General Insurance Council Knowledge

General Insurance Council Knowledge 

Marine Insurance

     

MARINE INSURANCE POLICY

 The fundamental principles of Marine Insurance are drawn from the Marine Insurance Act, 1963* As in all contracts of insurance on property, the contract of Marine Insurance is based on the fundamental principles of Indemnity, Insurable Interest, Utmost Good Faith, Proximate Cause, Subrogation and Contribution. Practitioners of Marine Insurance must familiarize themselves with the Act and uphold these Principles when negotiating Contracts and settling claims under the contract.

 INDEMNITY:

 The object of an insurance contract is to place the assured after a loss in the same relative financial  position  in  which  he  would  have  stood  had  no  loss  occurred.  By the Marine Insurance Act, the indemnity that is provided is “in manner and to the extent agreed.” A “commercial” indemnity is thus provided. Because insurers cannot undertake to reinstate or replace cargo in the event of loss or damage, they pay a sum of money, agreed in advance, that will provide reasonable compensation. In practice, this is achieved by agreeing in advance the insured value, based on C.I.F., value of the goods to which it is customary to add an agreed ten percent which is intended to include the general overheads and perhaps a margin of profit on the transaction.

 Upon total loss of the entire cargo by an insured peril the sum insured is paid in full, and if part of the cargo is a total loss, the appropriate proportion of the insured value is paid.

 Claims for damage are settled by ascertaining the percentage of depreciation and applying this percentage to the insured value. The percentage of depreciation is calculated by comparing the value the goods would realize in their damaged state with their gross sound value on the date of the sale. The same date is used for both values to avoid distortion of the result arising from fluctuations in the market prices.

 In Marine insurance it is customary to issue agreed value policies. The agreed value is conclusive between the Insurer and the Assured except in the event of the unintentional error or where fraud is alleged.

 “Duty” and “Increased Value” policies are not agreed value policies. They provide pure indemnity only.

 INSURABLE INTEREST:

 The Marine Insurance Act contains a very clear definition of insurable interest. It states that there must be a physical object exposed to marine perils and that the insured must have some legal relationship to the object, in consequence of which he benefits by its preservation and is prejudiced by loss or damage happening to it or where he may incur liability in respect thereof.

Whereas in fire and accident insurance an insurable interest must exist both at inception of the

contract and at the time of loss, the interest in respect of a marine contract must exist at the time of loss, though it may not have existed when the insurance was affected. This is necessary when one considers the mercantile practice under which there is every possibility of sale and purchase of goods during transit. However, the MIA has provided that where the goods are insured “lost or not lost” the assured may recover the loss, although he may not have acquired his interest until after the loss, unless at the time of effecting insurance he was aware of the loss and the insurer was not. If the assured had no interest at the time of the loss, he cannot acquire interest by any act or election after he is aware of the loss. Arising from this, both a contingent and a defeasible interest are insurable. A partial interest is also insurable.

 Unless like the normal indemnity policy of other classes of insurance, a marine cargo policy is freely assignable either before or after loss provided of course the assignee has acquired insurable interest.

 The type of sale contract also determines the Insurable Interest. A separate chapter has been devoted to most common terms of contracts known as “Inco Terms”. The terms dictate which of the two parties to the contract, is responsible to insure the goods.

 GOOD FAITH:

 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. In Marine Insurance, it is the duty of the proposer to disclose clearly and accurately all material facts related to the risk. A material fact is a fact, which would affect the judgement of a prudent Underwriter in considering whether he would enter into a contract at all or enter into it at one rate of premium or another and subject to what terms. Apart from the duty of disclosure, the insured must act towards the insurer in good faith throughout the duration of the contract.

 It is customary to classify breaches of the duty of utmost good faith under four headings: non- disclosure, concealment, innocent misrepresentation, and fraudulent misrepresentation. The first two are termed passive breaches and the other two are termed active breaches. The Marine Insurance Act places a statutory duty on the assured to disclose to the insurer all material circumstances known to him or which he should know in the ordinary course of his business.

 Whether non-disclosure is intentional or inadvertent, the effect is the same and the policy may be avoided, although deliberate and material non-disclosure would usually amount to fraud and render the policy void.

 Over-valuation, for example, must be communicated to the insurers; if it is not so communicated, it is a concealment of a material fact and voids the insurance.

 PROXIMATE CAUSE:

 “Proximate cause means the active, efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent source.”

 Insurers are liable if an insured peril is the proximate cause of the loss. If an insured peril is only the remote cause of the loss, the proximate cause being an uninsured or excepted peril, the insurers are not liable.

The proximate cause is not necessarily that which is proximate in time, but that which is proximate in efficiency. It is the dominant, effective and operative cause of the loss.

 In case of concurrent causes, following rules apply: -

 

a) If one of the causes contributing to the loss is an insured peril, and no excepted peril is involved, the loss is cov

b) If one of the causes is an excepted peril, the loss is not covered at all, unless the consequences of the insured peril can be separated from those of the uninsured peril, in which event the former, but not the latter, is cover.

 SUBROGATION:

 “Subrogation is the right which one person has of standing in place of another and availing himself of all the rights and remedies of the other, whether already enforced or not.”

