Ram Gopal Verma

B.Com. (Hons.) A.I.C.W.A., F.C.A. CHARTERED ACCOUNTANT

101, Swastik Bhawan, Ranjit Nagar Commercial Complex New Delhi 110 008 Ph. : Off. 25706379 Fax : 25708963 Res. : 25790142 Cell : 98 114 13816 E-mail : rgvermaca@yahoo.com

ABOUT THE AUTHOR The author of the book Ram Gopal Verma is a Chartered Accountant cum Insurance Surveyor for over 23 years in practice. Though people some times mistake him for producer director Ram Gopal Varma. Have you seen his movies? I am also his fan. Mr. Ram Gopal Verma was born in a place called Jalpaiguri in West Bengal. Originally his fore fathers came from Rajasthan to Bengal in search of water and livelihood. Even now he dreams in Bengali having taken his early education in Bengali medium. He now knows German and French as well. He qualified his C.A. From Kolkata and decided to settle in Delhi where in his opinion your constitutional rights are safe. He miserably failed in his C.A. Practice in a new city but got success with insurance companies where he found people not prejudiced since every one was from some other city. He has handled varieties of insurance claims in his life as insurance surveyor with various insurance companies. When even Supreme Court failed to convince itself over the definition of burglary and theft as interpreted by insurance companies, prompted the surveyor to write this book. Even I.R.D.A. admitted that the insurance policy terms and conditions are written in the most ambiguous manner prompted to write this book in simple language. He believes that spread of insurance knowledge would benefit rich and poor both. So far Indians are having very little knowledge of general insurance.

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Index Matter 1. Conclusion as Preface Chapter- 1 1. Introduction Chapter -2 2. Burglary Claim 15 23 23 23 23 24 25 25 25 26 26 26 27 32 33 34 35 35 36 36 37 37 38 39 39 40 41 41 42 42 10 Page No 7

Papers required in case of burglary Claim related to stock 2.1. Exclusions to burglary policy 2.2. Money not covered in case of burglary 2.3. Burglary from open stock yard 2.4. Loss has to be discovered within 14 days of incident 2.5. Value of insurance for computers on depreciated value or market value 2.6. Theft without forcible entry or exit is not covered in the policy 2.7. Roof of several building connected to each other 2.8. burglary season 2.9. Grill cut to enter in house/factory 2.10. Security of empty office/showroom/factories at night 2.11. Proper coverage of stock 2.12. Coverage of stock with transporters or C & F agents 2.13. Theft v/s burglary as per Supreme Court. 2.14. Only letter to police is not F.I.R. 2.15. Call at no. 100 of P.C.R. 2.16. Daily diary (DD) register/Roj Naamcha 2.17 Police hierarchy 2.18. Investigating Officer 2.19. The S.H.O. 2.20. Crime team 2.21. Crime branch of the State 2.22. F.I.R is mandatory as per insurance company 2.23. What to do if F.I.R. is not registered by local police 2.24. Hierarchy of magistrate and courts 2.25. Intimation of loss to police 2.26. Non cognizable offence report (NCO) 2.27. Loss due to Dacoity / volumetric exercise 2.28. Burglary and volumetric analysis 2.29. Section 457 in final report

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2.30. 2.31. 2.32. 2.33. 2.34. 2.35. 2.36. 2.37.

Regarding final report by police. Challan / charge sheet by police Vernacular translation of F.I.R. Recovery / Superdari Disadvantages of taking property on Superdari recovered Mere F.I.R. not enough after thought No mention of stolen stock in F.I.R. / subrogation Police status report Chapter 3 Fire Claim

43 44 45 46 47 48 48 48

3. 3.1. 3.2. 3.3. 3.4. 3.5. 3.6. 3.7. 3.8. 3.9. 3.10. 3.11. 3.12. 3.13. 3.14. 3.15. 3.16. 3.17. 3.18. 3.19. 3.20. 3.21. 3.22. 3.23. 3.24

Papers required in case of fire claim Re. fire loss to machines Re. fire loss to stock Re. fire loss to building what if records and books of accounts burnt in fire Damaged stock should not be removed before arrival of surveyor Cause of fire Loss due to water is also covered in fire policy Fire / water loss in paper industry Loss due to smoke or soot in plastic or garments or fabric Moral of insured and financial soundness in case of doubtful fire Technical report from another specialist Assess loss even if claim not admissible Collapse of roof in fire Certain allowable exclusions for self insurance Minimum deductible and voluntary deductible Mid-term change in sum insured add on covers Loss assessment can never be exact Fire policy by transporters Fire season, high voltage and its after effects Valuation for insurance on depreciated value or reinstatement value of machines Ask for terms and conditions a the time of renewal Fate of rejected claim after 12 months.

49 53 55 60 60 61 61 61 62 62 63 63 63 63 64 64 64 64 65 66 66 67 68 69 70

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Chapter 4 Flood Loss Claim 4. 4.1. 4.2. Requirement of papers in case of claim of loss due to flood Loss due to flood/ inundation Flood / inundation due to blockage of drain Chapter 5 Shop Keepers Claim 5. 5.1. 5.2. 5.3. 5.4. 5.5. All risk shop keepers policy Precautions by shop keepers/ factories Loss in electronic shop Loss of stock from shop under section i Loss of stock from shop under section ii Loss of cash from premises in shop keepers policy Chapter 6 C.IT. Claim 6. 6.1. 6.2. 6.3. 6.4. 6.5. 6.6. Requirement of papers in case of cash in transit loss claims Cash in transit / money Insurance Justification Money should be in custody only Cash in transit / money insurance policy cash carrying staff How cash to be carried how and by whom Proper coverage of office/ residence/ bank and vice versa Route of cash carrying should be approximately straight Keep enough balance for year round cash in transit Heavy cash break the trip to spread cash risk Over night cash in safe is also covered in cit policy Infidelity of cash carrying employee New branch not added in policy Loss from unattended vehicle Risk of cash in transit Chapter 7 7. 7.1. 7.2. 7.3. 7.4. Jewellers Block Claim 81 81 81 81 82
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71 72 73

74 74 75 75 75 75

76 77 77 78 78 78

6.7.
6.8. 6.9. 6.10. 6.11. 6.12. 6.13. 6.14.

78 78
78 79 79 79 79 80 80

Jewellers block policy Only cost is compensated After loss settlement recovery goes to insurers Safe of standard make Storage of stock in safe as per proposal form

7.5. 7.6. 7.7. 7.8. 7.9. 7.10. 7.11. 7.12. 7.13. 7.14. 7.15. 7.16. 7.17. 7.18. 7.19. 7.20. 7.21. 7.22. 7.23. 7.24. 7.25.

Stock kept out side safe at night Proposal form is basis of insurance Safety features of camera for jewellers Discount for safety and security Stock inside grill but not in safe Safe is unsafe without latest feature Safe should be fixed in the wall Safe is safer if there is no protruded side Safe number lock not working, then its not safe. Motion detector at night Guard to protect factory at night time Storage of stock in almirah New safe bought Stealing by operation of key Loss due to infidelity of employee Stock to other cities for sale or return Stock in another safe not in strong room Stock left in unattended vehicle Basis of valuation Important exclusions in jewellers block (JB) policy Same policy for diamond manufacturers as well as jeweller showrooms. 7.26. Common tricks 7.26.1. Dirty material on your clothes 7.26.2. Left side tyre puncture indication 7.26.3. forced accidents to stop you 7.26.4 Brief case on rear seat 7.26.5 Throw cash on road to cheat you 7.26.6 Not safe in car parking also 7.26.7. Tea with sleeping chemicals 7.26.8 Bus closed after getting down to deceive you 7.26.9. Criminals spot some one with valuables and cheat him 7.26.10. Force you to have sleep using chloroform 7.26.11 Hypnotise you to cheat Chapter 8 8. 8.1. 8.2. 8.3. 8.4. 8.5. 8.6. House Hold Claim

82 82 83 83 83 84 84 84 84 85 85 85 85 86 86 86 86 86 86 87 88 90 90 90 90 91 92 89 89 90 90 91 92 93

All risk house hold insurance policy Rate of gold jewellery All risk cover for jewellery in house hold policy. Valuation report Papers required in case of claim related to house hold policy Regarding gold jewellery and silver items Regarding loss of crockery and garments

94 95 96 98 98 99

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8.7.

Small electronic safe in houses

99

Chapter 9 9. 9.1. 9.2. 9.3. 9.4. 9.5. 9.6. 9.7. 9.8. 9.9. 9.10.

Misc. Policies claims

100

Other important insurance policies Loss due to LPG cylinder explosion Separate building policy for Earth quake long term Loan linked insurance policy for borrowers from bank Personal accident (P.A.) policy Mediclaim Policy Name difference in medical policy Age in case of mediclaim policies Name difference in medical policy Age in case of mediclaim policies Approval of limit by TPA in case of hospitalisation

100 100 101 102 103 104 105 105 106 106

Chapter 10 Car Claims 10. 10.1. 10.2. 10.3. 10.4. 10.5. 10.6. 10.7. 10.8. 10.9. Car insurance claims Car theft cases Insured declared value (I.D.V.) Very little car protection from theft Additional car cover Regarding car insurance and sale of car Depreciation in car claims Car policy exclusions Status of learners licence for claims Bargain for better coverage of car insurance and not bargain for less premium 10.10. Third party claim for car accidents/ mediclaim. 10.11 better to take cash less car insurance policy than ordinary car insurance policy. Chapter 11 Policy Related General Matters 11. 11.1. 11.2. 11.3. General knowledge about insurance claim related matters Proposal Form Letter of intension to insure Insurance policy taken for formality rendering it futile. 109 110 111 112 112 113 114 114 114 115 116 117

117 117 117 118

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11.4. 11.5. 11.6. 11.7. 11.8. 11.9. 11.10. 11.11. 11.12. 11.13. 11.14. 11.15. 11.16. 11.17. 11.18. 11.19 11.20 11.21 11.22 11.23. 11.24. 11.25. 11.26. 11.27. 11.28. 11.29. 11.30. 11.31. 11.32. 11.33. 11.34. 11.35. 11.36. 11.37. 11.38. 11.39. 11.40. 11.41. 11.42. 11.43. 11.44. 11.45. 11.46.

Condition of reasonable care clause applicable to almost all policies Coverage of items in the insurance policy Change of business or items Changes not made in insurance policy Contract of insurance policy Address of insured Change of ownership of insured Period of policy. Policy only signed by insurance company Terms and conditions not given by insurance company Bank stock statement Sum insured Dishonour of insurance premium cheque First loss basis coverage Short period excess stock last minute insurance close proximity claim Inspection by insurance companies loss minimisation Self risk coverage and exclusions Burglary / fire once in a life time experience Insurance advisor of industries Development officers v/s claim department New regime of brokers Insurance policy taken by banks on behalf of borrowers Bank assurance Further benefits of bank assurance Insurance premium pool Insurable interest for own stock and held in trust Stock given in trust to others Temporary godown Excess clause Substandard Automatic insurance with banks for stolen cheques/ theft from bank lockers Preliminary report v/s main surveyor appointment Role of investigator in insurance claims Avoid smaller claims Follow one company for insurance Renewal of insurance with same company. Claim settlement process Ad hoc payment against a claim Consent letter Letter to police to hand over future

118 119 120 120 120 120 122 123 124 125 126 126 127 128 128 129 130 130 130 131 134 135 135 136 137 139 140 140 141 142 142 142 143 144 146 147 149 150 151 152 153 153

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11.47 11.48. 11.49. 11.50.

recovery to bank. Whether to contest full and final claim payment Business of insurance company re-insurance Cancellation of insurance policy Not having R.O.in cities. Chapter 12 claim settling authority

154 155 156 156 156

12. 12.1. 12.2.

Hierarchy of insurance companies Financial authority for misc. claim settlement Financial authority for fire claim settlement Chapter 13 Grievances Authorities

157 159 160

13. 13.1. 13.2. 13.3.

What if claim not settled Consumer courts Insurance ombudsman Claim settlement week and grievance department at Regional Office /Head Office 13.4. Arbitration 13.5. Right to information act ( R.T.I.) 13.6. Insurance regulatory and development authority 13.7. Rights of policy holders to obtain a copy of survey report under IRDA rules 13.8. Ministry of public grievances 13.9. Ministry of finance 13.10. Civil courts Chapter 14 Preface as conclusion

161 161 163 164 165 165 166 167 167 167 167

168

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1. Conclusion As Preface
I now know after reading this book how to obtain proper insurance policy and provide relevant papers in support of the claim, should a claim arise. I realise that insurance company is my best friend in my worst time of crisis like fire / burglary / flood / earth quake / sickness / accident / or even after death, is friend of my family. Now the insurance company knows my new address even before I shifted to the new premises. How can you miss a friend in need and deed. Information about my new address to other friends and relatives can wait but not to insurance company. I now buy a new piece of jewellery or buy a new factory or office, but first information is given to insurance company to obtain endorsement on the existing insurance policy. The new mobile phone or lap top or car comes home along with a new insurance policy only. I now know my best friend in worst time is insurance company who charges so less for covering such a huge risk. No one knows your business better than you. You can become your own insurance surveyor. Make your own insurance claim file. Being a C.A. Or Doctor or Engineer or M.B.A. You can make your claim file better than the surveyor. The mystery and veil of secrecy around claim assessment by surveyor and insurance companies is hereby lifted and made transparent for the benefit of policy holders and claimants. This book is all about practical aspect of general insurance claims like that of Fire/ Misc/ Motor / Medical etc. and not about Life Insurance. There are many states in India where people are business-minded and are financially sound. They also have high education. In Gujarat people have money but they do not understand insurance and far less when it comes to insurance matters. There were not many claimants of earth quake insurance claims after the earth quake in Ahmedabad. In Kerala or Mizoram or West Bengal where people are highly educated but they also have little knowledge of insurance related matters. Then there are I.T. related skilful people but they do not have time for proper insurance policy and much less when it comes to claims. This book is dedicated to enrich knowledge of insurance related practical matters for all our countrymen irrespective of where they are living, whether in villages or towns or cities. The book is also for the unborn child who may become a c.a. Or engineer or business man and wants to take an insurance policy or he may have to take an insurance claim. I have spent major portion of my professional life as insurance surveyor and would love to give back to the society what I have learnt from them in terms of insurance knowledge. Let me make an attempt to enrich the future generation by providing them practical side of general insurance knowledge. Feelings of return back to the insurance industry and the society for what they have done to me has made me to write this book. In 1985 when I took insurance surveyor license, I did not have any knowledge at all about insurance claims related matters. In last more

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than 20 years I have learnt a lot but I feel the society at large is still at the same place where I was in 1985 in terms of insurance related matters knowledge. So I thought why not share the fruits of my knowledge with the society and thus repay to some extent what I have received in terms of insurance knowledge. I was inspired by many starting from Bill Clinton to Donald J. Trump or Robert T. Kiyosaki or Alan Greenspan who wrote books to enrich the society with their experience in their respective field. By reading their books many became much bigger than them and thus the torch was carried from generation to generation. Now their books are translated in various Indian languages to find place in A.H. Wheelers book stand on small railway stations as well. I am making a small contribution by way of this book to the insurance world knowing very well that my knowledge is very limited comparing to the vast knowledge store House With The Top Executives Serving With The Insurance companies as well as some of the past and present surveyors in the insurance industry handling claims of hundreds of crores. I wish some day Indians are insurance minded and there is plenty of reading material available. There are so many books in the market about theory side of insurance but the market lacks practical insurance books. The insurance knowledge is locked in the four walls of insurance companies and surveyors and that is exactly the reason insurance has not reached to one and all. India is a vast country and everyone may not have access to decisions of SC/HC/Consumer Courts related to insurance matters. They may be knowing very little english and may be knowing much less about insurance. But there lies all the more need of insurance due to burglary or fire or flood problems in their small town or village. Hence practical knowledge of insurance is very important to them.

