Page 182 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 10: Fire Insurance

In the next unit, you will study about the meaning of motor insurance along with the types of Notes
motor insurance policy. The next unit will also deal with claims under motor insurance and
third party claims.

10.1 Meaning and Definition

Some important definitions of Fire Insurance are given below:
1. Section 2(6A) of the Insurance Act, 1938 defines fire insurance business as “the business of
effecting, otherwise than incidentally to some other class of insurances business, contracts
of insurance against loss by or incidental to fire or other occurrence customarily included
among the risks insured against in fire insurance policies”.
2. V.R. Bhushan and Prof. R.S. Sharma defined fire insurance as “an agreement whereby one
party, in return for a consideration, undertakes to indemnify the other party against
financial loss, which the later may sustain by reason of certain defined subject matter
being damaged or destroyed by fire or other defined perils to an agreed amount”.

3. T.R. Smith defined fire insurance as ‘a contract whereby the insurers in return for a
consideration, known as premium, undertake to indemnify the insured against financial
loss which he may sustain, by reason of certain defined property, known as the property
insured, being damaged or destroyed by fire or other perils within a stated period of the
liability of insurer, being limited to a specified amount, called the sum insured”.
This definition is self-explanatory and includes all aspects of fire insurance.
As such, presence of a physical asset is a must to have the risk of fire covered. The asset, which is
insured, becomes the subject matter of the insurance contract. Occurrence of fire is essential and
the damage should be caused to the asset due to fire. The damage has to be compensated and the
assured has to be indemnified. The origin or cause of origin of fire damaging the asset is not of
importance.

If the insurance company finds the mala fide intentions of the assured, it can take it as a defence
to avoid the fire insurance claim settlements. As such, fire insurance contracts are a part of
general insurance and are contracts of good faith.

Caselet Companies may Share Higher Risk for
Engineering Fire Cover

ire and engineering insurance tariffs will soon be revised. The Tariff Advisory
Committee — an arm of the Insurance Regulatory and Development Authority
F(IRDA) — which looks into pricing of non-life insurance products, has already
prepared a draft of the revised fire insurance tariff and is now revising engineering tariffs
as well, sources confirmed to ET.
This is the first time in three years for engineering insurance and second for fire insurance
that the tariffs are being revised. Corporates may end up bearing a higher share of risk on
their engineering insurance in line with the international trend, while in fire the revision
will be more on regulations and categories.
Movement of insurance rates in international markets impacts reinsurance rates in India.
But since rates in India are tariff-governed, insurers are not absolutely free to vary rates.
Contd...

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