 Subrogation is a corollary of the principle of indemnity and the right of subrogation therefore applies only to policies, which are contracts of indemnity. Subrogation is a matter of equity, the purpose of which is to ensure that the insured is not over-indemnified for the same loss.

 (a)   In Marine insurance, where an insurer pays for a total loss:

      1i) he is entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for             (abandonment);

      1.ii) and he is subrogated to all the rights and remedies of the assured as from the time of the loss (subrogation)

 (b)   Where an insurer pays for a partial loss, he acquires no title to the subject-matter insured or to such part of it as may remain, but he is subrogated to all the rights and remedies of the assured as from the time of the loss, and in so far as the assured has been indemnified.

 In marine insurance subrogation applies only after payment of a loss. The insurer is entitled to recover only up to the amount, which he has paid, in respect of rights and remedies.

 On payment of a total loss, the insurer is entitled to assume rights of ownership of the subject- matter insured. The right is conferred upon him by abandonment (not by rights of subrogation) and the effect is that if the property is subsequently salvaged or recovered the insurer is entitled to retain the whole of the proceeds of sale even though they may exceed the sum paid out under the policy, always assuming the property is fully insured and that the assured was not bearing part of the risk himself.

 In addition to this right of exercising ownership of the property, the insurer is subrogated to “all rights and remedies of the assured” as from the time of casualty causing the loss. This simply means that if the loss has been caused by the negligence of a third party, against whom the assured has the right of action in tort – say, against a carrier or bailee – then the Insurer is entitled to succeed to any recovery (whereby the loss is reduced) the assured may affect from such third party. This principle applies equally to total and partial losses and has nothing whatever to do with the doctrine of abandonment.

CONTRIBUTION

 Sometimes one risk may be covered by more than one insurer. In that case it is desirable not only to ensure that the insured does not receive more than an indemnity but that any loss is fairly spread between all the insurers involved. The principle of contribution is a method of distributing fairly among insurers the burden of claims for which each shares some responsibility.

Following factors are required to exist before a loss is shared among the insurers

    a) There must be at least two policies of insurance.

    b) All insurances must be policies of indemnity

    c) The policies must cover

         i)The same interest

         ii)The same subject matter

         iii)The same peril

     d) A loss must occur

     e) The policies must be in force at the time of loss.

     f) All policies must cover the

     g) The policies must be legally enforceable.

A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the insured, in the manner and to the extent thereby agreed, against transit losses, losses incidental to transit. A contract of marine insurance may by its express terms or by usage of trade be extended to protect the insured against losses on inland waters or any land risk which may be incidental to any sea voyage. In simple words the marine insurance includes

A) Cargo insurance which provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea, air or by post. Thus, cargo insurance concerns the following:

 (i) export and import shipments by ocean-going vessels of all types,

(ii) coastal shipments by steamers, sailing vessels, mechanized boats, etc.,

(iii) shipments by inland vessels or country craft, and

(iv) Consignments by rail, road, or air and articles sent by post.

B) Hull insurance which is concerned with the insurance of ships (hull, machinery, etc.). This is a highly technical subject and is not dealt in this module. Simply speaking this part of marine insurance which is called Hull Insurance is dealing with insurance of Ships, barges launches, boats and offshore installations.

FEATURES OF MARINE INSURANCE

Offer & Acceptance: It is a prerequisite to any contract. Similarly, the goods under marine (transit) insurance will be insured after the offer is accepted by the insurance company.

2) Payment of premium: An owner must ensure that the premium is paid well in advance so that the risk can be covered.

3)Contract of Indemnity: Marine insurance is contract of indemnity and the insurance company is liable only to the extent of actual loss suffered.

4) Utmost good faith: The owner of goods to be transported must disclose all the relevant information to the insurance company while insuring their goods.

5) Insurable Interest: The marine insurance will be valid if the person is having insurable interest at the time of loss.

6) Contribution: If a person insures his goods with two insurance companies, then in case of marine loss both the insurance companies will pay the loss to the owner proportionately.

7)Period of marine Insurance: The period of insurance in the policy is for the normal time taken for a transit. Generally, the period of open marine insurance will not exceed one year.

8) Deliberate Act: If goods are damaged or loss occurs during transit because of deliberate act of an owner then that damage or loss will not be covered under the policy.

9) Claims: To get the compensation under marine insurance the owner must inform the insurance company immediately so that the insurance company can take necessary steps to determine the loss.

OPERATION OF MARINE INSURANCE Marine insurance plays an important role in domestic trade as well as in international trade. Most contracts of sale require that the goods must be covered, either by the seller or the buyer, against loss or damage.

Type of contract Responsibility for insurance Free on Board

The seller is responsible till the goods (F.O.B. Contract) are placed on board the steamer. The buyer is responsible thereafter. He can get the insurance done wherever he likes.

Free on Rail The provisions are the same as in (F.O.R. Contract) above. This is mainly relevant to internal transactions.

Cost and Freight Here also, the buyer’s responsibility (C&F Contract) normally attaches once the goods are placed on board. He must take care of the insurance from that point onwards.

Cost, Insurance & In this case, the seller is responsible Freight for arranging the insurance up to (C.I.F. Contract) destination. He includes the premium charge as part of the cost of goods in the sale invoice.

Practice in International Trade

The normal practice in export /import trade is for the exporter to ask the importer to open a letter of credit with a bank in favor of the exporter.