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Chapter 1
Introduction
By way of writing this book, effort is being made so that proper policy is obtained from insurance companies as per requirement of policy holder who if guided, can save enormous amount of time/money and avoid court cases. Purpose of insurance policy is to transfer some amount of risk to the insurance company by taking insurance policy after payment of insurance premium being cost of risk transfer. The potential policy holder can save his time if he can study the policy terms and conditions in advance even before it is issued. The prime purpose of taking insurance policy is to see whether the policy can give him the necessary coverage sought for. Effort should always be made to take all risk policy as far as possible. The policy document would clearly state what perils/ risks are covered. Secondly focus can be made on the exceptions mentioned in the policy terms and conditions. This is of utmost importance should a claim arise. Without terms and conditions, its like a tenant without rent agreement or a partnership made without a partnership deed, a company formed without memorandum of article of association. The insurance policy covers the risk subject to the terms and conditions. The terms and conditions are normally very exhaustive and written in very small letters but they do govern the policy coverage. It is very important to find mention of exclusions to the policy under which the risk is not covered inspite of issuing the policy and premium having been received by the insurance company. The exclusions are many and should be clearly under stood and kept in mind. E.g burglary from unattended vehicle is not covered in the policy. Burglary from house not occupied by any one for over 7 days is not covered in the policy. Theft without forcible entry or exit is not covered in the burglary policy. In burglary policy loss due to infidelity of employee is not covered. In case of personal accident policy death due to dangerous games like paragliding/bungee jumping/parachute jumping are not covered. Once you know what is covered and what is not covered then you know almost whole of the policy. Your duties are explained in the book in case of a claim. What are your rights should your claim be rejected by the insurance company also finds place in the book. Even after policy is issued, policy holder can study it and can get it amended by obtaining proper endorsement from the policy issuing office for required changes. Thus future disagreement or disputes can be avoided. In between the policy period, if any circumstances of the insured changes, then he can get the policy amended to suit his changed circumstances e.g., change in his business, address, value of stock is increased beyond sum insured, temporary change in place
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where he keeps stock. These can be amended in the policy and suitable endorsement can be called for, from the policy issuing office. Once a policy has been issued it will not necessarily serve the purpose through out the policy period. Time wise changes can be sought in the policy to suit changed circumstances. In case fire, engineering, marine, factory installation claims there are lesser problems involving corporations/companies who are in the organised sector. They obtain proper policy as per their requirement and are organised to meet papers formalities of insurance companies. The claims arise in the normal course of business and routine papers are provided to substantiate a claim. The large policy holders like industries, businessmen have scores of advisors/consultants/employees to advice them and to look after their interest. The large policy holders may even have insurance department in their own offices to supervise their insurance policies throughout the year. The insurance companies also take special care of these big industries/businesses that pays them huge insurance premium. However the individual and retail policy holders in the unorganised sector are scattered over the country and are even spread in small towns/districts where necessary guidance may not come forth easily by way of advisors. But the rules of insurance are same for all. The policy holder may be illiterate even then he may take insurance policy. Even in big cities the common man is unaware of the policy intricacies and its terms and conditions. They also fail to understand the policy terms and conditions in spite of the fact, the policy holder may be ca/ engineer/ businessmen/ lawyer/ government employee etc. It is target of this book to educate these masses, so that they can understand the policy, its terms and conditions, the rules governing the policy, grievances scope, their duties during policy period, and their rights on the happening of a loss. In this way the insurance companies would also be gainer, since an educated policy holder would contribute more of premium and thus total premium received by insurance companies would also increase. The retail customer being an average person will also seek coverage of risk by paying small amount of premium. The common man would be gainer since he can understand the policy issued to him and its intricacies by reading this book. He can plan his risk coverage in a better way. Even sitting in a small city or town or even sitting in a remote corner of the country he can under stand his insurance policy, thus better coverage of his risk. He need not visit insurance offices to find out his rights/ duties/ scope of coverage. In India many people are educated, even un-educated businessmen can ask their staff or educated family members to read relevant portion of the book and obtain suitable insurance policy.

As of now insurance policy holders are spread in big cities, big towns and policies are taken by industries, banks, companies, etc. The other segment of people not falling under

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this group are afraid of taking insurance policies and if at all they take insurance policy, they fail to look after their own interest during policy period, neither they are in a position to protect their interest in case of a claim. The head office of the insurance companies are located in metro cities like Kolkata, Delhi, Mumbai, Pune and Chennai. The regional offices are in state capitals or in big cities only the smaller towns have only divisional offices or branch offices. So the expertise of insurance is limited to big cities only the people in small towns are more prone to Theft/ Burglary/ Flood/Fire etc. but they rarely take insurance coverage in the absence of insurance related knowledge. The government offices like insurance ombudsman/ consumer courts are mostly in big towns again the smaller town people do not have easy access to these offices the common educated man is very quick to understand the policy if an effort is made let them plan for themselves their hard earned money can be safe guarded by paying small amount as insurance premium.

endless amount of time/money is spend after a claim is processed and finally rejected by insurance companies in defending their stand that the claim is not covered in the policy. The energy of the policy holder is also wasted in making efforts to ensure claim payment along with interest. It has to be under stood that in our country taking claims through the court or other legal routes is quite time consuming and spread over years of visit to lawyers and courts. The purpose of this book is to make an effort to avoid these wastages.

The insurance companies also want to settle a genuine claim falling under four corners of the policy wordings. Rejection of a claim is not their purpose but a claim which is outside the ambit of the policy cannot be entertained since they are also subject to C&AG Audit/Statutory Audit/Vigilance etc. There are many grievances redressal forums available to the policy holders who have to clearly understand their implications in terms of involvement of time and money, following and understanding terms and conditions of policy can help the policy holders to a large extent. A new surveyor and Loss Assessor/C.A./Engineer can refer the book for practical steps to conduct survey and assessment of loss keeping in view the policy terms and conditions and proposal form. Let a new student of commerce of class XI or XII or Graduation or P.G. Course refer the book as a base reference for easy understanding of insurance matters and make use of the knowledge for the benefit Society/Business/Industry. I went all over India for survey and assessment of claims but I found one thing in common that people wanted to insure and pay premiums but they had no one to guide

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them to a properly drafted insurance policy to cover their risk. People suffered huge losses and finally resulting rejection of their claims due to bad policy taken by them. People at large are not aware of intricacies of insurance related matters even by C.A./M.B.A./Engineers. This book is summary of my more than 20 years of experience and association with insurance companies as a surveyor and loss assessor and me being a Chartered Accountant. I found complete imbalance of information to people who takes insurance policies and those who issues insurance policies.

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Chapter 2
2. Papers required in case of burglary claim related to stock.
The first thing the surveyor would do is stock taking of saved items lying with the insured after the burglary. List of saved items must be made. The surveyor may take copies of relevant documents and initial on the following:1. 2. 3. 4. Cash book (initial on last page of cash in hand) Sale bills (initial on last few sale bills) Purchase bills initial on relevant purchase bills. Physical or computer generated stock register (initial on pages where stock has been stolen).

Re: policy Copy of insurance policy. Copy of insurance policy is required so that one can check sum insured under the policy, what items are covered under the policy, what is the policy period, whether the risk is covered under the policy or not, whether address where loss took place is covered in the policy or not etc. Policy number is generated in system after the insurance policy is issued. The policy number contains branch code, nature of insurance, year of insurance and policy number. Intimation letter to insurance company. Letter given to insurance company about the loss covers some of the basic facts about the loss as revealed by the insured. What is the approximate amount of loss? How the loss took place etc. Immediately on sending intimation letter about a claim, claim number is generated by the insurance company in their system. Reference to this claim number is made till the claim is settled. One can ask for claim number from the insurance company after lodging insurance claim. Intimation letter should also contain policy number under which claim has been lodged.

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1.

Claim form with details of items lost.

Claim form is issued by the insurance company. Once the claim on the basis of intimation letter is registered, claim form is needed for details of loss, quantity, what is amount of loss etc. Claim form duly filled up may be given to the insurance company or to the surveyor during survey. 2. Proposal form.

Proposal form is required to see the intention of the insured for coverage of items, what are the items stated in the proposal form. Insurance policy is issued on the basis of proposal form.

Re: Police 1. Copy of F.I.R. duly translated in english if not in english. F.I.R. is taken in order to check whether the loss is registered with the police or not. Under which section of Indian Penal Code F.I.R. is registered by the police. Information given in the F.I.R. Is taken as authenticate information and the items given in the F.I.R. is claimed to be the final list of stolen or damaged items. During assessment of loss, list of items stolen given in the F.I.R. is considered for assessment of loss.

2. Details of loss / subsequent letters given to police Detail of loss given by the insured to the police by way of subsequent letters may be collected. 3. Charge sheet / Arrest / Superdari for recovery/final police report u/s 173 of I.P.C. duly attested. Final police report is taken to check whether any arrest or recovery is made by the police or not. If arrest or recovery is not made, then police closes the file and issues untrace report to the applicant. If any arrest or recovery is made related to the case then police submits challan/charge sheet under section 173 of I.P.C. 4. Details of recovery and arrest made by the police. Recovered stolen items are deducted from the claimed loss.

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Re: Items Lost 1. Stock Register. Stock register is taken to check whether the items lost appeared in it and in what quantity. Small traders below Rs. 60.00 lakhs sales are not required to get their books of accounts audited if they show minimum amount of profit as per income tax act. So the insurance companies cannot invoke presentation of audited of books of accounts condition. In such cases books of accounts, purchase bills / sales bills / bank statements / vat return may be procured and analysed for assessment of claim. Volume of the stolen stock verses saved stock may be considered. Provisional trading account as on the date of loss (before loss) duly attested by c.a. May be obtained to find out stock at the time of loss to arrive at under insurance if any.

2. Details of stolen stock / item / rate / quantity / bills / payment / weight / packing / where kept. Detail of items lost is taken from the insured e.g. When purchased, how much payment was made, from whom purchased, rate of the stolen items, total value of the stolen items etc. 3. Detailed statement of owner and concerned staff as to how the loss took place. It helps the surveyor to know about the exact detail as to how the loss took place. What happened when insured came in the morning. How he came to know about the loss, what steps he had taken after knowing that the loss had taken place. When did he inform the police and the insurance company about the loss? . 4. Purchase bills of lost items. Purchase bills of stolen items are taken in order to check the genuinity of the claimed loss. When the stolen items were purchased/how old was the stock etc.? Re: Bank 1. Bank statement of the last few months transactions Whether most of the payments of purchases are made by cheque or not. Cash purchases are not very reliable and can be easily manipulated to exaggerate the claim. Some times heavy purchases are found made just before the loss and payments for such purchases are also not made. Such purchases needs deep scrutiny to find out whether they were

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intended to manipulate the claim or were genuinely purchases duly supported by challan, transport receipt, if purchased in the normal course of business to meet sales orders

2. Is there any credit limit with the bank? If yes, copy of stock statement submitted to bank for last few months duly verified by bank. If insured had taken loan against stock, then he has to give monthly stock statement to the bank. It also helps the surveyor to check the stock position of the insured as per stock statement. Is there any difference between book stock and stock as per bank stock statement, if yes, the same may be investigated. Normally year end stock as per balance sheet and stock statement is same and tallied to each other to avoid income tax problem and scrutiny by banks. Problem arises during the year when at the time burglary, stock as per stock register does not tally to stock as per monthly stock statement given to bank. Such cases need to be investigated in detail. Problem may get further complicated if it is a case of under insurance. As such it is advised that in case of bank limit against stock, stock statement should be submitted correctly as per stock records. 3. Copy of sanction letter of limit.

Sanction limit shows how much limit is sanctioned to insured against stock by bank.

Re: Saved Stock 1. Detail of saved stock in shop Item/ Qty. / Wt. / Rate/ Value. First thing any surveyor or preliminary surveyor would do is stock taking of saved stock and then tally with stock records and purchase bills.

Re: Books of Accounts 1. Up to date books of accounts for verification, purchase ledger, sale ledger & cash book, sale bills, receipt memo and issue memo. 2. Income tax returns, balance sheet and trading account of last 3 years. 3. Copies of transfer memo of stock sent to others for processing and thus saved. 4. Copy of sales tax return and vat return of last three years. Most of the insurance policies issued to Company / Firms / Commercial organisations have a condition that they will maintain proper books of accounts as required by law. This will help substantiate the insurance claim so far as its ownership / quantity / rate / value is concerned. Books of accounts play a vital role in assessment of loss.
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5. Copy of purchase bill of stolen items, volumetric analysis, year of purchase, proof of payment made, ledger of supplier duly verified by them in support of purchase bills of stolen stock. Purchase bill is of prime importance in support of goods having been stolen. Various purchase bills may be verified from the suppliers in case loss cannot be attributed to specific bill. Average rate may be allowed for the stolen quantity. The surveyor may also consider sale less gross profit percentage to arrive at cost of sales and apply this to arrive at cost of stolen items. Average cost of purchase in the last one year may be considered if it is found that only recent stock of last one year has been stolen. Proof of payment has to be established to prove ownership and insurable interest. Mere challan is not enough. Production of purchase bills/ books of account in support of ownership of stock One has to provide relevant documents including purchase bills to the satisfaction of the insurance surveyor deputed by insurance company. Claim not substantiated by the insured may be rejected by the insurance company. If the purchase bill is very old and cannot be produced or verified, in such cases the insured should convince the insurance company about presence of stock before loss. If stock is stolen and the insured does not have purchase bill, in that case he has to procure duplicate purchase bill from the supplier or produce challan in support of stock. Proof of transportation of stock to the insured may be provided. Past dealings in the books of accounts may be shown for verification by insurance company. 6. Stock register showing stock presence before loss. Quantity of items has to be established through stock register. If stock register is not maintained then suitable proof has to be given for quantity bought / quantity sold. Trading account showing stock at risk at the time of loss certified by c.a. As on the date of loss before burglary may be given as follows:Provisional trading account (before loss) Amounts (Rs. P.) Opening stock Purchases Direct expenses Gross profit Sales Closing stock Amounts (Rs. P.)

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The C.A. may have to be convinced to certify the provisional trading account before the loss and need not be audited but compiled on the basis of books of accounts. Provisional trading account as on the date of loss shows exact amount of stock that was with the insured at the time of loss to arrive at stock at risk. This will help assess adequacy of insurance to apply under insurance, if any. 7. Volumetric analysis of the stock. Stolen stock could have easily been accommodated in the room/godown or not? How stock was probably carried by thieves / time taken to load / number of persons required to load / vehicle required to carry. Volumetric analysis helps in determining the genuinity of claimed stock in quantity.

Re: Misc. 1. Profile of the company/ nature of business/ sister concern/directors. Is the factory on rent or self owned? Profile of the company gives a brief idea about the company and its working. It helps in knowing business of the insured. 2. Copy of newspaper cuttings about the loss duly translated in english. Newspaper cutting gives some idea about the loss/damage / incidence as well as arrest or recovery. 3. Is there any security arrangement in the factory after the business hours? If yes copy of security bill may be taken. 4. Map of the site of loss. Map of the site of loss helps in getting full knowledge about the premises as well as entry and exit route of the burglars. 5. Proof of forcible entry or exit. One must check for proof of forcible entry or exit. Whether kundi was broken or lock was cut or door was broken or window was broken. Could the stolen item have been easily taken through the gap made? This is important in case of burglary policy to collect proof of force applied to commit the burglary, other wise the loss is not covered in the policy.

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2.1. Exclusions to burglary policy The insured premises should not be left uninhabited for more than 7 days, e.g. M/s Kapoor industries left his Meerut factory during lock out for a period of one month. During this period burglary took place at his factory. The insurance claim was finally rejected on the ground of leaving his factory uninhabited for more than 7 days. Policy does not cover precious articles like gold, jewellery, cash unless specifically covered in the policy. Theft or loss by insureds staff or any other person like guard, watch man, sweeper who is law fully in the premises is not covered in burglary policy if infidelity of staff is excluded. Any major alteration that may increase chances of loss, done in the insured premises may also result into rejection of claim. 2.2. Money not covered in case of burglary In case of burglary policy, money and valuables are not covered in the policy unless specifically declared to the insurance company. 2.3. Burglary from open stock yard Normally loss from open stock yard is not covered under the burglary policy. Stock has to be kept under lock and key covered by walls and roof. Mere keeping stock in the factory in the yard secured by boundary wall is not enough. At the time of taking insurance policy one should make it very clear whether the plant is in the open or secured by plant room duly locked. If the trade requires keeping the stock in the open because of their nature of business or if the stock is very heavy or impractical to store in closed godown, in that case suitable policy should be taken covering such stock and risk in open yard. 2.4. Loss has to be discovered within 14 days of incident Burglary from godown or factory has to be discovered within 14 days of loss and intimated to the insurance company as per claim procedure. Loss may take place by breaking grill from one corner of godown or factory not visited by any one. The broken grill might have been covered by stock and as such no one noticed the broken grill. The thieves might have committed burglary at regular intervals without being noticed by any one. Forcible entry is very clear in such cases but the insurance company may not entertain the claim taking the plea that the loss took place before commencement of the policy or it may be case of theft of stock by staff and not covered in the policy. The loss may be due to pilferage and discovered during stock taking. In every factory some such losses are reported every year during stock taking and these losses are not covered under the policy. 2.5. Value of insurance for computers on depreciated value or market value In case computers the situation is very so far as its value for insurance is concerned. In Jan 2008 say 160 GB hard disk, Pentium double processor, Ram 1 GB, 17 inch monitor Tft are available for Rs. 30,000.00 and you insure correctly now. Next year the value of similar configuration computer is available for Rs. 15,000.00 and as per income tax you have proved 60 % depreciation in your fixed assets schedule showing the value as Rs. 12,000.00. As on Jan 2009 new computer for Rs. 30,000.00 far different in configuration

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than what you had purchased, it has say 640 GB hard disk, Ram is 4 GB and processor is very fast than what you had purchased. Thus decide what value you want to insure your computer next year. At 12,000.00 being depreciated value you can insure your computer. You can insure the same at Rs. 15,000.00 after obtaining valuation report. You cannot insure it at Rs. 30,000.00 since you do have these configurations in your computer. Even if you delete the up gradation from the new computer on account of the new hard disk, ram or processor, you will arrive at the same Rs. 20,000.00. In the third year, value in your books is just Rs. 4,800.00 after 60% depreciation on Rs. 12,000.00 and in the market the same computer is available for Rs. 7,000.00 while new computer has far better configuration costing Rs. 30,000.00. Should there be loss you cannot demand from the insurance company Rs. 30,000.00 inspite of best of your maintenance. Same is true for other electronic items like T.V. or printer. 2.6. Theft without forcible entry or exit is not covered in the policy It has been decided by the supreme court in the case UIIC Vs M/s Harichand Rai Chandan Lal ( SC dated 24-9-2004 C.A no. 8277 of 2004) that if any theft is committed, it should necessarily precede with violence i.e. entry into the premises for committed theft should involve force or violence or threat to insured or his employees or to the member of his family. Therefore the element of force and violence is a condition precedent for burglary and house breaking. In the absence of violence or force the insured cannot claim indemnification against the insurance company. 2.7. Roof of several building connected to each other In cities and crowded places, the roofs of several buildings are connected to each other from the top. One climbs the roof of any of the buildings and reaches the roof of the building in which he wants to commit burglary. The top floor may have collapsible gate or door which can easily be broken. Thus the thief enters the building from top to reach the ground floor and exit in the same way after committing burglary. Even if there ware security guards outside the building, they cannot discover the theft till the showroom is opened in the morning. The main showroom gate on the ground floor is not affected at all. 2.8. Burglary season Normally it is seen that lot of burglary takes place around 26th January, 15th august, Diwali, Dushera, 31 December, etc. During this period the local police are busy through out the night and day of 25th January to 26th January. 26th January night is the night of burglary since most of the police are tired and taking rest after 36 hours of duty. The same applies on other days including 15th august, Diwali and Dushera. Burglary takes place in working days with gap of one gazetted holiday or Sunday or weekly off for the market or holiday after Sunday, when burglars get 36 hours or more to plan and commit

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burglary e.g. Shop last opened on 12th April while 13th is Sunday and 14th is holiday for Ambedkar Jayanti. One should be over cautious on these days against burglary. 2.9. Grill cut to enter in House/Factory It has been seen that entry in the office/house/factory is made from the window having grill. The iron grill is fixed with the help of screws which are cut to make way for entry in the premises. As a matter of safety screws in the grill should always wielded so that one cannot break the window grill easily. 2.10. Security of empty office/showroom/factories at night Dogs should be left for security of empty office/ showroom/ factories at night. The dogs are better mode of security at night. They get up even at the slightest sound or smell.

