Indian Insurance Regulator i.e. Insurance Regulatory and Development Authority of India (IRDAI) hereby notified w.e.f.1st April,2024 , All Fire Insurance Tariffs & Engineering Insurance Tariff had been withdrawn
Fire Insurance Tariffs includes :
All India Fire Tariff
Industrial All Risks Tariff
Consequential Loss (Fire) Tariff
Petro-chemical Tariff
List of Hazardous Goods
Engineering Insurance Tariffs includes :
Contractors All Risk Insurance
Contractors Plant and Machinery Insurance
Machinery Breakdown Insurance
Electronic Equipment Insurance
Civil Engineering Completed Risks Insurance
Erection All Risk/Storage Cum Erection Insurance
Loss of profit (MB & BLOP) Insurance
Boiler and Pressure Vessels Insurance
Deterioration of Stocks-(potato) Insurance
Apart from above mentioned Policies , there are other 3 tariffs are also withdrawn i.e. Motor Insurance Tariff , WC Tariff & Marine-Tea Tariff.
Lets discuss Fire Insurance & Engineering Insurance in detail :
A] Fire Insurance
Since Pricing was already freed, now insurers are given freedom to innovate on Policy wordings offering
Does this mean that every insurer can now introduce New Version of Fire Insurance ?
As we all know Standard Fire Insurance Policy i.e. Laghu Udyam, Sookshma Udyam & SFSP policies are Named Peril policy , i.e. 12 named Perils are only form a Coverage part & each perils is worded with at least one exclusion apart from separate standard exclusions.
i.e. Fire
 Excluding destruction or damage caused to the property insured by
 A) i) its own fermentation ,natural heating or spontaneous combustion.
 ii) its undergoing any heating or drying process.
 B) burning of property insured by order of any Public Authority.
Impact Damage
Loss of or visible physical damage or destruction caused to the property insured due to impact by any Rail/ Road vehicle or animal by direct contact not belonging to or owned by
 a) the Insured or any occupier of the premises or
 b) their employees while acting in the course of their employment
Can Policyholder expect removal of these fine printed exclusions ?
Basically New Fire Insurance wording should be without any Peril specific exclusion, below are the few limitations which can be relooked :-
1] losses occurred due to Static Charge, Inherent Vice or spontaneous combustion exclusion should be removed.
2] Full Sum Insured Loss limits for AOG Perils & sub-limited Loss limits for FLEXA perils (depend upon PML) should be allowed.
3] Re-instatement Value clause for Newly purchased Machineries and Depreciated Market value basis for 2nd Hand Machineries both clauses should be allowed in one policy.
4] Lesser Deductible i.e. Deductible starting from 2% of Claim Value subject to minimum of Rs.10,000/-
5] Electrical exclusion for Particular machine can be removed
6] Waiver of Under-Insurance upto some higher limits i.e. waiver upto 30%
7] Since Commodity market is so volatile & having frequent ups & downs , Escalation Provision upto 25% should be Inbuilt cover.
8] Goods Held in Trust clause should be inbuilt cover for stock subject to Insured had taken full sum insured equal to value of own stock + Stock came for Job work.
9] Below part from Co-insurance clause should be removed as this denotes responsibility towards insured to comply, if any Insurer withdraws from earlier agreed share.
"In the event of any of the insurers, chosen by the Insured as per policy schedule above and listed in the coinsurance schedule, withdrawing from participation in this Policy at any time during its currency after giving due notice of 14 days, the insured shall arrange for an alternative insurer to take up the full share of risk vacated by the existing insurer. In the event of insured failing to do so, the insured shall be considered as his own insurer for such share of risk or part there of which is not taken up by such alternative coinsurer."
10] New Package Policy should be introduced for Manufacturing Units i.e. Fire Section + FLOP Section + Marine Transit + Workmen Compensation.
11] Reinstatement Value Clause : Provision to comply ‘The work of replacement or reinstatement must be commenced and carried out with reasonable dispatch and in any case must be completed within 12 months is very harsh on Insured , suppose Total Loss scenario in Risk location worth Rs.200 Cr Plus cannot be completed in 12 months , this provision must be increased to 24 months.
12] Coverage for machinery and equipment temporarily removed for repairs, cleaning, renovation or other similar purposes for a period not exceeding 60 days.=Â This should be allowed till 180 days
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B] Engineering Insurance Viz. CAR & EAR Insurance
below are the few limitations which can be relooked :-
1] Premium to be calculated for the entire period starting from :
Commencement of Work or First consignment arrival date at the site of Construction/Erection whichever is earlier. =Â However it had been seen customer approach for Insurance once banker come into picture and till this time construction is already started 9 months back & now customer is reluctant to pay backdated premium as Insurer is taking No claims confirmation even Policy period is also from premium payment date , this practice can be avoided.
 2] Testing Period of 6 months should be inbuilt cover in CAR policies as Residential project having Lift Assembly, HVAC , DG Sets installation in line.
3] Conceal Damage Clause of 90 days can be given Inbuilt instead of 50/50 Clause.
4] Extension of Policy period beyond 84 months should carry same Discount pricing pattern of originally issued policy subject to No Claims.
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Does this Forced Innovation to Insurers means a boon for Policyholders ?
As Insurers , Re-Insurers & Intermediaries have to evolve & evolve better , Upcoming Six months are very crucial for entire eco-system to breath as final go ahead to be obtain from Re-Insurers to introduce the Innovation !!
Eventually a Standard wording will emerge as per Market Agreement as Next Version to All India Fire Tariff & Engineering Insurance Tariff
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Blog Written By : Prasad Ranjankar
Faculty : The Real Underwriter Insurance Academy.
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