The terms and conditions of insurance are specified in the letter of credit. For export/import policies, the-Institute Cargo Clauses (I.C.C.) are used. These clauses are drafted by the Institute of London Underwriters (ILU) and are used by insurance companies in most of countries including India.

Types of Marine Cargo Insurance

a) Specific voyage policy: A specific voyage policy covers transportation of goods through inland transport, import and export for specific destinations.

b) Open policy/Open cover: An open policy or an open cover is an undertaking to cover all shipments/transits that will be made during the year. At inception the insurer will have only general details of the cargoes, estimated sum insured, voyages and the quality of vessels that will be used. Specific details are provided for each shipment in the order of dispatch or in the form of periodic declarations.

c) Annual Sales Turnover Policy An Annual Sales Turnover Policy has become very popular in India. This is no different from any open policy except that the rate of premium is charged only on the sales turnover (and any other components not captured by the term ‘sales turnover’). It is also known as Sales Turnover Policy (STOP) and Annual Turnover Policy (ATP) in different companies

d) “Duty” Insurance Cargo imported into India is subject to payment of Customs Duty, as per the Customs Act. This duty can be included in the value of the cargo insured under a Marine Cargo Policy, or a separate policy can be issued in which case the Duty Insurance Clause is incorporated in the policy.

e) Contingency Insurance( Buyer’s or Seller’s): This policy extends to cover the assured’s contingent financial interest in any goods where the assured has no responsibility to insure under the Terms of Sale or where the cover provided is more restrictive than that afforded under this policy.

The important exclusions under marine cargo policies are:

i)Loss caused by willful misconduct of the insured.

ii)Ordinary leakage, ordinary loss in weight or volume or ordinary wear and tear. These are normal ‘trade’ losses which are inevitable and not accidental in nature

iii. Loss caused by ‘inherent vice’ or nature of the subject matter. For example, perishable commodities like fruits, vegetables, etc. may deteriorate without any ‘accidental cause’. This is known as ‘inherent vice’.

iv)Loss caused by delay, even though the delay be caused by an insured risk.

v). Loss or damage due to inadequate packing.

vi)Loss arising from insolvency or financial default of owners, operators, etc. of the vessel

vii) War and kindred perils. These can be covered on payment of extra premium.

viii)Strikes, riots, lock-out, civil commotions and terrorism (SRCC) can be covered on payment of extra premium.

MARINE HULL INSURANCE

 Types of Marine Hull Insurance

Insurance of vessel and its equipment’s are included under hull insurance, there are several classifications of vessels such as ocean steamers, sailing vessels, builders, risks fleet policies and so on.

It is concerned with the insurance of hull and machinery of ocean-going and other vessels like barges, tankers, Fishing and sailing vessels.

A recent development in hull insurance has been the growth of insurance of offshore oil/gas exploration and production units as well as connected construction risks.

It is covered with specialized class of business particularly for Fishing Vessels, Trawler’s, Dredgers, Inland and Sailing Vessels are available.

The subject matter of hull insurance is the vessel or ship. There are many types of designs of ships. Most of them are constructed of steel and welded and are capable of sailing on the sea in ballast in with cargo.

The ship is to be measured with GRT (Gross Register Tonnage) and NRT (Net Register Tonnage). GRT is calculated by dividing the volume in cubic feet of the ship’s hull below the tonnage dock, plus all spaces above the deck with permanent means of closing.

NRT is the gross tonnage less certain spines for machinery, crew accommodation ballast spaces and is intended to encompass only those spinning used for carriage of cargo.

DWT (Dead Weight Tonnage) means the capacity in tons of the cargo required in load a ship to her load line level.

Subdivision of Hull Insurance

The Hull Insurance is further Subdivision into;

General Cargo vessels.

Dry Bulk Carriers.

Liquid Bulk Carriers.

Passenger Vessels.

These can be further divided into ocean going and coastal tonnage. Ocean going general cargo vessels is usually in the 5000 to 15000 GRT range, coasters are smaller in size and one engaged in the carriage of bulk cargoes.

Coastal tonnage does not withstand the same strains as ocean going vessels.

General Cargo Vessel

The general cargo vessels may be container ships, large carriers (LASH – Lighter Abroad Ship) Ro-Ro (Roll on Roll off) vessels, Refers (Refrigerated Vessels General Cargo)

Dry Bulk Carriers

Dry Bulk Carriers are specially constructed vessels in the size range of thousands GRT for coasters and 70,000 GRT for ocean going tonnage. The main bulk cargoes carried are iron ore, coal, grain bauxite and phosphate

Liquid Bulk Carriers

Tankers are strongly constructed to carry bulk liquid. The tankers have using tanks which do not extend across the breadth of the tanker.

Passenger Vessels

There are cruise vessels or passenger liners which sail on voyages to distant areas of scenically beautiful but rocky or shallow coasts or near the icy waters of the Arctic and Antarctic. They possess modem navigational systems.

Other Vessels

There are other types of vessels such as fishing vessels, offshore oil vessels and others.

Fishing Vessels

Fishing vessels bulk of steel and fiberglass (GRP) are much more prevalent.

Geographical/physical features of the area of operations vary from comparatively sheltered waters of inshore fishing to the full rigors of the open seas with exposure to gales, heavy seas fog ice and snow.