2.11. Proper coverage of stock

In case of insurance of stock in a factory, one should not simply mention that stock of say made ups and garments are sought to be covered in the policy. In that case if fabric is stolen from the factory, in that case fabric being neither made up nor garments will not cover in the policy. The coverage should be wide enough to cover raw materials, work in process, finished goods and all other goods related to insureds business. One should not restrict himself only to stock of finished goods or made ups or garments. The insured may decide to deal in leather goods or handicrafts which are easily covered if the mention in insurance policy that coverage is for all other goods related to insureds business. Mention of other goods may also cover packing items. 2.12. Coverage of stock with Transporters or C & F Agents Lot of companies have Transporters or C & F agents to store their stock. From the office of the insured challan is made for issue of stock from the godown of transporters or c & f agents. In such cases though policy is taken by the company who owns the stock but coverage should be taken for all godowns of transporters or C & F agents where stock of insured is kept. Either address of the transporters or C & F agents should be informed to the insurance company or coverage should be taken of all godowns of the transporters or c & f agents as per company records. Many a times it is possible that the transporters or c & f agents may take a new godown or they decide to keep excess stock at some other premises. In such a case having taken insurance policy covering all godowns of insured without exact address would benefit the insurance policy holder should there be loss.

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A. About police
Format of F.I.R. First information report U/s 154 of CR. P.C. Police station Time of loss Intimation of loss Date Complaint by Matter of loss area U/s of I.P.C.

Signed by sub inspector

After a burglary has taken place, the local police is to be informed and first information report (F.I.R.) Has to be lodged with the concerned police station. F.I.R. Is issued u/s 154 of cr.p.c. Detail of stolen stock and modus operandi of the burglary has to be informed to the police. In case of recovery of stock from the criminals tally has to be made with the details of stolen stock. The local police may write in their own hand writing oral statement of the complainant in the F.I.R. In the alternative the local police may take letter from the insured and copy language of the letter on the F.I.R. At the end of the F.I.R. Sheet reference may be given about the investigation officer who is deputed to look after the case or about visit of the I.O. At the site of crime or incident. Brief of the F.I.R. Is mentioned in the daily diary register. One must ensure that the local police write in the F.I.R. That force was applied e.g. braking of lock or door in committing the burglary.

F.I.R. Is normally lodged under following sections of I.P.C.: Section 379 Section 380 Section 391 Section 395 F.I.R is lodged for day time theft. F.I.R is lodged for night time theft. F.I.R is lodged for dacoity/robbery by five or more persons. F.I.R. Is lodged for dacoity/robbery.

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Section 397 Section 406 Section 457

F.I.R is lodged for robbery or dacoity with Attempt to cause death for loss due to infidelity of staff. is applied for forcible entry.

Several crimes at one place In case of series of offences in one area, at about one time, committed by one person or gang, in such cases one combined F.I.R. May be registered by police. It is not necessary to register separate F.I.R. The name of all the victims may be mentioned in the F.I.R. Or statement may be taken u/s 161 of cr. P.c. And add them in the F.I.R. Stamped copy of F.I.R. Along with copy statement u/s 161 may be enough as proof of loss having taken place. . Section 379: Punishment for theft- whoever commits theft shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both. Section 380: theft in a dwelling house, etc. Whoever commits theft in any building tent or vessel, which building, tent or vessel is used as a human dwelling, or used for the custody of property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. Section 391: dacoity when five or more persons conjointly commit or attempt to commit a robbery, or where the whole number of persons conjointly committing or attempting to commit a robbery, and persons present and aiding such commission or attempt, amount to five or more, every person so committing, attempting or aiding, is said to commit dacoity. Section 395: punishment for dacoity whoever commits dacoity shall be punished with (imprisonment for life), or with rigorous imprisonment for a term which may extend to ten years, and shall also be liable to fine. Section 397: robbery or dacoity, with attempt to cause death or grievous hurt if, at the time of committing robbery or dacoity, the offender used any deadly weapon, or causes grievous hurt to any person, or attempts to cause death or grievous hurt to any person, the imprisonment with which such offender shall be punished shall not be less than seven years. Section 406 : punishment for criminal breach of trust whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.

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Section 457: lurking house trespass or house breaking by night order to commit offence punishable with imprisonment whoever commits lurking house trespass by night, in order to the committing of any offence punishable with imprisonment of either description for a term which may extend to five years, and shall also be liable to fine; and if the offence intended to be committed is theft, the term of the imprison may be extended to fourteen years. Case no. I - A Case Of Theft Without Forcible Entry / Exit

Only section 379 or 380 of I.P.C. Is applied by police without invoking section 457, then it is said to be a case of theft without forcible entry or exit i.e. Someone has say operated key and stolen the stock or theft of stock from open yard or door was open and theft took place or jumped wall and theft took place without breaking any lock. If there is no forcible entry i.e. No locks broken or no doors broken then it is not a case of forcible entry. The insurance company does not cover such cases of loss due to theft without forcible entry or exit in case of burglary policy. How ever such losses without application of force being theft losses are covered in all risk policy. Case no. II - Loss Due To Infidelity Of Staff/Employee.

Burglary by forcible entry by staff is a case of loss by infidelity. The staff has legal right to be inside the insured premises but loss due to his involvement is not covered by the insurance company under burglary insurance policy. A separate policy for infidelity of staff has to be taken by the policy holder to cover such eventuality. Case no. III - Key Operation. Loss due to theft by operation of key is not covered in the policy. In such cases normally there is no evidence of use of force to commit the theft. The door or lock has not been broken to commit the theft. From the circumstances of the case it is clear that the lock has been opened by using the key. The burden of proof is on the policy holder as to how the loss took place. If the key has been procured by using force or threat to life then such a case of loss is covered in the burglary policy. The key may have been procured by using a gun or knife or threat to kill. In such cases breaking of lock or door is not necessary. Case no. Iv- Burglary by Using Force Only burglary by breaking lock or door or window then it is a case of burglary by using force. Such cases are covered in the burglary policy.

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2.13. Theft v/s burglary as per Supreme Court. Under the burglary policy the insurance companies do not cover a case of theft without using force. In the I.P.C. There is no difference between theft and burglary but the insurance companies do make a difference whether loss has taken place by using force or not. In case of loss having taken place without using force then such a case of loss is not covered in the burglary policy. Even the Supreme Court has failed to understand why insurance companies have tried to define burglary with force and without force whereas no such definitions exist in I.P.C. But insurance contract is a contract which if followed does mean that loss without use of force is not covered in the burglary policy. There is another variant case where police does not invoke forcible entry section 457 of I.P.C. In F.I.R. Or in final report but circumstances of the case clearly shows that it is a case of theft using force e.g. Locks found broken or door found broken or window grills found cut or almirah found broken. The circumstantial evidences may be enough to prove use of force. In such cases even if section 457 of I.P.C. has not been invoked by police even then the insurance company may settle the claim under burglary policy.

2.14. Only letter to Police is not F.I.R. Normally letter is given to the local police and the letter duly acknowledged by the police is considered to be F.I.R. In local parlance by general public. The general public does not have any idea about F.I.R. Since they visit a police station only once in a while or lifetime to have unique police experience. The local police tries to keep crime graph low by not lodging proper F.I.R. It may be noted that F.I.R. Is a legal document and is acceptable in the eyes of law in court, insurance company etc. The crime as mentioned in the F.I.R. Has to be reported to the higher ups in the police and then finally finds its way to government records. One copy of F.I.R. Is sent by the police to the D.C.P. / Magistrate, second copy to the records. Only a photocopy is given to the complainant by the subinspector who has registered the F.I.R. It is written outside every police station that lodging of F.I.R. And obtaining copy of the same is right of every citizen. How ever, the local police in criminal cases like theft, burglary, infidelity, financial claims involving banks, companies does make good efforts to avoid lodging of F.I.R. Till they find no other way but to lodge proper F.I.R. U/s 154 of cr.p.c. 2.15. Call at no. 100 of P.C.R. It is always suggested that in case of any loss due to theft, burglary etc. One should avoid visiting the local police station immediately but they should ring no. 100 of police control room so that immediate notice of crime is taken by police.

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The 100 call is answered by the police head quarter and immediately noting is made in the call register. The call is immediately referred to the Gypsy or Qualis PCR and also the district control room through wireless set. The PCR notes down in the register and immediately visits the site of loss. The PCR is the first to visit the site. They may also advise the complainant not to disturb the site till arrival of local police. The PCR as well as district control room then refers the matter to the concerned police station through wireless. The local police notes the message of PCR and district control room in the register and then visits the site of crime. In this way police cannot white-wash a crime. On arrival of the police team at the site of crime, necessary letter about the crime may be given to the police. In such cases through call at no. 100, the local police does register the case properly and issue proper F.I.R. After completion of initial formalities report about lodging of F.I.R. Is sent to police head quarter. In case of serious crime like robbery, review visit is made by senior police personnel like S.H.O. Or A.C.P. In case of cognisable offence F.I.R is registered. In case of non cognisable offence entry is made in separate register of rojnamcha or daily diary (D.D.) Register if investigation is not required. Original F.I.R. Is retained in the records First copy of F.I.R. Is sent to concerned magistrate Second copy of F.I.R. Is sent to complainant Third copy of F.I.R. Is sent to investigation officer Fourth copy of F.I.R. Is sent to A.C.P. Or D.C.P./A.S.P. Or D.S.P. Now a day more and more police stations are issuing computerised F.I.R. Copy. 2.16. Daily diary (DD) register/Roj Naamcha The local police notes in brief about the crime in the daily diary register serially; an investigation officer is earmarked for investigation, I.P.C. Section invoked is also mentioned. This register is saved and kept in record. Courts can also call for DD register for verification. This register has all details like I.P.C. Or cr.P.C. Invoked, summery of the F.I.R., who was investigating officer, action taken, recovery or arrest details etc? 2.17 Police Hierarchy Home guard Constable Head constable ( H.C.)

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He is the lowest ranking officer to investigate a case. He must be minimum 10 pass and Now a days even highly qualified are joining this rank. He has no star on his shouldeRs. Assistant sub inspector ( A.S.I.) He has a star on his shoulders He investigates grave cases. Sub inspector ( S.I.) He has two stars on his shoulders Serious cases including cheating are marked to him for investigation. He can be chowki in charge also. Inspector / Station House Officer ( S.H.O.) He has three stars on his shoulders Serious crimes including murder are marked to him for investigation.

Asst. Commissioner of police / asst. Superintendent of police He may be in charge of 2-3 police stations. He can supervise cases and can handle cyber crimes. .

Addl. ACP/ Addl ASP Dy. Cp / Dy. Superintendent of Police He can be district chief of police. Addl. Dcp / addl. Superintendent of police Jt. Dy. Cp / jt. Dy. Superintendent of police Special commissioner of police / sp. Superintendent of police Commissioner of police / superintendent of police

2.18. Investigating officer Investigating officer is earmarked for investigation of the crime. He is responsible for visiting the place of crime, conducting investigation, collecting necessary details of the crime, and deal with the file / case for all purpose till finalisation. He presents the case to the local magistrate and to the concerned court.

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2.19. The S.H.O. The S.H.O. Of the police station or station house officer is the head of the police station. He does not involve directly with the complainant except in major cases. He makes necessarily planning related to delegation of work, making strategy to catch culprits, stopping crime in his area, increasing patrol, communication with higher-ups like A.C.P./ A.S.P., D.C.P. / D.S.P., C.P./ S.P., Magistrate etc. 2.20. Crime team Crime team is there in every district. Some have dog squad as well. In case of serious crimes, help of crime team of the district is taken for photographer, fingerprints from the scene of crime, dog squad is also called for. Involvement of these departments is made in case of serious crimes and it is advised not to touch any thing till arrival of police or crime team for taking finger prints. 2.21. Crime branch of the state There are two DCP in the crime branch. One heads the traditional crime section and the second DCP may head the serious crime section. In case of traditional crime, the DCP may be responsible for crimes like Robbery, Burglary, Dacoity, inter state crime, homicide, anti kidnapping etc. Each unit is headed by one A.C.P./ A.S.P. Entire state may be his jurisdiction. He can directly register F.I.R. Also. Cases may be referred by police stations also. Cases can also be taken up where no action has been taken by local police.

In cases of serious economic offences, political cases, cheating cases above Rs. 1.oo crore etc. Economic offence wing of crime branch of state may be involved. Some of the departments of E.O.W. May be: 1. Land and building, 2. Cyber crime 3. Fraud and cheating 4. Anti forgery 5. Intellectual property right 6. Criminal breach of trust like siphoning of funds or over invoicing etc. Now a days separate police stations are made at these crime branches of state and one can register F.I.R with them directly in place visiting local police station.

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2.22. F.I.R is mandatory as per Insurance Company It is mandatory in case of insurance claim to lodge proper F.I.R., otherwise insurance company would take no time to reject the insurance claim. In such cases of loss without proper F.I.R., the insurance company does not get subrogation rights in case of recovery of stolen stock. As per law the local police are the only authority to take cognisance of the crime having been taken place. In case as per local police no such crime has taken place then the insurance company is also not in a position to take cognisance of the crime and thus rejects the claim. As such, mere letter to police detailing the loss is not enough unless proper F.I.R. U/s 154 of cr.p.c. Is registered by the local police. The police will apply sections of I.P.C. Under which crime has been committed. If F.I.R. Is not registered by the local police inspite of intimation to them, it may be presumed that local police is not convinced about the crime and as such they have not registered F.I.R. In the absence of F.I.R insurance companies do not accept such claims. It is a pre conditioned of insurance claim that F.I.R. has to be registered by the local police. If the insured is not satisfied with the action taken by the local police, he may approach the magistrate or court to direct the police to lodge F.I.R. Order of the court is enough proof for the insurance company to admit a claim, whether the local police does any thing or not after court order unless the police has proved that no such crime took place at all. 2.23. What to do if F.I.R. Is not registered by local police 1. One can again call number 100 and inform them that it is a double call case. These calls may be referred to vigilance department of police who can make sure that the local police register F.I.R. 2. One can also meet A.C.P. Of the district if F.I.R. Is not registered. 3. One can also meet the magistrate of the district who can order the local police to lodge F.I.R u/s section 156(3) of cr. P.c. Every 2-3 months the district magistrate is updated about progress of F.I.R in all cases involving the 2-3 police stations under him. 2.24. Hierarchy of Magistrate and Courts Judiciary -- Magistrate They have 2-3 police stations under him. Metropolitan Magistrate (M.M.) Addl chief Metropolitan Magistrate ( A.C.M.M.)

