IDEAL INDIAN SCHOOL, DOHA-QATAR
XII INSURANCE (0814)
CH 2 FIRE INSURANCE NOTES
I. TwoMark Questions:
1. What is the role of the General Insurance Council formed in 1957?
The General Insurance Council was established to ensure fair conduct and sound business
practices in the general insurance sector.
2. When did general insurance become nationalized in India?
General insurance was nationalized in India on January 1, 1973, following the General Insurance
Business (Nationalisation) Act of 1972.
3. Who was the first to recognize the potential of fire insurance after the Great Fire of
London?
Nicholas Barbon was the first to recognize the potential of fire insurance, establishing the first
fire insurance office in 1681.
4. What does the term "Insurable Interest" mean in fire insurance?
"Insurable Interest" refers to the financial benefit or stake that the insured has in the property
being insured.
5. What is the Principle of Causa Proxima in fire insurance?
The Principle of Causa Proxima means that the fire must be the immediate and dominant cause
of the loss for a claim to be valid.
6. Can a fire insurance policy be assigned to a third party?
No, a fire insurance policy cannot be assigned without the permission of the insurer, as the
insured must have an insurable interest at the time of the contract and loss.
7. What is the significance of the "Cover Note" in fire insurance?
The Cover Note provides provisional protection to the insured until the fire insurance policy is
issued.
8. Which types of loss are covered under fire insurance?
Loss caused by fire, efforts to extinguish fire, removal of property to prevent further damage, and
damage caused by firefighting efforts are covered.
9. What is a Specific Fire Insurance Policy?
A Specific Policy insures the risk for a fixed amount and pays either the actual loss or the insured
amount, whichever is less.
10. What is the purpose of a Surveyor in fire insurance?
A Surveyor inspects the property to estimate the risk and provides a report that helps the
insurance company decide whether to accept or reject a proposal.
Four Mark Questions:
1. Explain the main principles governing fire insurance.
The principles of fire insurance include:
Indemnity: The insured is compensated only for the actual loss.
Utmost Good Faith: The insured must provide truthful and complete information.
Insurable Interest: The insured must have a financial interest in the property.
Contribution: If multiple insurers cover the property, each pays a proportionate share of
the loss.
Deliberate Acts: Losses caused deliberately by the insured are not covered.
2. Describe the procedure for taking a fire insurance policy.
The procedure includes:
(a) Selection of the insurance company.
(b) Filling the proposal form with details about the proposer and the property.
(c) Establishing credibility of the proposer.
(d) Surveying the property by a qualified surveyor.
(e) Accepting the proposal based on the surveyor's report.
(f) Paying the premium for risk coverage.
(g) Issuing a Cover Note for provisional protection.
(h) Issuing the Final Policy.
3. What are the different types of fire insurance policies?
The different types include:
1) Specific Policy: Insures for a fixed amount, paying either actual loss or insured amount,
whichever is less.
2) Valued Policy: Pays a fixed amount regardless of the actual loss.
3) Average Policy: Insurer pays in proportion to the insured value relative to the actual
value of the property.
4) Floating Policy: Covers property at different locations under a single sum insured.
5) Comprehensive Policy: Covers fire and other risks like theft, burglary, and thirdparty
risks.
6) Replacement Policy: Insurer replaces the property instead of paying cash for the loss.
4. What types of losses are not covered under fire insurance?
Losses not covered include:
Fire caused by earthquakes, invasion, or war.
Subterranean fires.
Fires caused by orders from public authorities.
Fires caused by the inherent defect of goods (e.g., fermentation or spontaneous
combustion).
Losses caused by lightning or explosion unless they cause actual ignition.
5. Explain type of Losses Covered by Fire Insurance
Fire insurance covers the following types of losses:
1. Direct Losses Due to Fire: This includes loss or damage to property directly caused by
fire.
2. Loss Due to Efforts to Extinguish: Fire Damage resulting from the actions taken to put
out the fire.
3. Loss Due to Removal of Property Damage or loss occurring while removing property
from the premises to prevent further damage.
4. Loss During: Firefighting Damage caused by fire brigade operations during their efforts
to extinguish the fire.
5. Wages Paid: During Firefighting Compensation for wages of individuals engaged in
extinguishing the fire.
6. Discuss the documents required by the insurer for processing a fire insurance claim.
The documents include:
i Certified true copy of the policy and endorsements.
ii Claim form.
iii Newspaper reports (if any).
iv Photographs of the damage.
v Past claims experience.
vi For fire claims specifically, additional documents such as the Fire Brigade report, police
reports, forensic laboratory reports (if applicable), and the internal committee report on
the cause of fire.
7. What are the Provisions Relating to Assignment of Fire Insurance Policy?
i Assignment Restrictions A fire insurance policy cannot be assigned to another party
without the insurer's permission.
ii Insurable Interest The assignee must have an insurable interest in the property at the time
of both contract and loss.
iii Transfer of Rights Assignment involves transferring legal rights and liabilities, which is
subject to insurer approval to ensure that the assignee has an insurable interest.
8. write a note on Principle of Indemnity with Respect to Fire Insurance
The Principle of Indemnity in fire insurance means that the insured is compensated only for the
actual loss suffered, and not beyond it. The goal is to restore the insured to the same financial
position as before the loss. Key points include:
i Actual Loss Compensation The insurer pays for the actual amount of loss or damage, not
exceeding the sum insured.
ii No Overcompensation If the property is insured for more than its value, the insured
cannot claim more than the actual loss.
iii Restoration, Not Profit The principle ensures that the insured does not profit from the
insurance but is instead reimbursed for the loss incurred.
9. Explain Scope of Fire Insurance
The scope of fire insurance includes:
a. Coverage of Property Includes buildings, plant and machinery, stocks, furniture, and other
contents. It covers both immoveable and moveable properties.
b. Specific and Special Items Includes specific items such as bullion, precious stones,
manuscripts, and valuable documents.
c. Types of Coverage
i. Building Covers the structure including foundations, interiors, and
electrical systems.
ii. Plant & Machinery Includes equipment, both new and secondhand.
iii. Stocks Covers raw materials, finished goods, and inprocess items.
iv. Contents Covers furniture, fixtures, and household goods.
d. Perils Covered Primarily covers damage or loss due to fire. It may also include loss due to
firefighting efforts, removal of property, and related damages.
e. Exclusions Does not cover losses from certain causes such as war, riots, or subterranean
fires, and losses from deliberate acts by the insured.
The scope ensures comprehensive protection against a range of firerelated risks, subject to policy
terms and conditions.
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