Offshore Oil Vessels

The offshore oil vessels are used for explanation or for commercial production of oil from the ocean beds.

Hull and Machinery Insurance

The policy covers the hull, machinery and equipment and stores etc. on board but do not cover cargo.

The insurance cover, the requirements of the individual ship owner and protects him against partially loss, total loss, ship’s proportion of general average and salvage charges, sue and labor expenses and ship-owner’s liability towards other vessels arising from collisions.

Hull Underwriting

Hull underwriting requires the following information to assure the risk: Type, construction, builders, age, tonnage, dimension, equipment, propulsion machines, engine, fire extinguisher; classification society, merchant shipping act, warranties, navigation physical and moral hazard.

 

Fire Insurance

     

 

Fire insurance is a contract of insurance against the loss/damage by accidental fire or other occurrences customarily included under a fire policy.

Types of Fire Policies

1.Standard Fire and Allied Perils Policy

 The “Standard Fire and Allied Perils Policy” popularly known as SFSP, covers the following perils:

Fire

Lightning:

Explosion / Implosion:

Aircraft Damage:

Riot, Strike and Malicious Damage (RSMD):

Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation (STFI):

Impact Damage:

Subsidence and Landslide including Rockslide

Bursting and/or overflowing of Water Tanks, Apparatus and Pipes

Missile Testing Operations:

Leakage from Automatic Sprinkler Installations

Bush Fire: It means fire spread from the bushes.

 More covers can be added( Add-on Covers) by endorsement and by paying additional premium under SFSP policy in addition to the above covers. 

  2.Special Policies:

1) Floater Policy: This policy is issued only for the stocks stored in warehouses/godowns at various places but belonging to the policy holder. This policy issued to stocks in godowns where inter godown movement of stocks is very frequent and where it is not possible to record each and every inward and outward movement of stocks cannot be monitored. Policy holder can take the policy for one sum insured which is floated over all the godowns. 

2) Declaration Policy: This type of policy is useful where there are frequent fluctuations in stocks / stock values and to avoid the under insurance (insurance of lower value) of the stock. Based on the pre-agreed terms the stock value to be declared periodically say monthly and the premium at the year-end (Policy year) is worked out on the average of the stock value declared and excess premium if any will be refunded to the policy holder.

3) Floater Declaration Policy It is combination of the above-mentioned policies i.e. stock lying at various locations and the value of stock fluctuating.

 The following are the normal exclusions under any types of fire policies mentioned above General Exclusions

THE FIRE INSURANCE DOES NOT COVER THE FOLLOWING RISKS KNOWN AS GENERAL EXCLUSIONS

(a) The first 5% of each claim subject to a minimum of Rs. 10,000 in respect of each loss arising out of “Act of God perils” such as Lightning, STFI, Subsidence, landslide and Rock slide covered under the Policy

b) The first Rs. 10,000 of each loss arising out of other perils in respect of which the Insured is indemnified by this Policy.

The Excess shall apply per event per Insured.

Loss, destruction, or damage caused by war, and kindred perils.

Loss, destruction, or damage directly or indirectly caused to the insured property by nuclear peril.

Loss, destruction, or damage caused to the insured property by pollution or contamination.

Loss, destruction, or damage to any electrical and / or electronic machine, apparatus, fixture or fitting (excluding fans and electrical wiring in dwellings) arising from or occasioned by over-running, excessive pressure, short circuiting, arcing, self-heating or leakage of electricity, from whatever cause (lightning included).

Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or damage of any kind or disruption whatsoever.

Earthquake Vulcanic eruption: Earth Quake can be covered under the fire policy but by paying additional premium,

Loss or damage due to Terrorism unless specifically covered.

Loss or damage by spoilage resulting from the retardation or interruption or cessation of any process or operation caused by operation of any of the perils covered.

Loss by theft during or after the occurrence of any insured peril except as provided under Riot, Strike, Malicious and Terrorism Damage cover.

Loss or damage to property insured if removed to any building or place other than in which it is herein stated to be insured, except machinery and equipment temporarily removed for repairs, cleaning, renovation, or other similar purposes for a period not exceeding 60 days.

ADD ON COVERS:

 Normally, depending upon the need and risk exposure following additional covers are given.

    1.Combustion (by Fire Only)

    2.Earthquake (Fire and Shock)

    3.Forest Fire

    4.Impact damage due to Insured’s Own Vehicle and the articles dropped from them.

    5.Deterioration of Stocks in Cold Storage premises due to accidental power failure consequent to damage at the premises of       Power Station due to an insured Peril. (Applicable only when stock is covered)

    6. Deterioration of Stocks in Cold Storage premises due change in temperature arising out of loss or damage to the cold storage                machinery (ies)in the Insured’s premises due to operation of an insured Peril. (Applicable only when stock is covered)

     7.Architects etc. fees (more than 3%)

     8.Debris Removal (more than 1%)

     9.Omission to Insure, Additions, Alterations, Extensions Clause

     10.Spoilage Material Damage Cover (applicable to stock and machinery containers only)

     11.Leakage and Contamination Cover

     12.Temporary Removal of Stocks Clause

     13.Loss of Rent Clause

     14.Insurance of Additional Expenses of Rent for An Alternate Accommodation

     15.Start Up Expenses.

Choosing the amount to be insured.