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Addl. Session Judge ( A.S.J.) Chief Metropolitan Magistrate At district courts Session Judge High court at state level Supreme court 2.25. Intimation of loss to police Normally the person who first rings P.C.R. No. 100 does find mention of his name in the F.I.R. The loss may have taken place in say m/s x & company but F.I.R. Can be lodged by the director, partner, owner or employee of the insured company saying that loss has taken place in m/s x & company due to burglary on dated at time by breaking locks of the shop / godown / factory door. As such it is not necessary that only the insured company has to lodge F.I.R. Mention of name of insured or his address is enough to cover the loss in the eyes of insurance company. It should be ensured that correct address of the site of loss is mentioned in the F.I.R. And the same should tally to the address mentioned in the insurance policy. Letter to the police can be given detailing the incidence of loss, estimated amount involved, brief detail of the loss in quantity / rate / value / time / date or even can be said that they will inform the local police after checking records. In such cases it is very important that later on detailed information must be given to the police about the loss. Mostly people forget after lodging F.I.R and no one reads that in the middle of F.I.R. It is written that detailed information would be given to the police later on. Not providing detailed information to the police may affect the insurance claim. All letters including intimation letter, detailed letter of loss must be duly acknowledge by the police by putting a sign, date and rubber stamp.

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2.26. Non Cognizable Offence Report (NCO) In case of certain type of losses the local police does not register F.I.R. It is discretion of the police whether to convert the complaint to F.I.R. Or into daily diary. It is not necessary to register F.I.R. For all cases. Jewellery/Purse/Cash/Mobile Phone/Foreign Currency has been lost or stolen in a Cinema Hall/Marriage/Market/Bus/Car/ Temple/while travelling and the same could not be traced. There is no doubt on any one. Separate daily diary register is maintained by the police for such cases. For such cases the local police can register non cognizable offence report and the same can be sufficient for insurance claims. In such cases final report is not issued by local police. However after some time the local police can close the case by writing on the non cognizable offence report itself that there is no arrest or recovery. 2.27. Loss due to Dacoity / Volumetric Exercise Burglary involving 5 or more person is a case of dacoity u/s 391 of I.P.C. And the local police may make all efforts to make sure that there is no mention of 5 or more persons in F.I.R. Or in intimation letter to keep crime graph low. This may later on create trouble to insured. He may have to prove how such a big burglary of stock could take place in such a short time not involving say 10 persons. In case of volumetric / time / weight analysis prove that the weight of the stolen stock was say 3 tonnes and only a Tata 407 truck could have only transported it requiring about 10 persons. Each carrying say 20 k.g. At a time in three minutes could make 20 trips in one hour or 20 x 20 = 400 k.g. And involving 6 persons could have carried 400 k.g. X 6 persons = 2400 k.g. Keeping in view 100 meters distance from the place of stock to truck. 1.5 minutes to carry, 1.5 minutes to return thus not more then 2.4 tonnes or approx. 3 tonnes could be carried in the given time / persons involved / vehicle in a claim of loss of 3 tonnes. The volume of a Tata 407 truck is approximate 1.5 feet height x 5 feet width x 9 feet length = 67.5 cubic feet. This volume has to be enough to store the stolen stock. 2.28. Burglary and volumetric analysis In the case of a burglary involving 50 cloth bales weighing about 40 k.g. Each cannot be stolen by two thieves manually. In such a case involvement of a vehicle to carry the stock is very important to justify the burglary. The security guard may state that he had seen two thieves running with two bales and on being chased they left two cotton bales and ran away. The owner may inform the police that 50 bales had been stolen and the police may also register F.I.R. And issue final untraced report later on. But the claim may not be

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justified on the ground that 50 bales weighing about 2000 k.g. Cannot be carried by two persons and as such mere lodging of F.I.R. Cannot be a reason to admit the claim. Thus mention of time period of burglary, number of persons involved, mode of transportation possibility is very important. Else it can land the insured into difficult corner. One must mention the actual information to the police so that truth can easily fall into place related to the burglary.

2.29. Section 457 in final report Even if initially section 457 of I.P.C. For forcible entry has not been applied but later on police applies section 457 in final police report, then the loss may be said to be covered under the burglary policy. The police during investigation may find that it was really case of burglary by using force as such initially in the F.I.R. They may book the case u/s 380 of I.P.C. And may not initially apply section 457 but later on in final report they may insert section 457 of I.P.C. On being satisfied that loss has taken place by using force only. Even if police does not invoke section 457 of I.P.C. But mention breaking of door/window etc. In the complain letter to police or similar mention in the F.I.R. May be enough to cover the claim under burglary policy.

2.30. Regarding Final Report By Police. Usual final police report of untraced is issued by police when there is no arrest or recovery. Normally untraced report is issued after 90 days of F.I.R. In case of union territory like Delhi where police commissionarate are in force as per law, in these places police has judicial powers to issue final police report after 90 days of F.I.R. Acceptance of final report by magistrate or court is not necessary. Specimen of untraced report F.I.R. No. .. Dated.. U/s . Lodged at police station . Is reported sent as untraced in the absence of any arrest or recovery in spite of investigation. The case would be reopened again if any fresh clue received. Signed S.H.O / S.I. Date This untraced report is enough for the insurance company to settle the claim. Normally, claims are not settled by the insurance company till final untraced report is received by them. Though in the insurance policy there is nothing to suggest that final report is necessary for settlement of a claim. It has only become customary to await final report. But in other states final report duly singed is filed by police with the magistrate and admitted by court is necessary. It may take more then 6-9 months to issue such final

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report in other states. It contains full matter of F.I.R., section of I.P.C. Applied, steps taken by police for investigation, final conclusion by police. The same is forwarded by concerned police station to D.S.P. Office to the magistrate / court for acceptance of final report. The court can ask the complainant if he is satisfied about the outcome of police enquiry and then only orders closure of the case. The whole process can take substantial amount of time of even more than a year. The court accepted final report u/s 173 of cr. P.c. Is required by insurance company for settlement of claim. An application, after paying required court fees, can be made to court for providing copy of final report. Simply police attested final report is not acceptable to insurance companies, since police does not have judicial powers in other states to issue final report.

2.31. Challan / charge sheet by police In cases where arrest has been made by police concerning the crime, local police submits charge sheet / challan u/s 173 of cr. P.c. Against the criminals in the court of law. In such cases final police report is not issued. The charge sheet / challan copy can be given to the insurance company for settlement of claim. Though court case can go on for years for insurance companies can settle the claim on the basis of charge sheet / challan without awaiting final verdict of court. The charge sheet contains as follows:First column Complainant

Second column Persons not sent for trial or proclaimed offender Third column Name and address of accused (A) In custody, arrested to recover and can continue crime. (B) On bail or recognised, not arrested, charges sheeted, trial accused.

Fourth column Miscellaneous other facts of the case.

If the crime section invoked requires maximum possible punishment less than 3 years as per I.P.C. Invoked, then its non cognisable offence and it is cognisable offence if

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requires maximum punishment is more than 3 years. Charge sheet has to be filed within 60 days of arrest if maximum possible punishment is more than 7 years. Charge sheet has to be filed within 90 days of arrest if maximum possible punishment is more than 10 years. 2.32. Vernacular translation of F.I.R. Matter of F.I.R. / final report / challan / charge sheet in local language is required to be translated in English. Moreover police language itself is antiquated and cannot be understood in writing or even the wordings which are mix of English era/ king time / old rulers time language. Oriental insurance H.O. Being in north cannot understand south / west / eastern languages. United India H.O. cannot understand northern local dialects mixed of Urdu / Hindi. If a claim has to be settle at H.O. level, then translation is very necessary in English.

2.33. Recovery / Superdari In case part of stolen property is recovered from the criminals, the same is kept in the police custody / maalkhana for identification by the owner. Once the owner has identified the stolen property, the custody may be handed over to the owner on the basis of superdari by the court on application. Superdari means that owner has to safeguard it for production in the court till the case is finalised and crime is established against the criminal. The owner cannot sell it or pass it on to others, the property received in superdari. The insurance company deducts from claim payable, the recovered property and only the balance claim is settled by them. At the time of identification of stolen property or custody under superdari, proper information must be given to insurance company / surveyor about deterioration of value / quantity resulting claim. Should any deterioration in quality takes place in the recovered property, the loss of value may be considered in the claim by surveyor/insurance company. 2.34. Disadvantages Of Taking Property On Superdari Recovered If the property has been recovered in some other city in that case insured has to go to that city court and city police station to obtain possession of the recovered goods at his own cost. E.g. Car owner is in Delhi but his stolen car has been recovered in Jalpaiguri in West Bengal. Now insured has to go to Jalpaiguri police station and Jalpaiguri court at his own cost along with police to take possession of the car. He has to bring it back to Delhi in

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transport spending another say Rs. 8,000.00. Travelling cost including transportation cost from some other city is not reimbursable under the insurance policy.

Now the insured has to visit the police station and court to take delivery of recovered property on bond. Having taken delivery does not mean that he can sell it or use it in the manner he wants. He has to safe guard it and produces it in the court as and when asked by the court. Property cannot be sold till case is finalised in the court. The insured has to be present in the court as and when asked till finalisation of the case in the court on every date. What if one is working in a company and cannot attend the court dates regularly. Court warrant is issued to call such owners in the court. Same is the case if in place of car, stock is recovered from by the police. The insured has to say bear rent to store the property on superdari and still not being able to sell. Simultaneously pay interest to bank on the loan. The recovered stock may become useless after lapse of considerable time and not saleable any more.

2.35. Mere F.I.R. Not enough after thought The role of police is to catch culprits but not to prove quantum of loss. Sometimes it is seen that policy holder lodges F.I.R. Saying that e.g., jewellery has been stolen but later on he finds that cash is insured under the policy. So later on he gives another letter to police that huge amount of cash has also been stolen. Had cash been stolen, then it would have found strong mention in the initial F.I.R. Moreover, the source of cash if not proved. The insured never had huge amount of cash at home. The cause of keeping cash at home is also not proved. Financial standing also does not substantiate the claim of loss of cash. In such cases mere lodging of F.I.R. And subsequent letter to police may not result into settlement of cash claim being a case of after thought. Though police may not quash the F.I.R., they may end up issuing final police report but that does mean that the claim has to be settled by the insurance company. In such cases police F.I.R. cannot be sole reason / basis for settlement of claim.

2.36. No mention of stolen stock in F.I.R. / subrogation Sometimes it is found that police has lodged F.I.R. For genuine case of burglary of say cash but later on insured says that he has lost stock also in burglary. He proves in books of account that stock had also been stolen but there is no mention in F.I.R. / final police report that stock has also been stolen. Insured mentions in F.I.R. That he will give details of other stolen items later on after checking books of account but he never gives details to the police. If the stock is recovered later on, then the insurance company cannot get subrogation rights to recover the stolen goods from the police since there is no mention of stocks having been stolen in F.I.R. or in final report. As such insurance company may not

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settle such claims pertaining to stock loss unless found mentioned in the F.I.R. Or final police report. The insurance company cannot get proper subrogation rights from the insured.

2.37. Police status report Status report about recovery or arrest or investigation may be obtained from police before settlement of a claim. If final report cannot be issued even after 90 days has past after the loss. Chapter 3 fire claim Fire insurance coverage is given for:1. Building, 2. Machinery and accessories, 3. Stock and stock in process 4. Furniture, fixtures and fittings.

Insurance of valued policy In case of insurance of items like work of art, old machinery, manuscript valuation certificate as acceptable to insurance companies should be provided for insurance of valued policy. Source of fire excluded Loss to electrical machines, fixture or fittings arising from over heating, excessive pressure, short circuiting, leakage of electricity to machines, fixtures, apparatus directly affected shall be excluded from the loss. How ever consequential or subsequent to other machines, apparatus, and fixtures shall not be excluded. In other words the place from where fire started is excluded for the purpose of fire loss. If say fire stated from main electrical switch then loss to main electrical switch is excluded and cannot be compensated to the insured. How ever as a result of fire, other machines and building including fixtures were also affected and damaged, they would be indemnified under the fire policy claim. Papers required in case of fire claim The surveyor has to understand the business of insured first and then only proceed with survey and assessment of claim. Nobody knows your company better than you. 1 Profile of the company/ nature of business/ sister concern/directoRs. Is the factory on rent or self owned?

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Profile of the company gives a brief idea about the company and its working. It helps in knowing business of the insured. 2. Copy of fire insurance policy. Copy of fire insurance policy is required so that one can check sum insured under the policy, what items are covered under the policy, what is the policy period, whether the risk is covered under the policy or not, whether address where loss took lace is covered in the policy or not etc. Policy number is generated in system after the insurance policy is issued. The policy number contains branch code, nature of insurance, year of insurance and policy number. 3. Intimation letter to insurance company. Letter given to insurance company about the loss covers some of the basic facts about the loss as revealed by the insured. What is the proximate amount of loss? How the loss took place etc. Immediately on sending intimation letter about a claim, claim number is generated by the insurance company in their system. Reference to this claim number is made till the claim is settled. One can ask for claim number from the insurance company after lodging insurance claim. Intimation letter should also contain policy number under which claim has been lodged.

4 Claim form with details of items lost. Claim form is issued by the insurance company. Once the claim on the basis of intimation letter is registered. Claim form is needed for details of loss, quantity, what is amount of loss etc. Claim form duly filled up may be given to the insurance company or to the surveyor during survey. 4. Proposal form. Proposal form is required to see the intention of the insured for coverage of items, what are the items stated in the proposal form. Insurance policy is issued on the basis of proposal form. A. Re: police/fire brigade 1. Letter to police/police report. In case of fire, letter is given to the police mentioning about the fire. Copy of letter to police is taken in order to check whether the fire loss information was given to police or not. Any information given to police for the first time is taken as the correct information. 2. Fire brigade report. Fire brigade report reveals cause of fire. In the report of fire brigade it is clearly written from where fire started/cause of fire/how many water tank were used/what is the exact

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time of arrival of fire brigade vehicle/list of damaged items. Fire brigade reports plays vital role. 3. Letter to police The local police also gets involved to make sure that the fire has not taken place due to mischief or if it is intentional or genuine. 4 Newspapers cutting about fire. Newspaper cutting gives good evidence/proof about the fire. 5 Detailed write up of the incident of fire, how it was discovered etc. What is the starting point of fire/ who had first seen the fire/ when information was sent to police and fire brigade. It helps the surveyor to know about the exact detail as to how fire took place. What happened when insured came. How he came to know about the fire, what steps he had taken after knowing that fire had taken place. When did he inform the fire brigade and the insurance company about the loss?

Copies of balance sheet of last three years obtained from c.a. / banks. This would reveal depreciated value of building, stock and machines over the last three years. Copies of sales tax / vat returns. Weight of debris to original (to some extent). Fire brigade report. This report would contain details of damage to building, machines, and stock. Cause of fire would be explained. Police report. Information to police is must in case of fire. They in turn inform fire brigade. The local police ensure that it is not a case of intentional fire. Statement of owner / staff / witness about business and fire. Copy of newspaper cuttings about the fire loss Newspaper cutting gives some idea about the loss/damage / incidence. Map of the place detailing near by location and location of machines and store godown. Bank liabilities. Sanction letter from bank and liabilities on account of building, machines and stock may be verified. Manufacturing process. Flow chart of production process and showing use of machines till final production may be made. Market report of insured about credit worthiness. Whether the insured heavily indebted in the market. Did have bad financial repute and not being able to sell his stock. Could he have interest in the fire? Not being able to run a factory, one can take interest in the fire. Such cases need detail investigation. Was the business going on smoothly till date of loss?

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3.1. Re. Fire loss to machines Cost of machines as per bills and proof of payment duly supported by bank statement, machine suppliers ledger, machine purchase ledger and verification from the supplier. The use of the machine has to be explained in the production process. Present value of machines duly supported by quotation has to be produced from few suppliers of similar type of machines to verify if prices have gone up or down. Repairing option may also be worked out to find if it would be cheaper to allow repair or depreciated value less of salvage. For salvage value advertisement may be given in news paper or offer may be taken from few salvage dealeRs. Salvage value may be deducted from the assessed loss of machines. For the purpose of adequacy of insurance, total value of depreciated machines at the time of fire may be compared with the sum insured. In case of under insurance suitable deduction may be made from the assessed loss. In case of fire heat may raise causing damage to sensitive parts of the machine. Metal parts may expand and contract due to pouring of water by fire brigade. This action results massive Damage to expensive machines. The damages can be revealed only after close examination. Apparently they may look not affected but they are not good for production either. These days machines are run by I.C. And C.N.C. Controllers, these gets affected due to heat.

Assistance may be taken from mechanical engineer or chartered engineer to find out extent of damage to the machine. Estimate may be taken from the supplier for repairing charges of the damaged machines. Details of saved and affected machines may be taken in the following format: Mach ine ------1. 2. 3. 4. 5. Qty. ------Rate/co st -------Value -------------Serial no. Year of Manufactur making er -------------------------Proof of payment --------------

Purchase bill copies of machines from suppliers and their ledger copies Purchase bill copies of machines given to bank for financing. Quotation of similar machines lost in fire. Depreciated value of the machines as per fixed assts schedule. At what value insurance was taken.

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3.2. Re. Fire loss to stock In case of stock lost due to fire, calculation may be made separately for raw material, work in process and finished stock. After making inventory of damaged stock separate list has to be made as per status of the damaged stock. In case of raw materials verification may be made of purchase bill, challan, payment proof duly supported by bank statement, suppliers ledger, stock register, excise stock register, verification of purchase bills / ledger of supplier may be taken from the supplier and rates may be verified independently from other suppliers as well. For work in process suitable cost for conversion may be added to the cost of raw material on account of labour portion, power, over heads etc. Considering the status of work in process. In case of finished goods sale price less gross profit percentage or cost of production may be calculated and allow lower of the two. In case of loss of stock, profit cannot be allowed but only cost can be compensated. Salvage value may be deducted from the assessed loss on account of stock. Average purchases and sales of each of last 12 months before loss may be considered. The same may be read with sales tax or vat return. Last three years sales and purchases may also be considered. Abnormal movements can be easily detected if proper analysis of accounts is made and justification should be sought. For the purpose of adequacy of insurance, total value of all stock at the time of fire may be compared with the sum insured. In case of under insurance suitable deduction may be made from the assessed loss.

