Fire insurance norms to be rationalised

The Insurance Regulatory and Development Authority (Irda) has decided to rationalise the norms for fire insurance of buildings. In a circula...

The Insurance Regulatory and Development Authority (Irda) has decided to rationalise the norms for fire insurance of buildings. In a circular, it has allowed introduction of “first loss cover” in the householders policies issued by general insurance companies from June 1.

Essentially, insurance officials claimed, once a claim was paid under this cover, the policy-holder would have to pay the proportionate premium again to restore entitlement to the full sum assured. Any loss above the limit laid down in the policy would have to be borne by the insured. They said it was a positive development for the industry, and revival of an abandoned pratice.

The circular stated that various players had requested permission for such a policy and that the matter had also been taken up in the General Insurance Council. This was referred to the Tariff Advisory Committee (TAC) as the fire insurance part is under tariff. TAC recommended that the insurers can include householders’ policies on first loss basis covering fire insurance of building and contents under householders package policies.

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It stated that the householders package policies issued on first loss basis shall include besides fire insurance at least a combination of one or more sections of the following non-tariff items:

Burglary, housebreaking, larceny and theft insurance; all-risk insurance of jewellery and valuables; accident insurance of fixed plate glasses; breakdown insurance of domestic appliances and TV, VCR, VCD, DVD, etc.; insurance of pedal cycle; insurance of travel baggage; personal accident insurance and; public liability and workmen’s compensation liability. While fire insurance of building and contents under the package policy continue to be under tariff, the rest of the items fall in the non-tariff category.

The tariff for building has been pegged at “not less than 0.50 per mille (thousand) on TSI” (the sum insured). For contents, it has capped the maximum sum insured at Rs 50 lakh. The tariffs prescribed are: for up to 25 of the full value cover, insurers must charge at least 50 per cent of 0.50 per mille of full value premium; up to 50 per cent — 70 per cent of 0.50 per mille; up to 65 per cent — 85 per cent of 0.50 per mille; up to 75 per cent — 90 per cent of 0.50 per mille; beyond 75 per cent 0.50 per mille.

The maximum TSI of Rs 50 lakh will be subject to the condition of partial average wherein first loss insurance shall be restricted up to the percentage of full value cover, Irda added. The policy-holder will also have to give a signed consent “that in the event of the total value of contents at risk at the time of loss being greater than the total value declared for purpose of this insurance and incorporated in the schedule, the insured shall be considered as being his own insurer, for the difference, and shall bear a rateable share of the loss accordingly.”