While the proposer is the best person to know about the intrinsic/financial value of the property to be insured, here are some suggestions to choose the value to be insured.

 To get the amount equal (or almost equal) to the loss after an accident, one has to choose either of the following methods of indemnity.

Normal Indemnity:

The market value of the property can be chosen as Sum insured. Under this type of indemnification depreciation will be deducted from the actual expenses for reconstruction /reinstatement/ replacement, towards the usage of the property till the time of accident.

Reinstatement Value policy:

Under this type of indemnity which is popularly known as “new for old”, The cost of reconstruction/ re-erection without deducting depreciation is paid. In simpler words irrespective of the usage and age of the property destroyed/damaged/lost, the cost of constructing the property anew will be paid. Sum Insured should be the cost of the reconstruction as a new property.

Escalation Clause:

This clause provides automatic and gradual increase of Sum insured as per the percentage of escalation chosen, by payment of additional premium. This will ensure that sum insured is coping up with inflation of value of the property during the currency of the policy.

 Remember these points while buying fire insurance:

Buying a fire insurance policy bring customer’s peace of mind as it covers them for losses or damages resulting from a fire and other covered events/perils.

But following points should be considered while buying fire insurance for proper protection.

Perils Covered

Exclusions

Add on Covers

Proper Description of The Property

Related Clauses Like Goods Held in Trust Clause, Reinstatement Value Clause Etc.

Adequacy of Sum Insured to Avoid Under Insurance.

 

Motor Insurance

     

 As per Section 146 of Motor Vehicles Act 1988 No person can drive a vehicle without proper insurance, which reads as   under:

Necessity for insurance against third party risk. — (1) No person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person a policy of insurance complying with the requirements of this Chapter:

[1][Provided that in the case of a vehicle carrying, or meant to carry, dangerous or hazardous goods, there shall also be a policy of insurance under the Public Liability Insurance Act, 1991 (6 of 1991).]

Types of Policies:  

There are two types of Policies:

(i)  Liability Only Policy:  This covers Third Party Liability for bodily injury and/ or death and Property Damage. Personal Accident Cover for Owner Driver is also included. This policy is also known as ACT only policy etc. 

(ii)  Package Policy(Comprehensive):  This covers loss or damage to the vehicle insured in addition to (i) above.

In Indian Market there are number of covers offered by Insurance companies under various names the basic cover will be either of these two policies, of course, with some addon covers.

Comprehensive (Package)car insurance policy

In Car insurance, a comprehensive car insurance policy covers damage to your vehicle caused by certain events. These include (but are not limited to) fire, theft, vandalism and falling objects. This also comes with a deductible you volunteer to pay and which you are obliged to pay before the insurance company pays the remainder.

It is advisable to buy the Comprehensive insurance policy for your car because it covers the insured, vehicle and third party in a single policy.  This type of insurance covers all the risks covered in the Motor Vehicles Act plus loss or damage caused to the vehicle :

 

by fire, explosion, self-ignition or lightning;

by burglary, housebreaking or theft;

by riot and strike;

by earthquake (fire and shock damage);

by flood typhoon hurricane storm tempest inundation cyclone hailstorm frost;

by accidental external means;

by malicious act;

by terrorist activity;

whilst in transit by road rail inland-waterway lift elevator or air;

by landslide rockslide.

 

Personal Accident Cover -Coverage of ` 2 lakhs for the individual driver of the vehicle while travelling, mounting or dismounting from the car. Optional personal accident covers for co-passengers are also available.

 Third Party Legal Liability -Protection against legal liability due to accidental damages resulting in the permanent injury or death of a person, and damage caused to the surrounding property.

Subject to the limits of liability as laid down in Motor Vehicles Act 1988 as amended from time to time, the insurance Company under this section will indemnify the insured in the event of an accident caused by or arising out of the use of the vehicle against all sums which the insured shall become legally liable to pay in respect of: -

 (i) death of or bodily injury to any person including occupants carried in the vehicle (provided such occupants are not carried for hire or reward) but except as far as it is necessary to meet the requirements of Motor Vehicles Act, the Company shall not be liable where such death or injury arises out of and during the employment of such person by the insured.

 (ii) damage to property other than property belonging to the insured or held in trust or in the custody or control of the insured.

 Exclusions

The Comprehensive Insurance policy excludes the loss or damage caused due to:

Normal wear and tear and general ageing of the vehicle

Depreciation or any consequential loss

Mechanical/ electrical breakdown

Loss/ damage due to war, mutiny or nuclear risk

Damage to/ by a person driving any vehicles or cars without a valid license

Damage to/ by a person driving the vehicle under the influence of drugs or liquor

Vehicles including cars being used otherwise than in accordance with limitations as to use

Wear and tear

Consumables

Damage to tyres and tubes unless the vehicle is damaged at the same time, in which case the liability of the company shall be limited to 50% of the cost of replacement

Driving the vehicle against the limitations as to use.

 INSURED DECLARED VALUE:

 Each car is insured at a fixed value which is termed as the Insured’s Declared Value (IDV). This sum insured is calculated based on several factors. Here’s how it works:

IDV is calculated based on the manufacturer's listed selling price of the vehicle plus the listed price of any accessories after deducting the depreciation for every year as provided by the Indian Motor Tariff.