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1 Stock register. Stock register is taken to check whether the item lost appeared in it and in what quantity. Re: Saved stock 1. Detail of saved stock Item/ Qty. / Wt. / Rate/ Value. First thing any surveyor or preliminary surveyor would do is stock taking of saved stock and then tally with stock records and purchase bills.

3. Details of fire affected stock / item / rate / quantity / bills / payment / weight / packing / where kept/serial no./supplier/proof of payment/ batch no. Detail of items burnt is taken from the insured e.g. When purchased, how much payment was made, from whom purchased, rate of the fire affected items, total value of the fire affected items etc.

Cost of burnt stock is considered to arrive at the loss without allowing any profit.

Detail of burnt items is taken so that the insured can provide the exact detail of loss. When purchased, how much payment is made, from whom purchased, rate of the damaged items, total value of the damaged items etc. Cost of damaged items can be verified from the purchase bills. Stock register may be verified for quantity of stock with the insured before fire. Salvage value of damaged stock may be found out, if any. In case of manufacturing industry cost of damaged stock may have to be calculated on basis of cost of raw material, processing cost, direct overheads, indirect overheads etc. Attributable to the damaged stock 3. Purchase bills of lost items. Copies of purchase bills from suppliers and ledger as appearing in suppliers books. Purchase bills of stolen items are taken in order to check the genuineness of the claimed loss. When the fire affected items were purchased/how old was the stock etc.? Various purchase bills may be verified from the suppliers in case loss cannot be attributed to specific bill. Average rate may be allowed for the stolen quantity. The surveyor may also consider sale less gross profit percentage to arrive at cost of sales and apply this to arrive at cost of burnt items.

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Average cost of purchase in the last one year may be considered if it is found that only recent stock of last one year has been stolen.

Re: bank 5. Bank statement of the last 12 months transactions

Whether most of the payments of purchases are made by cheque or not. Cash purchases are not very reliable and can be easily manipulated to exaggerate the claim. Some times heavy purchases are found made just before the loss and payments for such purchases are also not made. Such purchases needs deep scrutiny to find out whether they were intended to manipulate the claim or were genuinely purchases duly supported by challan, transport receipt, purchased in the normal course of business to meet sales orders. Is there any credit limit with the bank? If yes, copy of stock statement submitted to bank for last 12 months duly verified by bank. If insured had taken loan against stock, then he has to give monthly stock statement to the bank. It also helps the surveyor to check the stock position of the insured as per stock statement. Is there any difference between book stock and stock as per bank stock statement, if yes the same may be investigated. Normally year end stock as per balance sheet and stock statement is same and tallied to each other to avoid income tax problem and scrutiny by banks. Problem arises during the year when at the time fire, stock as per stock register does not tally to stock as per monthly stock statement given to bank. Such cases need to be investigated in detail. Problem may get further complicated if it is a case of under insurance. As such it is advised that in case of bank limit against stock, stock statement should be submitted correctly as per stock records. 6. Copy of sanction letter of limit. Sanction limit shows how much limit is sanctioned to insured against stock by bank. Re: books of accounts 7. Up to date books of accounts for verification, purchase ledger, sale ledger & cash book, sale bills, receipt memo and issue memo. 8. Income tax returns, balance sheet and trading account of last 3 years. 9. Copies of transfer memo of stock sent to others for processing and thus saved. 10. Copy of sales tax return and vat return of last three years. 5. Copies of sales bills from the parties and ledger as appearing in 6. Salvage value of damaged stock.

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Provisional trading account showing stock at risk at the time of loss certified by C.A. As on the date of loss before burglary may be given as follows:Provisional trading account (before loss) Amounts (Rs. P.) Opening stock Purchases Direct expenses Gross profit Sales Closing stock Amounts (Rs. P.)

The C.A. May have to be convinced to certify the provisional trading account before the loss and need not be audited but compiled on the basis of books of accounts. Provisional trading account as on the date of loss shows exact amount of stock that was with the insured at the time of loss to arrive at stock at risk. This will help assess adequacy of insurance to apply under insurance, if any.

Removal of Debris . Before removal of debris one has to make sure that the debris justifies existence of stock before fire. Only top portion of stock normally gets burnt in fire. The second stock layer gets damaged. Finally spraying of water will restrict further burning. Though fire can continue for some time even after fire and thus sporadic fire eruption from time to time may take place and again need to call fire brigade. How ever 100% burning does not take place normally. In case of chemicals water may have mixed with the chemicals. Drums may have been broken or melted. Rough counting can be done about presence of number of drums before fire. As such nature item lost in fire is very necessary and their chemical composition. There would be heap of half burnt garments justifying quantity. In case of medicines mere heat is enough to destroy utility of medicines. Once debris removal has been allowed there is nothing but books of accounts to justify the claim. 3.3. Re. Fire loss to building Damage to building may be in a position to repair or remake it once again. Due to heat and fire the pillars or wall or roof may have to be reconstructed again or even repaired. Report may be taken from an architect or civil engineer about need to make new shed or only repair is required. Estimate of cost of repairing may be taken from a civil engineer in detail. The building has to be reinstated in same situation in which it was at the time of loss. Should any new addition or improvement is made, the same may be disallowed. Salvage value on account of metal sheet or iron bars may be deducted from the loss. Cost of debris removal may be allowed

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For the purpose of adequacy of insurance, total value of building appearing in the books of accounts at the time of fire may be compared with the sum insured. In case of under insurance suitable deduction may be made from the assessed loss. Assistance may be taken from civil engineer or structural engineer to find out extent of damage to the building. Estimate may be taken for repairing charges of the damaged building. 3.4. What if records and books of accounts burnt in fire In case of fire claims involving building/ stock / machinery, it is observed that sometimes office of the insured is also gutted in fire resulting loss of records / computers containing accounts. In such cases the task become more tedious since relevant records in support of loss cannot be produced. In such cases second line of documents has to be obtained from various other sources. 3.5. Damaged stock should not be removed before arrival of surveyor Damaged stock should not be removed till arrival of surveyor or preliminary surveyor for stock taking of damaged as well as saved stock. Some people remove damaged stock for cleaning and separation of stock from the shop or factory and thus causes confusion in assessment of loss. Without personally verifying the situation of fire after fire, the surveyor is put to difficult situation where he may not be in a situation to justify the huge claimed loss. 3.6. Cause of fire Cause has to be covered into the policy. There are certain exclusions which are not covered in the policy. Fire should not be spontaneous combustion like in cotton due to say heat or friction. 1. Fire has to be accidental in nature. 2. Cause of fire has to be established. 3. Cause of fire may be say accidental electric short circuit in transformer or main switch board. 4. Cause of fire is mentioned in the fire brigade report. 5. Cause of fire should not be mysterious, other wise the claim may be rejected. 6. It may be noted that the place where fire originated cannot be compensated. 7. As a result of fire whatever other damages took-place are covered in the policy. 8. Depreciation is deducted for period of use depending on life of asset.

3.7. Loss due to water is also covered in fire policy In case of fire, loss due to fire can be very little like in case of paper industry, but loss due to water sprayed by fire brigade can be huge loss. Such losses are not due to fire but because of water sprayed by fire brigade are also covered in the fire policy.
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Loss due to rain / water inundation / flood is also covered in fire policy. During the rainy season loss can take place in basements due to inundation Loss due to seepage of water is not covered in fire policy.

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3.8. Fire / water loss in paper industry It has been noticed that scrap value of paper industry is very different. Paper damaged by water starts stinking very fast and many policy holders wants lifting cost since it cannot be kept and neither used. The fact is just the opposite. In paper industry the scrap is made into pulp again and people are encouraged to walk through the pulp to break the fibres. Water is added to make it pulp. You sell old news papers at Rs, 5.00 per k.g. And needs to be made pulp by tearing and adding water. The damaged papers can be easily sold for Rs. 5 to 7 Rs. Per k.g. Where as cost of fresh paper is about Rs. 12 to Rs. 15 per k.g. Thus there can be recovery up to 50% of cost even if paper is damaged by water or fire. 3.9. Loss due to smoke or soot in plastic or garments or fabric In case of plastic items there may not be loss due to direct fire but actual loss may take place due to heat. Plastic items are badly affected by heat giving way to size and cannot be used for practical purpose for which it is made. Loss is more to computers due to heat. Similarly in case of garments industry huge loss can take place due to smoke and soot. Especially synthetic garments will badly get affected by soot which is a form of carbon and cannot be washed off the fabric inspite of dry cleaning. More over, smoke smell may not go with fabric washing. Thus huge loss may take place though on the face, cloth may seem not affected by fire. Even small hole is enough to spoil the whole piece of garments or fabric. Due to spraying of water by fire brigade colour bleeding may tale pace rendering the fabric useless. How ever it may be noted that like paper, fabric or garments also have salvage value and there are second market in every city. Even fabric cutting can be sold as scrap. In some cases value of fabric may be very high because of export order and special manufacturing but the same cannot be used in the local market in case of even small damage. The salvage value will be very less and same as that of any ordinary fabric. Loss due to fire is say about 25% but another 75 % of loss is due to spraying of water by fire brigade. Loss can be reduced by way of use of foam or powdered anti fire chemicals to stop fire by restricting supply of oxygen. 3.10. Moral Of Insured And Financial Soundness It is necessary to check whether the insured had majority of able to sell stock or he had huge bank liability and not being able to pay or he was insolvent in the market since he could not pay his creditoRs. In such circumstances the insured may be beneficiary of fire and he may have manipulated the fire to benefit himself out of the insurance claim. Such cases need to be investigated and substantiated for any foul play. 3.11. In Case Of Doubtful Fire The preliminary surveyor locally appointed pending appointment of final surveyor may raise doubt on the cause of fire. The left over burnt debris may not justify huge claim by the insured. The insured may have lodged several claims in the past causing doubt on the claim. Financial bankruptcy may justify investigation. Loss may have taken place immediately after taking insurance policy. The cause of fire may be doubtful. Terms of appointment of the investigator may be spelled out. The investigation report may be considered by the final surveyor in his report.

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Report may be sought from forensic department to find out if the fire is manipulated. 3.12. Technical report from another specialist Technical report from another specialist e.g. Engineer having experience about possibility or repair or alternative good use Of the damaged articles. This way loss can be reduced. 3.13. Assess loss even if claim not admissible Some times surveyor may find that the fire or burglary loss not covered in the policy due to any reason what so ever including he is not convinced about the fire or proper books of accounts in support of the claim has not been produced by insured or insured has not cooperated in assessment of loss. In such circumstances at a later date the insured may win a case in the court after a few years of legal battle. It may be too late to assess the loss after passage of long time. The court may end up giving order that the claimed amount may be paid to the insured and to avoid such court judgements the surveyor may assess the loss to the best of his capability should the claim has to be paid in future due any reasons what so ever. The surveyor can even state that assessment of loss should not mean that the claim is admissible under the policy. 3.14. Collapse of roof in fire In has been seen in many cases that fire causes intense amount of heat and the roof collapses causing bigger loss. These roofs are mostly settled on iron angles supporting stone slabs. Intense heat in the closed godown or factory causes the iron angles to bend and the roof collapses. As result the loss increases and it becomes more difficult to take out the saved stock. Normally roof would not collapse in RCC constructed rood. It is better to avoid keeping expensive stock in such angle supported roof godowns. 3.15. Certain allowable exclusions for self insurance Under standard fire policy it is allowed not to take insurance coverage of storm, tempest, flood, inundation risk ( STFI) as well as risk of riot, strike, malicious damage and terrorism damage (RSMTD). It would be a case of self insurance if these coverages are not taken. The insurance premium would be less but at huge risk of self coverage in case of loss. One should not step into the trap of less premium by excluding these risks in the fire policy. 3.16. Minimum deductible and voluntary deductible 5% of each and every claim will be deducted subject to minimum Rs. 10,000.00 in respect of each and every loss due to act of god (AOG) perils like lightening, STFI, subsidence, landslide and rock slide covered under the policy. Similarly one may have to pay less premium by way of discount if he opts for voluntary deductibles under fire policy and the minimum deductible amount can be as low as Rs. 10.00 lacs for act of god and Rs. 5.00 lacs for other perils.

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3.17. Mid-term change in sum insured In case of fire policy it is allowed to increase or decrease sum insured, while the policy is in force. 3.18. Add on covers By payment of extra premium one can take certain add on covers along with standard fire policy. Some of these are as follows: 1. Deterioration of stock in cold storage due to power failure as a result of damage at the insured premises of power station due to insured peril. 2. Deterioration of stock in cold storage due to change in temperature arising out of loss or damage to cold storage machinery in the insured premises due to operation of insured peril. 3. Spontaneous combustion. Such losses may take place in cotton factories, chemical factories etc. Where fire can take place on its own fermentation, naturally heating or spontaneous combustion. Loss is allowed only if fire has taken place and not otherwise. Insurance premium is charged as per category of goods. For category i goods insurance premium is minimum and highest for category iv goods. 4. Omission to insure addition, alteration or extension of buildings, machinery, plant and other contents which the insured may erect or acquire at a later date in the factory during policy period. 5. Earthquake (fire and shock). Our country has been divided in four earthquake zones and accordingly insurance premium is charged. Insurance premium is highest in zone i and lowest in zone iv. 6. Loss due to leakage and contamination. 7. Additional expenses of rent for alternative accommodation. 8. Start up cost necessarily and reasonably spent by the insured consequent upon a loss covered by this policy.

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3.19. Loss assessment can never be exact Especially in case of fire loss exact assessment of loss is not possible in most of the cases. The loss is assessed on approximation basis on the basis of physical verification made and proof collected from relevant books of accounts and circumstantial evidences. E.g. In case of fire in a garment shop or factory one cannot identify the item from the burnt fabrics or garments. Exact tally cannot be made to the stock register in a going concern. Effort is made to reduce the error in calculation by estimating the quantity affected by fire. One has to finally rely on the books of accounts after being satisfied that loss had taken place. Even from burnt fabric/garments one cannot make out from the ashes mixed with mud/water how much was the exact quantity before fire.

3.20. Fire policy by transporters Fire/riot/ strike/burglary policy can be taken by transporters as well covering risk of fire against goods held by them on behalf of consignor by charging freight and insurance. Big transporters also provide storage facility to many a customer at their godowns by charging storage charges. In case of fire the transporters can lodge claim against the insurance policy taken by them. For cost of goods the consigner can be approached for bills. 3.21. Fire season, high voltage and its after effects There are very high probabilities of fire during Diwali, Vishwa- Karma Puja. During winter fire takes place due to excessive use of heaters and heat convectoRs. Fire due to high voltage from electricity power station is very common during summer. Normal voltage is 180-280 and fire can take place if voltage is say 350-400 sometimes at when the factory is closed. In such cases fire take place due to high voltage. Nothing can be saved if such high voltage is at day time when the factory is running. Due to high voltage whole of the factory can be gutted in fire. Adequate fire safety measures by way of fire safety audit, fire extinguishers, checking loose connections, avoiding sparking in electric joints, weak insulated / molten / old / naked wire. Inflammable items should not be kept near electric points / bulbs. As a result of fire insurance companies will indemnify the depreciated actual cost basis loss of machines and stock, but what about loss due to stoppage of business, breaking of link with suppliers, payment demand from suppliers, not receiving payments for supplies already partly made, business restarting expenses, over heads, loss of profit, payment of interest and instalments to bank, new machines have to be bought at higher prices leading to financial hard ship. One has to take utmost care in case of use of highly inflammable fuels, boiler or heating of fluids at very high temperature. Leakage of these items can cause immediate fire. In case of leakage of acid or heated fluid or petrol you have no way but to run for life, instead of fighting fire. This type of fire is almost impossible to stop till factory turns to ashes. Once fire catches in plastic items or paper or clothes, fire keeps on reigniting even after a few days of fire fighting efforts.

