Karnataka, Yanam
Door No. 6-2-46, Moin Court,
AC Guards
Lakdikapul, Hyderabad – 500 004
Ph: 040-65504123, 23312122
42 Loss Prevention Association of India Ltd.,
Head Office: Warden House
Sir P.M. Road
Mumbai – 400 001
Br: New Delhi, Kolkata, Chennai, Hyderabad, Kochi
43 Insurance & Risk Management Guild of ICAI, refer page 9 of February 2007 issue of SIRC of ICAI News Letter www.insuranceicia.org/guildAppForm.aspx
ANNEXURE – 13: Reference Books
S. No. Title Author / Publisher
1) Modern Law of Insurance in India K.S.N. Murthy & K.V.S. Sarma N.M. Tripathi Private Limited, Mumbai
2) Principles and Practice of Insurance and Survey and loss assessment (IC-S01) Insurance Institute of India, Mumbai
3) Fire Policy Drafting (IC-54) - do -
4) Consequential Loss (Fire) Insurance (IC-55) - do -
5) Fire Insurance Claims (IC-56) - do -
6) Marine Clauses (IC-63) - do -
7) Marine Insurance Claims ((IC-66) - do -
8) Marine Insurance (IC-67) - do -
9) Motor Insurance (IC-72) - do -
10) Personal Accident & Sickness Insurance (IC-73) - do -
11) Misc. (Accident) Insurance (IC-75) - do -
12) Misc. Insurance (IC-78) - do -
13) Liability and Engineering Insurance (IC-79) - do -
CA M.R. Prasad
CAclubindia