If the price of any electrical and / or electronic item installed in the vehicle is not included in the manufacturer's listed selling price, then the actual value (after depreciation) of this item can be added to the sum insured over and above the IDV.
In case of vehicles fitted with bi-fuel system such as ​petrol/​diesel and CNG/LPG, permitted by the concerned RTO, the CNG/LPG kit fitted to the vehicle is to be insured separately at an additional premium of 4% on the value of such kit. You need to specifically declare this in the proposal form.

What Insurance Cover Is Right for You?

If what you are looking for is coverage for yourself, against damages to lives and properties of third parties (as required by M V Act) and your vehicle, a comprehensive car insurance policy is what you need. It is a wider coverage plan since it has provisions for third-party along with cover for the damages to your vehicle due to accidents. Comprehensive coverage policy is expensive as compared to just third-party insurance cover.

Various insurers are offering covers as mentioned above and in addition to that add on covers also. There might be slight variations in the benefits and exclusions depending on the insurance company and it is advisable to check the terms and conditions in detail before taking a policy

 

Health

     

The term ‘Health Insurance’ relates to a type of insurance that essentially covers your medical expenses. A health insurance policy like other policies is a contract between an insurer and an individual / group in which the insurer agrees to provide specified health insurance cover at a particular “premium” subject to terms and conditions specified in the policy.

A Health Insurance Policy would normally cover expenses reasonably and necessarily incurred under the following heads in respect of each insured person subject to overall ceiling of sum insured (for all claims during one policy period).

Room, Boarding expenses

Nursing expenses

Fees of surgeon, anesthetist, physician, consultants, specialists

Anesthesia, blood, oxygen, operation theatre charges, surgical appliances, medicines, drugs, diagnostic materials, X-ray, Dialysis, chemotherapy, Radio therapy, cost of pace maker, Artificial limbs, cost or organs and similar expenses.

Sum Insured

The Sum Insured offered may be on an individual basis or on floater basis for the family as a whole.

Minimum period of stay in Hospital

In order to become eligible to make a claim under the policy, minimum stay in the Hospital is necessary for a certain number of hours. Usually this is 24 hours. This time limit may not apply for treatment of accidental injuries and for certain specified treatments. Read the policy provision to understand the details.

Pre and post hospitalization expenses
Expenses incurred during a certain number of days prior to hospitalization and post hospitalization expenses for a specified period from the date of discharge may be considered as part of the claim provided the expenses relate to the disease / sickness.

Two modes of settlement of health insurance claims

Cashless Facility

Insurance companies have tie-up arrangements with a network of hospitals in the country. If policyholder takes treatment in any of the net work hospitals, there is no need for the insured person to pay hospital bills. The Insurance Company, through its Third Party Administrator (TPA) will arrange direct payment to the Hospital. Expenses beyond sub limits prescribed by the policy or items not covered under the policy have to be settled by the insured direct to the Hospital. The insured can take treatment in a non-listed hospital in which case he has to pay the bills first and then seek reimbursement from Insurance Co. There will be no cashless facility applicable here.

Reimbursement facility

Here the insured intimates the insurer that he is undergoing treatment & incurs all expenses in the course of medical treatment. After discharge from hospital he submits the claim form with all necessary documents claiming reimbursement.

When you decide to buy an insurance policy:

Check if the company selling the policy is registered with IRDAI

Make sure you buy the policy through a genuine licensed agent or broker. Ask for an identity card or license

You can also buy policies from the company directly

Read the policy brochure/ prospectus carefully and get to know what the policy covers and does not cover

Aviation

     

The insurance provides coverage for hull losses as well as liability for passenger injuries, environmental and third-party damage caused by aircraft accidents.

In the world of aviation insurance, there are several different options available to customers depending upon their needs and wishes. Each type of insurance offers a very specific type of coverage and it is important to understand the differences between each type.

 Types of aviation insurance

In-flight insurance

Ground risk hull (non motion) insurance

Ground risk hull (motion) insurance

Public liability insurance

Passenger liability insurance

Liablity

     

It is a part of the general insurance system of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy.

Policy covers civil liabilities to third parties, arising from bodily injury, property damage, or their wrongs due to the action or inaction of the insured. It covers only civil liabilities and not criminal liabilities.

Types of such policies

 Personal liability

Business liability

Property damage liability

Motor car liability

Personal Accident

     

Personal Accident insurance or PA insurance is an annual policy which provides compensation in the event of injuries, disability or death caused solely by violent, accidental, external and visible events. It is different from life insurance and medical & health insurance.

This policy is basically designed to offer some sort of compensation to the insured person who suffers bodily injury solely as a result of an accident which is external, violent and visible. Hence death or injury due to any illness or disease is not covered by the policy.

Types of PA policies

Individual PA policy

Group PA policy

Grameen PA policy

Child welfare PA policy

Crop

     

Crop insurance is purchased by agricultural producers, including farmers, ranchers, and others to protect themselves against either the loss of their crops due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities.

Agriculture in India is highly susceptible to risks like droughts and floods. It is necessary to protect the farmers from natural calamities and ensure their credit eligibility for the next season. For this purpose, the Government of India introduced many agricultural schemes throughout the country. Crop insurance is one such scheme

Pradhan Mantri Fasal Bima Yojana

The new Crop Insurance Scheme is in line with One Nation – One Scheme theme. It incorporates the best features of all previous schemes and at the same time, all previous shortcomings/weaknesses have been removed.