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3.22. Valuation for insurance on depreciated value or reinstatement value of machines Value for insurance of building, new machines, furniture & fixtures can be considered at depreciated value or at reinstatement value. E.g. A new machine costs Rs. 10.00 lacs to the insured and he can insure it for the same value. Next year he may consider say 10 % depreciation for it and the value comes down to Rs. 9.00 lacs. How ever the new machine price may have increased to Rs. 11.00 lacs since there is increase in dollar value or increase in excise duty or increase in price by supplier. In such a case the insured has an option to insure it for depreciated value of Rs. 9.00 lacs being market value of similar type of machine or insure at reinstatement value of Rs. 11.00 lacs and pay insurance premium accordingly. In case he wishes to insure it at depreciated value, in that case his value as per fixed assets schedule may be enough and accordingly pay less insurance premium on Rs. 9.00 lacs. On the other hand he may opt for reinstatement value and declare to the insurance company his intention t insure value of Rs. 11.00 lacs being cost of similar new machine without depreciation and accordingly pay insurance premium. In such a case he has to provide valuation and intention to take coverage of new machine apart from payment of premium on reinstatement value. Suitable present day quotation and valuation report may be taken from an engineer or valuer. Otherwise it would be presumed that the renewal has been done at depreciated value as per his fixed assets schedule. Similarly buildings can be insured at depreciated value or at reinstatement value. Over a period of time building starts depreciating but cost of material and construction cost keeps increasing. After say 10 years the depreciated value remains half but reinstatement value increases to double of original cost due to increase in labour cost and cost of cement, bricks and iron bar. These factors need to be considered at the time of fresh or renewal of insurance policy. Suitable valuation report from architect or civil engineer may be taken for reinstatement value. It has been noticed that renewal of insurance is a routine matter for most of the companies. Premium calculation is made and cheque is given to the agent. Where as before policy expiry takes place discussion should be made by insured for proper coverage, technical details should be discussed, additional documentary requirements, valuations for premium calculation, addition of any new premises, stock insurance at higher value considering business expansion plan, additional risk coverage, valuation of building, uninsured items bought during the last year etc. Renewal of insurance should not be routine job but it should be considered as risk management. Should unforeseen circumstances results losses due to flood, earth quake, riot, fire in the premises, burglary, theft by staff etc. is the insured premises ready for such calamities and adequate coverage has been taken in the insurance policy. Normally such meeting takes place only after loss takes place and insurance agents, technical persons, consultants are called for guidance till next mishap takes place.

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3.23. Ask For Terms And Conditions A The Time Of Renewal To avoid confusion one can ask the insurance agent to bring latest terms and conditions to the standard fire policy to verify coverage allowed and exclusions made. Every now and then changes are made by insurance companies in the policy and its terms and conditions. The insurance policies and terms and conditions are filed with the IRDA for approval. These cannot be changed at will later on. Verification of terms and conditions in advance ensures proper decision. E.g. It may be possible that in one year terrorism cover had been offered with payment of extra premium while storm was automatically included in the standard policy. In the second year terrorism is automatically covered in the standard policy but storm is separately covered on payment of extra premium. In the first year you suffered loss of say Rs. 5.00 crores due to terrorism and did not get claim in spite having standard insurance policy due to not paying additional premium for terrorism. In the second year you suffered loss on account of storm of Rs. 4.00 crores and you again did not pay additional premium for storm coverage. Both the claims were repudiated on the grounds of non coverage worth Rs. 9.00 crores while you had standard fire policy. 3.24 Fate Of Rejected Claim After 12 Months. After liability of a claim has been rejected by insurance company and 12 months have passed since then, in such cases insurance company will not be liable for such claims unless any suit has been filed before expiry of 12 months. For example insurance company had repudiated a fire loss claim on 12 1-2007 and the insured did nothing in between except say writing letters or meeting insurance company officials till 12 -1-2008. He did not file any suit in the meantime neither filed for arbitration, and then such claims will be deemed to be abandoned and cannot be revived. However it is a matter of interpretation whether the insurance company is legally correct in restricting limitation period in violation of contract act which allows three years limitation period. Chapter 4 4. Requirement of papers in case of claim of loss due to flood A. Re: lost items

1. Details of loss in the following format: Sl. No. Item Qty. Value Amount ---------- -------- ------- ---------- ------------

Purchase bill Proof of Extent of --------------- payment loss -------------- --------------

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In flood loss, it may be possible that some items were fully damaged and some are partially damaged needing repair or cleaning. Exact calculation of loss may be made of the damaged items. 2. Quotation for repairing of fully or partially damaged items. Surveyor can ask for quotation of repairing of partially damaged goods. If the goods are repairable then it is not necessary to pay the full claim amount for those goods. It helps in minimisation of loss. In case of food items, loss due to flood may be minimised by taking quotation from cattle feed suppliers who may buy them for cattle. For other items there are many scrap Dealers who find them good bargain at cheap price. Electrical items may be repaired after spending some amount and then sale them as second hand. Fridge TV. Etc. May be easily repaired to make them useful by certain category of customers who are ready to pay less price for them. 3. Technical report of fully damage items. Surveyor may take technical report of damaged items in case of electrical or mechanical goods that they are beyond repair. 4. Details of damaged stock / item / rate / quantity / bills / payment / packing / where kept. Detail of items damaged is taken from the insured e.g. When purchased, how much payment is made, from whom purchased, cost of the items, total value of the items etc. 5. Detailed statement of how the loss took place. Exact cause of loss may be arrived at after in depth inquiry about the loss. Whether there was rain in that area may be supported by news paper reports as well. . 4.1. Loss due to flood/ inundation Loss due to flood or inundation is covered under fire clause. Separate policy for flood is not issued by insurance companies. Should there be loss due to flood, in that case damaged stock to be separated. Steps should be taken to minimise the loss. The damaged food can be used for cattle feed and thus loss can be reduced. Cost can be verified from bills. Photographs can be taken of the damaged stock. Some of the damaged stock likes soap, washing powder etc. Can be sold at reduced price and the insured himself can be one to offer best price. A letter can be signed by the insured to accept the damaged stock as per agreed rate and value. Balance value can be allowed as loss. In support of flood, copies of news paper/ meteorological report can be taken. Else photo graph can be taken to establish flood.

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4.2. Flood / inundation due to blockage of drain What do you think caused flood in Mumbai in the year 2005 and 2006, its due to blockage of drains. Drainage system in cities fails during sudden heavy rain and you are prone to flood losses if you factory, shop, house is on the ground floor. These are the days of climate change and rain may be very heavy at times and above average rain may cause more inflow than the drainage system can handle. More over before the rain season inspite of all claims by municipalities the drainage system chokes and caused rain water to over flow on the roads leading to factories, shops, houses. In 2006 flood came in Gujarat causing huge loss due to flood. There is hardly any state including Bihar, Tamilnadu, Andhra Pradesh, Uttar Pradesh, Orissa, Assam, and West Bengal which is immune to flood during rainy season. . Nothing can stop rain water once it over flows drains or riveRs. Not to mention basements and low lying areas are first victim of inundation. During rainy season even if you find heavy rain may cause flood, you have no way of removing stock, machines, and house hold items to safer areas. Flood does not spare any one, be it poor or rich. Flood/inundation takes place due to blockage of drains and you do not have any way to cover you against flood on Saturday or Sundays. As such planning against flood loss is very important and this way you at least safe guard against loss of value of items insured. There is barely any cover available to small policy holders against consequential loss due to flood e.g. Loss of business, loss due to depreciation of insured items, loss due to disruption of business or loss of life etc. As such taking coverage against flood is very important. In shop keepers policy, house hold policy, coverage for flood/fire is bundled together in the policy.

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Chapter 5 5. All risk shop keepers policy These days insurance companies provide various all risk policies, such as, shop keepers policy which is an all risk policy. The benefit of all risk policy is that they cover various risks which are otherwise difficult to get and are more expensive. Shop keepers policy provides among other things coverage of theft, fire, terrorism, infidelity of staff, cash in safe etc. One does not have to take separate policies for burglary in which coverage is not given for theft without use of force, whereas in shopkeepers policy theft is automatically covered. The all risk policy is inbuilt one to cover several risks in one policy. Thus lot of time and energy is saved as a result of taking all risk shop keepers policy. As far as possible one must try to take all risk policy in place of separate policies. Now a days shopkeeper policy can be issued for sum insured up to Rs. 1.00 crore. This policy can also be taken by shops that have godown facility as well. Small factories cannot take this policy since they are not shop keepeRs. 5.1. Precautions by shop keepers/ factories Most of the shop keepers normally use shutters to close their shops. Burglaries from shops are common affair. It has been noticed that at night time a tempo or truck is parked out side the shop. Later on the shutter is pulled apart by tying a rope to the hook of the shutter and tied to the truck and the shutter breaks apart. Other wise a jack can be inserted in the gap of the shutter and floor. The jack can lift the shutter on winding it up like jacking up a car. The shutter can be protected by fixing magnetic catch to activate siren or phone in case of unauthorised opening of shutter. But what if the shutter is cut from the middle or plate is taken out to enter the godown. In such cases movement sensors costing not more than Rs. 10,000 can be used linked to mobile phones/ siren. If some one enters the premises after the system has been activated, then on unauthorised entry siren may blow or one may link it to mobile phone for warning of burglary? These system can also be used effectively by factories in remote areas to safe guard their godown or plant. Mere security guards are not enough unless supported by electronic security systems. Even 5.2. Loss in electronic shop In case of electronics items affected by water/fire, stock taking is the first step. Stock not affected has to be separated from damaged stock. Then separation has to be made from the angle of fully damaged and the one that can be repaired. Effort can be made to get them repaired to minimise loss. Estimate can be taken from repairing shops. What ever cannot be repaired has to be viewed from the angle of scrap value. The insurance company is not going to lift the damaged stock but the insured has to make efforts to sell the scrap. Insured has to act as if they are not insured and take all possible reasonable what they would have done had no insurance policy been there. Finally cost of repairing may be allowed as loss so long as it is justifiable. Scrap value can be different for

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different materials. Certain items can fetch very good scrap value while some may not fetch any scrap value. Supplier can be approached for providing damaged parts. Advertisement can be given in news paper to dispose off damaged items or near by people can take interest in buying the damaged stock. 5.3. Loss of stock from shop under section I In case coverage has been taken under section I for building as well as contents (excluding money and valuables), then loss of various items including stock due to theft without forcible entry is also covered in the policy.

5.4. Loss of stock from shop under section ii Against house breaking risk for contents (excluding money and valuables.) Coverage has been given for loss of stock excluding valuables due to burglary by forcible entry or exit only and not by theft without using force. 5.5. Loss of cash from premises in shop keepers policy In all risk shop keepers policy, loss of cash has been covered including loss due to misfortune. At night time it is not necessary to keep cash in safe, cash can be kept in steel cup board/ steel cash box under lock and key. But loss of cash from unattended vehicle is not covered in the policy.

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Chapter 6 6. Requirement of papers in case of cash in transit loss claims A. Re: cash lost 1. Denomination of cash lost. Detail of cash lost in denomination wise must be taken by the surveyor. 2. Proof of cash sent. Proof of cash sent must be checked by the surveyor e.g. Cash book/cash inward and outward register etc., bank pay in slip if cash was to be sent to bank, cash voucher signed by cash carrying employee. B. Re: employee 1. Copy of attendance register/appointment letter/salary certificate. Detail of employee who was carrying the cash. C. Misc. 1. System of collection and depositing cash. What is the system of carrying cash from one place to another? Was the same routine route followed every time or some changes were made in the route. 2. Detail of box/bag in which cash was carried. Colour/size (l x b x h)/lock/make/volume/weight Volumetric analysis of the container in which cash was carried should be made to check whether the claimed cash can easily be accommodated in the container as specified by the insured. 3. What safety measures were taken as per insured while depositing /carrying cash. Proper safety measures have been taken by the insured or not? While carrying cash, the box containing cash was chained up or not? Whether any security guard was accompanied while carrying cash etc. 4. Copy of security investigation report conducted by the insured, if any. Copy of security investigation report may be provided to the surveyor, it helps the surveyor in knowing the exact position/security measures taken while carrying the cash. 5. Copy of R.C. Of vehicle in which lost cash was carried. Exactly how many staff was present in the vehicle at the time of incidence and their statements about how the loss took place. . 6. Detail of route taken by the insured on the date of loss.

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6.1. Cash in transit / money insurance justification In case of a claim, presentation of cash book, voucher duly signed by the person carrying cash, employment proof, balance cash in hand, how cash was accumulated, cash denomination, under what circumstances loss took place. Volumetric analysis of cash in bag etc. Total cash turn over till the time of loss is of immediate significance. Financial position of insured to rule out wrong claim intention or exaggeration of claim amount. 6.2. Money should be in custody only In case of loss to money under money insurance money has to be in the hands of the employee in transit. Cash must not be lost from unattended vehicle. 6.3. Cash in transit / money insurance policy In case of cash in transit policy care has to be taken while mentioning mode of transportation of cash. In case of mention of car/train/bus/three wheeler as mode of transportation, then cash transported on cycle cannot be treated as compliance of policy terms and condition. Carrying of cash in bicycle had increased chances of loss in transit and as such claim can be rejected by insurance company. 6.4. Cash carrying staff Similarly, these policies find mention of person who can carry cash. If cash was to be carried by cashier, in that case cash carried and lost by some other person cannot justify coverage of loss. So cover may taken for any one employee of the company in place of restricting only to cashier. . 6.5. How cash to be carried how and by whom At the time of taking insurance policy, care has to be taken as to how and who will carry cash apart from cash to be carried in bag or brief case. Coverage should be sought as Wide as possible and not restricted one. 6.6. Proper coverage of office/ residence/ bank and vice versa Cash from office or residence to bank or vice versa or cash from residence of insured to bank or office and vice versa should be clearly mentioned. Whether intention is to cover all banks or particular one needs clear mention. In case of cash sent o a bank not covered in the policy will be difficult to cover in the event of claim. 6.7. Route of cash carrying should be approximately straight

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Cash from office to bank cannot cover a route, if the employee was going to some other place other than bank. 6.8. Keep enough balance for year round cash in transit Estimated total amount of the money in transit per annum should be as wide as possible to cover any loss and not be out side estimated amount of cash in transit by wide margin. Calculation should be done from time to time to find out if total estimated amount in transit has exceeded and additional amount is further required under the policy. The insured would be within his right to get a claim even if total turn over has exceeded the estimated turn over at the time of loss during policy period by paying additional premium for the extra turn over. 6.9. Heavy cash break the trip to spread cash risk Effort should be made to send cash to bank not in one trip but broken in more than one trip, if more cash than permitted amount at one time under the policy is required to be sent to bank. E.g. In case of limit of any one loss of Rs.15.00 lacs, Rs. 30.00 lacs can be sent to bank in two rounds of Rs. 15.00 lacs each time in place of one trip containing Rs. 30.00 lacs beyond policy condition. 6.10. Over night cash in safe is also covered in cit policy In case of cash in transit policy, over night cash in safe is also covered against loss due to burglary. 6.11. Infidelity of cash carrying employee Infidelity of employees carrying money is also covered in the policy. 6.12. New branch not added in policy In case of change of address or new branch being opened, in that case immediate information should be given to insurance company otherwise loss concerning such branches would not be deemed to be covered in the policy. 6.13. Loss from unattended vehicle Loss from unattended vehicle is not covered in the policy. E.g. Insured had gone to another office while keeping the cash in scooter dicky or car. On return he finds that the cash from the unattended vehicle has been stolen by breaking the dicky or glass. Such losses are not covered in the policy on two grounds of not taking reasonable care as well as loss from unattended vehicle. 6.14. Risk of cash in transit

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To avoid risk of heavy or regular cash dealing with bank, these days private banks are offering cash remittance or withdrawal facility at nominal charges at your door step. The security agency hired by the bank would visit your business premises regularly to collect cash for deposit in the bank. The receipt issued on behalf of bank by the security agency would be valid for immediate cash credit in your bank account in case of any mis happening in transit. This way one can avoid cash in transit risk as well as save man power. Insurance policy is taken by the cash carrying security agency covering transit risk at nominal premium in view of huge cash in transit at any moment of time spread over the whole country.

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Chapter 7
7. Jewellers block policy This is another all risk policy for jewellers who are covered for various risks including theft bundled in one policy. Several risks are covered under one policy. 7.1. Only cost is compensated In case of loss, the insurance company is liable to compensate only up to the extent of cost of the stolen gold. Say loss took place in March 2008 of 1 k.g of gold which costs the policy holder Rs. 6.00 lacs in the year 2005 as per purchase bill. The insurance company can pay claim up to Rs. 6.00 lacs only though the present price of gold may be Rs. 12.00 lacs for 1 k.g.

7.2. After loss settlement recovery goes to insurers In case of recovery of say 1 k.g. Of gold by the police after settlement of a claim, the insurance company will take possession of the same from the police, in view of subrogation rights taken from the policy holder at the time of settlement of claim.

7.3. Safe of standard make Normally in the insurance policy or proposal form it is mentioned that stock shall be kept at night in safe of standard make. What is standard safe is something debatable and not defined any where. But the safe should be burglar proof and should be able with stand break attempt. It is not necessary that only godrej safe are burglar resistant. 7.4. Storage of stock in safe as per proposal form In the proposal form if the policy holder has mentioned that he has a safe of godrej make and at the time of burglary it is found that he has say local kamal make safe which was broken and burglary took place of gold jewellery. In such a case the insurance company may be within their right to reject the claim. What is mentioned in the proposal form and being part of agreement cannot be allowed to be altered to advantage of the insured. As such correct disclosure should be in the proposal form while taking insurance policy. Similar judgement was given by the supreme court in the case of Oic vs Samayanallur primary agricultural coop. Bank case ref. Jt1999 (9) sc9. 7.5. Stock kept out side safe at night There is difference between silver jewellery and silver items. Bulky silver items or other stocks including silver jewellery or stones are normally kept by jewellers out side safe at

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night time. Suitable cover should be taken for covering such stock. Stock kept out side safe can be in the window display or in the counters or in drawers or cupboards. Specific cover is available for stock in the display window. Similarly in the proposal form suitable mention should be made for stock out side safe at night time for stock kept in the counter, drawers and cupboards. 7.6. Proposal form is basis of insurance It may be noted that proposal form is the basis of contract if the insurance policy is issued. In case of any interpretation of coverage, proposal form is referred as basis. If it is mentioned in the proposal form that whole of the stock other than gold jewellery shall be kept outside the safe, in that case insurance company cannot repudiate claim pertaining to say stolen silver articles or of stones not kept in the safe. 7.7. Safety features of camera for jewellers With advancement of technology feature of live camera and its continuous recording for 24 hours in the computer are no longer expensive matter. Even six cameras can be simultaneously recorded for 7 days in the computer having say 160 GB memory hard disk. Total system does not cost more than Rs. 1.00 lac and all unmanned. Value one k.g. Of gold is now a day about Rs. 12 lacs and average stock of 5 k.g would require not less than Rs. 60 lacs worth of stock apart from show room cost or rent. Jewellers are always target of burglary since ages. Additional safety feature like recording camera should always be welcomed by jewellers Even 24 hours recording may be made by a small recording camera to watch unwanted movements by security guard or some one approaching the show room from the rear side. One watch man may be kept on duty inside the show room to be relieved only in the morning after the show room is opened. 7.8. Discount for safety and security. One should not resort to obtaining unnecessary discounts for security measures like 24 hours watch man, CCTV etc. While one may have CCTV but it may not work on the day of burglary due to maintenance problem. The security guard may not be present on a rainy day. Thus obtaining small discount in insurance premium may become a cause of irritation if claim arises when there is violation of security condition as per insurance policy or as per proposal form filled by the insured. 7.9. Stock inside grill but not in safe Many a places in India jewellers or security companies have the practice of keeping gold stock or cash in side strong grill. They may not keep stock in the safe. The stock kept inside the grill is equally safe as if kept in a strong room. Suitable declaration if made in the proposal form may be enough to cover such stock in the insurance policy. Other wise

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insurance companies may not accept the claim. As per proposal form or insurance policy stock of gold jewellery must be kept at night in safe only.

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7.10. Safe is unsafe without latest feature Thieves keep on attempting jewellers all over the country. They are one step ahead of security measures. They join hands with other anti social elements to upgrade their knowledge. But they can be beaten by technology only. Stand alone safe have been broken like piece of paper by inserting heavy duty hydraulic jacks or by hammering on door ends to make the side safe wall bow like and thus give way. With the help of high R.P.M. Cutters the safes have been cut from rear weak side. As such it is very important to add features like motion detector or magnet catch in the safe to activate siren/ mobile phone warning / Security Company. 7.11. Safe should be fixed in the wall Safe is more of safe from the front side but not on sides. Safe derives its biggest strength once it is fixed in the wall from three sides. Such safes cannot lift and stolen. Safe if fixed in the wall makes it much stronger since cutting it from front side is quite difficult. Front door metal used is almost cut proof. But on sides there are only two plates of metal sheet and RCC in between. Front safe door contains no RCC. Once fixed in the wall, its side wall cannot be hammered to a bow or cut to make gap. The better the material used in reinforcing it in the wall, the stronger it will be. The rear and two side walls may be reinforced with good quality RCC containing metal pieces as well. 7.12. Safe is safer if there is no protruded side Safes should be plain on front ends and not protruded curves. These can be hammered to a bow if ends are protruded. Similarly there should be no gap in between the door or safe wall, so that hydraulic jack ends cannot be entered in the gaps to tear off the safe door. 7.13. Safe number lock not working, then its not safe. Many a safe are old and one lock or number lock does not work. Such old safes are not trust worthy and fails basic requirement of burglar proof safe. Using such safes for keeping valuables is invitation to burglary. 7.14. Motion detector at night Motion detectors in the safe room or in the show room are good safety measure. The same can be connected to the cell phone of owner or employee who stays nearest. Mere connecting the motion detector to sire can have nuisance value. But link to cell phone may go a long way to protection. 7.15. Guard to protect factory at night time During holidays and night the factory is protected by employing guards through security companies. Now a days involvement of guards in burglary is another cause of burglary. During night time camera can be fixed at a height having focus on the main gate, and

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other three corners of the factory. Power to the camera can be given by battery and linked to computer for recording. Leaving night guard to talk to strangers at night or they commit nuisance in the factory or sleep at night time can be checked by way of camera recording. Camera can have good effect on the security guard to act diligently at night. 7.16. Storage of stock in almirah Godrej iron store well or almirah having a locker in the middle used by normal house hold cannot be termed as safe and burglar resistant by no stretch of definition of safe. If these godrej almirah have been mentioned as safe in the proposal form, then its mis declaration and such claims may be rejected if loss takes place. It is clearly mentioned in most of the policies that the claim of loss from something which is not safe cannot be entertained even if policy issued. 7.17. New safe bought If during the policy if a new safe has been bought, in that case intimation may be given to the insurance company about the new safe and obtain suitable endorsement to the policy. The old insurance policy does not cover loss from the new safe how so ever strong it may be. 7.18. Stealing by operation of key If loss takes place by opening the safe by using the key of safe, in such a case the claim would not be entertained. E.g. Key to safe is kept in the show room during day time. The owner goes out of the show room for 5 minutes leaving the key in the show room and some one takes the key and steals gold. Such a claim is not admissible unless key has been taken by force or by threat to life. 7.19. Loss due to infidelity of employee In jewellers block insurance policy infidelity of employee if excluded, in that case loss in which the employee is involved will not be covered under the policy. 7.20. Stock to other cities for sale or return Jewellers do carry gold jewellery to other cities for sale or return. In case of any loss of gold jewellery due to dacoity, or other wise, proper challan should be there, mention should be there in the F.I.R., the other party two whom these were shown must confirm presence of such gold jewellery to justify a claim. 7.21. Stock in another safe not in strong room At the time of taking policy, the insured makes mention of safe in the strong room but loss may take place from another safe not in the strong room. In such cases care should be taken to mention about the safe out side the strong room for coverage in the insurance policy. Other wise the claim would not be entertained.

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7.22. Stock left in unattended vehicle Stock of gold is normally carried in a vehicle from one place to the other within city or outside the city, it is very important to note that gold must not be left unattended. Such a claim would not be considered by the insurance company. Such a case of loss is clearly covered under exception to the policy.

7.23. Basis of valuation In case of claim under jewellers policy, the basis of valuation is normally cost plus 10%. 7.24. Important exclusions in jewellers block (jb) policy 1. Stock not in custody of directors, is not covered if stock is left unattended. Stealing from unattended vehicle is not covered in the policy. 2. Stock at premises other than that of broker is not covered in the policy while not attended by the broker. 3. 4. 5. 6. 7. 8. Loss in due course of cleaning. Loss discovered during stock taking. Loss while the property is in public exhibition. It needs separate insurance policy for such exhibition. Loss due to infidelity of staff, cutter, customer, angadia, gold smith, family member of insured. Loss by opening of safe by use of key/ duplicate key unless obtained by force. Loss by mysterious circumstances.

7.25. Same policy for diamond manufacturers as well as jeweller showrooms. Unfortunately requirement of jewellers and diamond manufacturers are different but they have common policy. As such it is best to enclose a separate letter specifying their exact risk coverage requirements. In case of jewellers their gold smiths do not work for them exclusively but for any one who gives them work. The gold smiths keep changing and may be in different towns as well. The gold smiths are completely in unorganised shape. Verification of bills of gold smiths after lapse of some time is very difficult due frequent changes in number gold smith who works for the jewellers, rendering it futile to cover them within city or out side city non dedicated, not in house gold smiths. Many a times jewellers make purchases including from customers against cash of old gold jewellery from not very identifiable sources. The purchases increases stock at risk but cannot be confirmed by surveyor in case of a claim. More over they do not maintain piece wise stock register most of the times. Whereas diamond traders are in organised sector. They have full control over the job worker firms who either work in the insureds premises or in some other premises

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exclusively for them. Proper bills are raised and payments are made cheque after deducting TDS. The rough diamonds are properly accounted for by way of return of polished diamonds and rejections supported by yield mentioned in detail.

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Maintenance of daily stock register containing quantity, quality, value, details of sales and purchase is very important for jewelleRs. Otherwise one cannot make out how much stock was with the jeweller at the time of loss. Insurance company is not responsible for unaccounted gold stock. Normally it is noted that jewellers do not maintain piece wise stock register. They would simply maintain stock register on totality basis e.g. Total stock weight say 5.00 k.g. Of 22 carat or 20 carat. They would have tags mentioning item, weight of gold, purity, weight of stone with each piece of jewellery in display and in safe. In case of burglary of gold jewellery it cannot be expected that the thief would leave the tags. In such cases if partial loss takes place, then balance stock saved has to be weighed to find out how much is stolen. In case whole of the stock has been stolen in that case volumetric analysis would be required to find out what was the total stock at the time of burglary. 7.26. Common tricks Guarding one self against these common tricks can save you from loss of valuables, laptop, jewellery, cash in transit 7.26.1. Dirty material on your clothes The cheat can put some dirty material on your clothes and force you to go to the nearest place for cleaning. One of the cheat may also offer to help you clean. In this process his other accomplice may run away with the bag containing valuables, while you are busy cleaning yourself. 7.26.2. Left side tyre puncture indication While you are driving the car and stop at a red light, cheat can knock on your left window to say that the front left tyre is deflated. You cannot see the front left tyre seating on your steering and there is no way but to come out and see it for yourself. You would not like to drive punctured tyre, since it may cut the tyre and tube. These reactions are spontaneous, forcing you to stop. More over the front tyres are always a little deflated due to weight of engine. Mind it, another cheat is also on a scooter on your left, while his accomplice is just behind your car awaiting you to get out to inspect. The moment you get out of the car the cheat opens the right driving side door or rear right door to take out the brief case and run on the opposite side. You realise the theft only after you have settled in the car and notice the missing brief case. In the mean time the cheat has already vanished with the valuables and the scooter borne cheat plus who warned you are also vanished. 7.26.3. Forced accidents to stop you If you are smart enough not to come out of the car, the cheat may finally cause small accident with your car and force you to stop. Once you get out of the car, his accomplice may take out the bag containing valuables from you car. Finally the scooter borne cheat may simply compromise and let you go. Later on you notice the missing bag.

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7.26.4 brief case on rear seat Leaving brief case on the rear seat is what most people do. This delays discovery of missing brief case and gives ease of stealing to cheat by opening the rear door or from the rear side glass. Brief case should always be kept in the middle of two front seats. If you have another partner with you in the car the brief case is within his reach or if you are alone, then it is within your eye sight.

7.26.5 throw cash on road to cheat you If you are walking on the road with valuables, the cheat would spread cash on the road/ floor just ahead of you to notice. How can you step on cash or ignore cash. You fall in the trap of greed for a second and that is what the cheat is looking for. You pick up the road cash, he picks up your brief case and coolly vanishes in the crowd. His other accomplices make sure you do not chase him. 7.26.6 not safe in car parking also You carry valuables and you are under surveillance of the gang of cheat. The cheat are also professional and make dry run on the routes taken by you. Thus they familiarise them selves with your habits. You may get down from the car or bus to ease your self or to buy cigarettes or to take food or park the car in parking area. The cheat awaits you commit the error and opens the car door or breaks window glass to commit the theft. 7.26.7. Tea with sleeping chemicals You are smart enough not to leave the valuables unattended while you are in a bus. The cheat may befriend you. You go to take tea in a stall. The cheat brings you tea after pouring chemical in the tea to make you sleep after some time. You get up in the morning and notice that you are at the farthest destination of the bus or you are sleeping alone in the bus without your valuables. In another variant, the cheat may come up to your hotel and stay in the same hotel having become your friend in the journey. The cheat finally offers you something to drink or eat food laced with chemicals. You sleep in the hotel for a day or two and finally find yourself without your valuables or money, even to pay hotel bill. 7.26.8 bus closed after getting down to deceive you You believe in the good bus conductor who locks the bus after every one gets down and you leave the brief case containing valuables in the bus. You go to take refreshment and return to find the brief case missing. The bus conductor is not responsible for your valuables. You have left your goods unattended at your own risk in the bus.

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7.26.9. Criminals spot some one with valuables and cheat him The number of gangs operating in trains and buses cheating people with laddu or peda or biscuit or prasad laced with chemicals is regular feature. These gangs are operating with gang members in a particular area for years together. You may be travelling in their area once in a while but they travel everyday with monthly passes as their investment. They detect a new passenger who is over watchful of his belongings containing valuables are their target. Once target has been identified you do not have a way out. If one cannot cheat you, the next gang buys you by paying small consideration to the out gong gang, to finally cheat you. 7.26.10. Force you to have sleep using chloroform You may be some one smart who is well versed with all these styles of cheating. At night time you tend to relax a little bit and you find chloroform in mild dose near your nose and you get a sound sleep. The man who walks down with your bag or suit case or brief case at night may be having even a female partner on whom even the police would not doubt.

Under jewellers block insurance policy, claims can be of huge amount even to the extent of completely empting the shop of gold stock worth a crore or more. But the first hurdle is with the police or the court. Unless they issue final report, the claim cannot be settled by insurance companies. Though there is provision of part payment in insurance parlance but the claim has been recommended by the insurance surveyor and admission of liability by the insurance company. All these process can take substantial amount of time. In the mean time the bank would not stop charging you interest. You may not have enough capital to restart the business. In such circumstances it is better to guard your stock from losses. Taking insurance claims is a painful process unless you have enough capital to support you even after the loss. So it is better to be aware to safe guard your assets to the best of your capability. No doubt taking insurance claim is undoubtedly no one would cherish at any cost. 7.26.11 Hypnotise you to cheat This is an age old trick for cheating by white collar non criminal minded people. They do not hurt/injure you in course of cheating. Their approach would be sophisticated and friendly to win your confidence. Unwittingly you give your consent to the cheat and become a willing victim till you realise that you have been cheated. It takes some time before you come to your senses and realise that you were hypnotised and cheated by someone. The style of cheating can be as follows:A) You come out of your bank after collecting jewellery in your purse or bag. You are a middle aged lady and walking back to your home while worrying about worldly things. You are approached by a sophisticated person who claims himself to be a famous astrologer. He tells the lady that she has a son whose life is in danger at this particular moment of time because of bad position of staRs. Her sons life can end in an accident. This has to happen unless she wants to save his life. He asks her whether money is more

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important or life of her son. Naturally for a mother life of her son is more important. Then she reveals that she is financially well off and some more family secrets. Any mother would like to save her sons life and in this way she gives consent by falling in his trap. The man says that she has to remove all metal from her possession for sometime while he prays for safety of her sons life. The lady takes out all jewellery including ring, bangles and jewellery taken out from bank in a white handkerchief offered by the person. The man asks her to close her eyes for a minute and tells her to hand over the metal in the handkerchief to him. He assured her that by removing metal her son would be saved. In a few seconds he vanishes leaving the lady praying to god. After a few minutes the lady reaches home. She talks to family members and finds that her son is safe. She finally discovers that she was cheated by the so called astrologer. The same cheating method can be applied in broad day light and in a busy market in any shop or in house. Once who let the person inside the premises and let him talk to you, you are hypnotised and finally cheated of cash or jewellery whatever you can surrender immediately for well being of your son / daughter / husband. The victim can be a mother or father or wife. The entry is friendly and exit is equally friendly. In case of small loss you may be embarrassed to reveal your foolishness. In case of big loss everybody comes to know of it.

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Chapter 8
8. All Risk House Hold Insurance Policy
This is one insurance policy which should be taken by all house hold without fail. We all care for our home, jewellery, electronic items, house hold items which accumulates over a period of time with our hard earned money. What if the same is lost in flood, fire, burglary, lost in transit, earth quake takes place. All these risks call for suitable insurance policy so that in case of loss one is in a position to knock on the doors of insurance companies. There are two house holds of Mr Sharma and Mr. Verma. Due to fire, both their houses got burnt. Mr. Sharma had taken insurance policy that covered his building and he immediately lodged insurance claim. Timely help was rendered by the insurance company though he did not have any financially sound friend or relative to help him. Insurance company turned out to be his god sent saviour. But Mr. Verma did not have any insurance policy covering his house and he did not have any one to fall back upon at this time of need. Though he had many friends but all turned him down. In our country we do not have social security. You may be paying lacs of rupees as income tax, but should you become poor or bankrupt due to any reasons what so ever, no help can be expected from the income tax department or government. That so why the first thing we do is to make a house to cover your family and then have jewellery for a bad day or for your childrens marriage or for old age. Taking insurance policy for these valuables is very important so that your hard money does not get snatched from you by natural or man made calamities. Jewellery loss is covered even in case of loss due to misfortune and any where in India. E.g. Mr. Verma lives in Delhi but the loss took place when he was in Chennai while the family was attending a marriage ceremony. Even such loss would be covered in the all risk house hold policy.