The highlights of this scheme are as under:

There will be a uniform premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5%. The premium rates to be paid by farmers are very low and balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss on account of natural calamities.

There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government.

Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction.

The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments.

Weather based Crop Insurance

Weather Based Crop Insurance aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from incidence of adverse conditions of weather parameters like rainfall, temperature, frost, humidity etc.

Let us look at risks covered & exclusions?

Risks: Following risks leading to crop loss are covered under the scheme:-

Yield losses (standing crops, on notified area basis): Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, such as (i) Natural Fire and Lightning (ii) Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc. (iii) Flood, Inundation and Landslide (iv) Drought, Dry spells (v) Pests/ Diseases etc.

Prevented sowing (on notified area basis):- In cases where majority of the insured farmers of a notified area, having intent to sow/plant and incurred expenditure for the purpose, are prevented from sowing/planting the insured crop due to adverse weather conditions, shall be eligible for indemnity claims upto a maximum of 25% of the sum-insured

Post harvest losses (individual farm basis): Coverage is available upto a maximum period of 14 days from harvesting for those crops which are kept in “cut & spread” condition to dry in the field after harvesting, against specific perils of cyclone / cyclonic rains, unseasonal rains throughout the country.

Localized calamities (individual farm basis): Loss / damage resulting from occurrence of identified localized risks i.e. hailstorm, landslide, and Inundation affecting isolated farms in the notified area.

Exclusions: Risks and Losses arising out of following perils shall be excluded:- War & kindred perils, nuclear risks, riots, malicious damage, theft, act of enmity, grazed and/or destroyed by domestic and/or wild animals, In case of Post–Harvest losses the harvested crop bundled and heaped at a place before threshing, other preventable risks.

Property

     

Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or boiler insurance. Cover that you need depends upon the type of property you are seeking to cover.

Insurance of property means insurance of buildings, machinery, stocks etc against Fire and Allied Perils, Burglary Risks and so on.

Whether you own your building, lease your workspace or work at home, business property insurance protects your business' physical assets. Commercial property insurance plans vary from policy to policy, but are generally categorized by the type of event leading to a loss, and by what specifically is insured.

Engineering

     

Engineering insurance

It refers to the insurance that provides economic safeguard to the risks faced by the ongoing construction project, installation project, and machines and equipment in project operation

The rapid industrialization of our country has led to increasing use of machines in industry. Though use of machinery results in increased production capacities, in the event of accident and breakdowns, they can be potential sources of financial loss & business closure.

In spite of proper care and maintenance of machinery, mishap may yet occur. Sometimes the extent of damage may be quite high and may also lead to fatal or non‐fatal injuries the remedy for such losses is offered by means of the pecuniary protection provided under the polices.

Normal types of such insurances are

Project Insurance

Operational Machineries Insurance

Business Interruption Insurance

 

Complaints and Grievances

     

A grievance is defined as any communication that expresses dissatisfaction about an action or lack of action, about the standard of service / deficiency of service of an insurance company and / or any intermediary or seeks remedial action.

Every insurer must ensure a grievance redressal mechanism is in place for providing excellent customer service which in turn is the most important tool for business growth.

Grievance redressal is based on the following principles

Customers are treated fairly at all times

Complaints raised by customers are dealt with an open mind, with courtesy

Customers are informed through policy document of avenues of escalation process of their complaints and grievances within the organization

To treat all complaints efficiently and fairly as they can damage the company’s reputation and business if not handled properly.

IRDAI has through various regulations mandated the following requirements to be complied with by all insurers

Ensure a board approved grievance redressal policy document is in place

All complaints must be logged in through IGMS(Integrated Grievance Management System portal) of the authority

Every insurer must have grievance redressal officer (GRO) whose contact details are provided in all the communication with the policy holder

Insurer must abide by the grievance redressal guidelines advised by IRDAI

Regular reporting of all category of complaints & reconciliation of pending complaints is order of the day

The category of complaints number, intermediary involved, action taken, RCA (root cause analysis) to be placed before the committee of policy holder protection of interest at every meeting for discussion & directions

Policy holder can lodge a complaint in any of the manner as listed below

If one are unhappy with the insurance company procedures or claim settlement, one can

Approach the Grievance Redressal Officer of its branch or any other office that one deals with. All formal mail IDs of Grievance Redressal Officers, GRO, of all insurance companies is made available in IRDAI portal:  policyholder.gov.in

Complaint in writing along with the necessary support documents to be provided

Written acknowledgement of complaint  date to be obtained.

The insurance company should deal with all complaint within 15 days.

If that does not happen or if policyholder is  unhappy with the solution he can:

Approach the Grievance Redressal Cell of the Consumer Affairs Department of IRDA:

Call Toll Free Number 155255 (or) 1800 4254 732 or

Send an e-mail to complaints@irda.gov.in

Make use of the Integrated Grievance Management System:

Register and monitor your complaint at igms.irda.gov.in

Send a letter to IRDAI with his complaint to

Address for communication for complaints by paper/fax: 

Insurance Regulatory and Development Authority of India

Consumer Affairs Department – Grievance Redressal Cell.

Sy.No.115/1, Financial District, Nanakramguda, 

Gachibowli, Hyderabad – 500 032.

 

IRDAI guidelines on grievance redressal

Every insurer shall have a system and procedure for receiving, registering and disposing of grievances

in each of its offices. This and all other relevant details along with details of Turnaround Times (TATs) shall be clearly laid down in the policy. While insurers may lay down their own TATs, they shall ensure that the following minimum time frames are adopted:

 

(a). An insurer shall send a written acknowledgement to a complainant within 3 working days of the receipt of the grievance.

(b). The acknowledgement shall contain the name and designation of the officer who will deal with the grievance.

(c). It shall also contain the details of the insurer’s grievance redressal procedure and the time taken for resolution of disputes.

(d). Where the insurer resolves the complaint within 3 days, it may communicate the resolution along with the acknowledgement.

(e). Where the grievance is not resolved within 3 working days, an insurer shall resolve the grievance within 2 weeks of its receipt and send a final letter of resolution.

(g). Where, within 2 weeks, the company sends the complainant a written response which offers redress  or rejects the complaint and gives reasons for doing so,

(i). the insurer shall inform the complainant about how he/she may pursue the complaint, if dissatisfied.

(ii). the insurer shall inform that it will regard the complaint as closed if it does not receive a reply

within 8 weeks from the date of receipt of response by the insured/policyholder. Any failure on the part of insurers to follow the above mentioned procedures and time-frames would attract penalties by the Insurance Regulatory and Development Authority.

 

 Insurance Ombudsmen

With an objective to provide a forum for resolving disputes and complaints from the aggrieved insured public or their legal heirs against Insurance Companies, the Government of India, in exercise of powers conferred on it u/s 114(1) of Insurance Act, 1938 framed "Redressal of Public Grievances Rules, 1998", which came into force w.e.f. 11th November, 1998. These Rules aim at resolving complaints relating to the settlement of disputes with Insurance Companies on personal lines of insurance, in a cost effective, efficient and impartial manner. These Rules apply to all the Insurance Companies operating in General Insurance business and Life Insurance business, in Public and Private Sectors.

To implement the above Rules, the Institution of Insurance Ombudsman has been established and is functioning since 1999. The Ombudsman functions within a set geographical jurisdiction and can entertain  disputes relating to partial/total repudiation of claims, delay in settlement of claims, any dispute on the legal construction of the policies in so far as such disputes relate to claims, disputes regarding premium paid or payable in terms of the policy and non-issuance of insurance documents.

The Insurance Ombudsman is provided with a Secretarial Staff by the Governing Body of Insurance Council and such staff is drawn from Insurance Companies. The total expenses on running the Institution are shared by all Insurance Companies, who are Members of the Insurance Council. 

The Insurance Ombudsman scheme was created by the Government of India for individual policyholders to have their complaints settled out of the courts system in a cost-effective, efficient and impartial way.

There are Insurance Ombudsman in different locations and any person who has a grievance against an insurer, may himself or through his legal heirs, nominee or assignee, make a complaint in writing to the Insurance ombudsman within whose territorial jurisdiction the branch or office of the insurer complained against or the residential address or place of residence of the complainant is located.

Complaint is to be lodged with the Insurance Ombudsman under whose territorial jurisdiction the insurer’s office falls, at the address provided in website / insurer communication which includes policy document.

Policyholders can approach the Ombudsman with complaint if:

 He has first approached your insurance company with the complaint and

they have rejected it

not resolved it to your satisfaction or not responded to it at all for 30 days

complaint pertains to any policy you have taken in your capacity as an individual and

the value of the claim including expenses claimed is not above Rs 20 lakhs.

Complaint to the Ombudsman can be about:

a)    Delay in settlement of claims, beyond the time specified in the regulations, framed under the IRDAI Act, 1999.

b)    Any partial or total repudiation of claims by the Life insurer, General insurer or the Health insurer.

c)     Any dispute about premium paid or payable in terms of insurance policy

d)    Misrepresentation of policy terms and conditions at any time in the policy document or policy contract.

e)    Legal construction of insurance policies in so far as the dispute relates to claim.

f)     Policy servicing related grievances against insurers and their agents and intermediaries.

g)    Issuance of life insurance policy, general insurance policy including health insurance policy which is not in conformity with the proposal form submitted by the proposer.

h)    Non issuance of insurance policy after receipt of premium in life insurance and general insurance including health insurance and

i)      Any other matter resulting from the violation of provisions of the Insurance Act, 1938 or the regulations, circulars, guidelines or instructions issued by the IRDAI from time to time or the terms and conditions of the policy contract, in so far as they relate to issues mentioned at clauses (a) to (f)

 The Ombudsman will act as mediator and 

Arrive at a fair recommendation based on the facts of the dispute

If you accept this as a full and final settlement, the Ombudsman will

Inform the company which should comply with the terms in 15 days

 Award:

If a settlement by recommendation does not work, the Ombudsman will:

Pass an award within 3 months of receiving all the requirements from the complainant and which will be binding on the insurance company

Once the Award is passed

The Insurer shall comply with the award within 30 days of the receipt of award and intimate the compliance of the same to the Ombudsman.

 There is no appellate authority governing Ombudsman order. The order is final & binding.

For IRDAI guidelines on Ombudsman and further information click here 

The list of Insurance Ombudsman can be accessed here.