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Jewellery can be insured by husband and loss can be caused by wife. Jewellery should not be left unattended, other wise the claim is not admissible. E.g. Mr and Mrs Batra goes to attend a marriage and at the end of the ceremony they pack their jewellery in a pouch and kept on a chair. In the mean time some one urgently called them and they leave forgetting the jewellery on the chair. After some time they realise that they had forgotten the jewellery on the chair and find it missing. Such claims may not be covered in the policy. This is all risk policy for house holds, covering various risks. Loss due to theft without forcible entry is also covered in the policy. Loss by misfortune for jewellery and valuables is covered against all risk including for misfortune any where in India. But one must care for following:Proper declaration must be given for jewellery with description / bill / valuation report / rate / weight / value. Cash is not covered in the policy unless declared. As and when new jewellery is added in family, bill or valuation report must be sent to insurance company for coverage in insurance policy by paying extra premium. In house hold items what is sought to be covered must be clearly mentioned together with details of furniture, fixtures and fittings, clothes, t.v., fridge, micro oven, CD player, PC, work of art, house hold appliances, carpets, etc. Details can be made room wise for the whole house one by one, as well as photographed digitally. Description like item, quantity, price, store, purchase date may be noted. In case of work of art and other items without purchase bill or items whose value has substantially changed, separate valuation report may be taken for proper insurance cover. The policy holder may take photo graphs, video, digital photo may be taken of the house hold items including jewellery insured. One can create these additional evidences which cannot be captured on documents. Video or still photo graph can further support your claim in case of fire or burglary. The digital photo graphs may be stored in computer in office as well as at home or in pen drive or on CD. Even the documents can be scanned and store. In case of expensive items like camera / computers / laptop etc. Proper bill / valuation report / serial number / model / make / year / quantity / rate / value must be provided with proper configuration to insurance company. Individual items cannot exceed 5% of sum insured unless separately covered. E.g. If insurance policy has been taken for Rs. 1,00,000.00 in that case no item can exceed rs, 5,000.00. A camera costing say Rs. 15,000.00 cannot be covered unless separately insured and declared. Theft from unattended car is not covered in the policy. E.g. You have gone to the market leaving you laptop in the car and the laptop is stolen. Such losses from unattended vehicle is not covered in the policy. Unless specifically covered, jewellery is not covered in the policy. You have to give a separate list mentioning item- weight- purity -rate -value of each item of jewellery intended to be insured.

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8.1. Rate of gold jewellery Weight of gold jewellery does not change over the period, the same list can be used for insurance after including recent acquisitions of new jewellery. But gold rate keeps on changing from time to time. Two- three years back rate of gold was about Rs. 5,000.00 per 10 gram and now in 2008 march it is say Rs. 12,000.00 per 10 gram. In such a case, suitable increase in sum insured is very necessary from year to year. Should you take sum insured on the higher side but rate of gold has gone down, in such a case due to claim, lesser amount being present market rate may be considered for assessment of loss. It is always better to take higher sum insured in place of lesser sum insured.

8.2. All risk cover for jewellery in house hold policy. In case of house hold policy, all risk cover is available to jewellery and valuables against loss caused by misfortune as well as theft, whilst any where in India. Conditions of average clause are not applicable in such cases. Loss is restricted to the sum insured set against such item in the schedule. Coverage for jewellery is against agreed value. 8.3. Valuation report In case of jewellery, one does not often take jewellery bills from shops. He may have received jewellery during marriage from parents / in laws. Being small tax payer one is not required to file wealth tax return containing details of jewellery. In family jewellery is most vital for financial safety / security. Utmost care should be taken to insure them. Typical claim during marriages is falling of necklace from neck of wife during marriage and not finding the same. In such cases filing of missing jewellery report is necessary with the police. Statement of incidence has to be given by insured. Route map and marriage card is required. Video clipping or witness may be taken to ensure the lady was wearing the said neck lace. Income tax return, nature of business, bank statement in proof of financial sound ness may be obtained by surveyor.

In case of house hold jewellery, under insurance is not applicable since insurance is done on the basis of jewellery value declaration. An affidavit duly notarised of all jewellery may be given to the insurance surveyor detailing the lost jewellery:Item -weight - rate value how acquired- year of acquisition- lost or saved. The balance saved jewellery not stolen may be produced for verification to the surveyor. Verification may be made by the surveyor from the balance saved jewellery whether any of the lost jewellery is with the policy holder or not. Bank locker of the insured may be visited to verify if the insured has any saved jewellery in it. When was the locker last

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opened by the insured may be verified to ensure it was not operated immediately after the loss.

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In case of a claim / loss, one often makes mistake about description of item / weight / rate / value of jewellery lost. This results problem in settlement of claim. One may call a kada as kangan or churi or bracelet and in insurance policy it is mentioned as bangle, while in F.I.R. It is mentioned as kada and in fact it is a kangan. The local dialect may change from place to place for various jewellery items. Moreover, in policy the weight is say 10.5 grams for a kada but in F.I.R. The weight of the kada is mentioned as 15 grams. But actually it weighs 12 grams. The purity as per claim form is 23 carats and 22 carats as per policy and 20 carat as per F.I.R. In such cases, claims settlement of household jewellery becomes a problem for both policy holder and insurer. Valuation report may be taken from the jeweller for insurance purpose mentioning exact name / weight / rate / purity / value. There are many jewellers in every town who are authorised valuer as per income tax act and their services may be availed for such purpose. The valuation report may not cost more than 0.5% of the valuation done. A copy of valuation report may be given to the insurance company at the time of taking insurance policy. In F.I.R. / claim form same description of item / weight may be mentioned so as not to create confusion. In case of subsequent purchase of jewellery immediately information may be given to the insurance company with proper bill / valuation report for coverage by paying additional premium. Though as per insurance companies the declared item / value is final and can be insured, the claim settled but what about confusion / discrepancy created by insured himself resulting rejection of the claim or less claim settled. In case of a claim, insured will have to produce relevant records / papers as asked in support of the claimed item to the satisfaction of surveyor / insurance company. 8.4. Papers required in case of claim related to house hold policy. How the loss took place/when it was discovered/how the burglars entered into the premises./exact room and almirah from where the items were stolen/ where was the occupants at the time of burglary? Purchase bills of items lost. Valuation certificate of gold jewellery and silver items. Purchase bill of stolen items helps in deriving the cost of items stolen. In case of jewellery if there is no bill/or if they were gifted by some one, in that case earlier valuation certificate or affidavit may be provided to the surveyor. Item/weight/quantity/value of saved item.

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The first thing the surveyor would do is, stock taking of saved items lying with the insured. List of saved items must be made and tallied with list of items covered under the policy. Copy of F.I.R/final police report. Detail of items lost. 8.5. Regarding gold jewellery and silver items: Item/year of purchase/quantity/weight/value/amount of loss/purchase bill. The rate declared in the insurance policy is accepted unless rate has gone down in the meantime. 8.6. Regarding loss of crockery and garments: Item/ year of purchase /quantity/ value/ amount of loss/ purchase bill. Random market enquiry about value can be made in the absence of purchase bills. Depreciation may be applied in such cases to arrive present value keeping in view life of the item stolen. Depreciation can be as high as 50% in case of house hold items. Copy of income tax return of last three years. Copy of income tax return shows financial position of the insured.

Statement of neighbours / servant about the loss. Statement about the loss may be taken from the neighbours, servant to verify genuineness of the claim. Detail of bank lockeRs. Since when last operated before burglary and after burglary. Certificate from bank regarding operation of bank locker. Detail of saved items in the locker.

8.7. Small electronic safe in houses These days most house holds avoid using even godrej almirah for storage of valuables. They keep them in wooden wardrobe/drawers which are not safe from any angle. Though there is no such condition in the insurance policy to keep valuables in safe or otherwise. Valuables can be stored in electronic safe which are easily available for Rs. 5000.00 to Rs. 10,000.00. These safes are burglary proof and will become much stronger if fixed in the floor or wall.

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Chapter 9 9. Other important insurance policies 9.1. Loss due to LPG cylinder explosion Under fire clause loss due to explosion in LPG cylinder are covered in the house hold policy. Similarly it may be noted the LPG gas companies e.g. I.O.C., H.PCL., B.P. Also takes insurance policy covering loss to domestic consumers due to leakage and explosion provided they use I.S.I. Mark pipes for LPG gas regulator. Claim can be lodged for loss of life, medical treatment by registered users at their registered premises as per records of LPG dealer. 9.2. Separate building policy for earth quake long term We do not have social security in our country. Our house or flat is our sole financial security for a bad day. In case of house / flats / bungalows suitable cover should be taken in view of last bad experience of earth quake in Ahmedabad. In case of earthquake one becomes homeless. If he is in a high rise building, then he is at a bigger loss since he is nowhere because he does not own any land. Building can also be insured under house hold or shop keepers policy. How ever insurance policy has to be taken every year. Insurance companies also offer long term insurance policy up to 10 years single policy against one time premium payment by allowing 50% discount or 5% value increase every year. To take care of escalation in construction cost, one can forgo discount and let the value increase by 5% every year. As a result the building will not be under insured. One need not to renew policy every year. Normally insurance companies do not issue long term policies of more than one year term but this one is an exception. However, one must take care of following:One must obtain 64 VB certificate of payment of premium immediately after issue of policy, since 10 years is too long a period to retain premium payment proof by insurance companies. While settling a claim they have to ensure that premium had been collected and bank statement or other necessary papers are checked and then only the claim is settled. After checking relevant records certificate of proof of payment of insurance premium is issued u/s 64 vb. Only value of super construction is insured in case of a building and not value of land.

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9.3. Loan linked insurance policy for borrowers from bank. Many individuals take bank loan, housing loan, personal loan and invest in business / shares / properties. Sometime they take loan for personal needs of various nature including marriage loans, educational loan by offering properties as collateral securities or on the basis of personal guarantee. What if the borrower has a fatal accident and he cannot effectively earn or he dies and the family is not in a position to pay back the loan outstanding and they land up in a big financial crisis. In case loan instalment not paid by the surviving family members, the lending bank will simply take over the mortgaged property and leave the family home less. Even after death, no one would desire such consequences to his family. In such cases it is better to take loan linked policy. The benefit of such a policy is that the insurance company will directly settle the loan amount of the bank should a claim arise. One need not face financial crises to repay bank loan if he has taken loan link policy. Normally the bank and insurance companies both are run by the same institution like SBI v/s SBI life, ICICI v/s ICICI Lombard etc. As time passes the loan amount reduces, so does the assured amount. In the event of loan having been fully paid, nothing is paid to the survivor borroweRs. The ease of settlement of borrowed amount is the beauty of the insurance policy, in case of a claim, without endless formalities. The claim is settled even if the borrower has natural death or accidental death. The insurance premium can be paid by the borrower separately. Otherwise the borrower may request for increase in loan amount by the amount of insurance premium of the total policy period and let the EMI increase accordingly. For example against loan of say Rs. 50.00 lacs there may be instalment of say Rs. 50,000.00 per month over a period of say 20 years and additional say one time payment of Rs. 5.00 lacs may be made for loan linked insurance policy that may increase the E.M.I. By another Rs. 5,000.00. Thus the borrower may have to pay Rs. 55,000.00 as E.M.I. to the bank. At the end of say 5th year, if he was to die in a road accident or by natural death due to say heart attack, his family can be relieved of the botheration to pay further E.M.I. of Rs. 55,000.00 p.m. On the outstanding loan of say Rs. 40.00 lacs. After death of the borrower, naturally the income of the family would substantially reduce and the P.F., Gratuity etc. Of even Rs. 30.00 lacs may not be enough to settle the outstanding loan of Rs. 40.00 lacs bank loan. These policies do not need to be renewed yearly, once option has been made to increase loan / E.M.I. Amount. In this way lending banks can reduce non performing assets and also avoid litigation and unnecessary recovery actions. The borrower can also give financial security to the surviving family members by of his foresighted actions. 9.4. Personal accident (p.a.) Policy These days the very basic purpose of life insurance policy is defeated in view of high cost of education / housing. The cost of average house of three bed-rooms is not less than Rs. 50.00 lakhs. Higher education cost anything between Rs. 20 30 lakhs.

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The premium of a Rs. 50.00 lakhs p.a. Policy is about Rs. 5000.00 per annum. Should an individual suffer accidental death, his family at least gets Rs. 50.00 lakhs. The premium is very less and affordable. In case of accidental death, his family is financially secure. The cost of a similar insurance policy under life insurance policy is prohibitively expensive. About Rs. 5,000.00 is the premium annually for a life insurance policy for 10 years of sum insured of Rs. 50,000.00. In case of death Rs. 50,000.00 from life insurance is too small a figure in the face of P.A. Policy of Rs. 50.00 lakhs. Even if you are to insure your self under life insurance for Rs. 10.00 lacs and pay say Rs. 50,000.00 Rs. As insurance premium for a period of 20 years, the sum assured is not enough to buy even a L.I.G. Flat of one bed room these days in a city. Life insurance policies are good for investment and better if you survive to take maturity amount. While in case of accidental death you need personal accident policy to protect your family after you are no more in this world. On the other side p.a. Policy of Rs. 1.00 crore costs about Rs. 10,000.00 would be boon for the family should accidental death take place. There would be enough money for the whole family to educate kids costing Rs. 20.00 lacs, buying a house for Rs. 50 lacs, putting Rs. 30.00 lacs in bank earning 10 % interest p.a. (Rs. 25,000.00 p.m.). What if you survive and no accidental death takes place in that be happy with your family. These days highly educated I.T. Employees, Engineers, C.A., Bank Employees, successful business men earn approx. 1.00 lacs p.m. Which is much more than their family needs but their life is on fast track on good cars, overseas tours. Such people do need such P.A. Policy. Road accidents in car are common and the whole life gets upset. So protect your family by p.a. Policy. You will be surprised to know that there were about 1.30 lakhs of people who died in road accidents in India during the year 2007 and this figure is highest in the world, even more than road accident deaths in china who was once holding this record. The coverage is valid all over world unless restricted in the insurance policy. Inform insurance company of any change in profession or business of insured. At the time of renewal inform whether any infirmity or disease has taken place since last policy.

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9.5. Documents and investigations required in case of p.a. Claim 1. Insurance policy copy. Since when the policy had been taken. Copies of earlier year police. Coverage taken. 2. Terms and condition to the policy. 3. Proposal form. The insurance has been accepted as per proposal form and any misstatement in it may render the policy ineffective. 4. There is provision of nominee in the proposal form itself so as to facilitate the policy holder in case of any claim. 5. Claim intimation letter detailing the time, date, place of accident to insurance company along with policy no. Inform insurance company before cremation unless reasonable cause is shown. 6. Claim form duly filled in has to be submitted to insurance company. 7. Is the cause of death covered in the insurance policy? Attention has to be paid to the exclusions mentioned and terms and conditions which will be minutely dissected and analysed by the investigator and insurance company. Was the insured intoxicated or poisoned at the time of death. Could it be a case of suicide? Is it a case of death due to negligence of insured? 8. Medical report/ post mortem report/ Death certificate. In case of death in hospital, was the accident major cause of death. 9. Police F.I.R. In case of accidental death / panch nama copy. Place and cause of death as per police report. 10. Heirs of the insured with proof/ affidavit 11. Viscera report in case of accidental death. It may take a few month before this report is received. Viscera report confirms what was in the stomach and intestines of the insured at the time of death. Existence of drug, alcohol or poison is ruled out in this report only. 12. Map of the site where accident took place. 13. Statement of witness of the incident. 14. Relevant documents concerning the insured e.g. Date of birth certificate, school leaving certificate, photo, income tax return of last three years, bank statement, nature of business, driving licence, pan card, election card etc. 15. At the time of accident who was with the insured and his statement? 16. Was the insured heavily indebted or involved in gambling, speculation etc. Financial status of the insured including property, bank balance, shares etc. 17. Route taken by the insured at the time of death. Was the insured coming from a party at night? Did he have any animosity with any one? Was some one interested or benefited due to his death. 18. Was the insured suffering from epilepsy or any mental disease. 19. Did the insured have any credit card or life insurance policy covering personal accident. 20. Investigator is appointed by the insurance company to find out coverage in the policy. Investigator would visit the site of loss to find out what had happened and meet nearby people including police for evidence. The papers and documents may vary from case to case. The investigator has to be satisfied about the incident and coverage before he submits his report.

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9.6. Exclusions to the p.a. Policy 1. Loss due to suicide is not covered in the policy 2. Under the influence of drug, alcohol at the time of death. 3. Participation in civil riot etc. At the time of death or accident. 4. Participation in any dangerous sports like para gliding, motor racing, scuba diving etc. Causing death or accident. 5. In the case of misstatement of age the policy runs into trouble. 6. Learning to operate an aircraft. 7. Coverage has been given subject to exception for which insured is self insurer. 8. Breach of law causing death or accident with criminal intent.

9.7. Pre existing disease in mediclaim policy This policy is best taken when you are disease free. It is always better to take insurance policy with the same company so that pre existing diseases starts getting covered in the policy. E.g. In 1st year say cataract or hernia surgery is not covered. But after 4th year all pre existing diseases gets covered. In the terms and condition one can find mention of disease not covered for certain number of years. As per new guide lines by I.R.D.A. Pre existing disease is any ailment or injury or related condition for which you had sign or symptom and were diagnosed or received medical attention or advise or treatment within 48 months prior to your first mediclaim policy. In case of timely renewal of policy and contracting a new disease during policy period, then such disease cannot be excluded. If timely renewal is done, then there is no need of medical check up for renewal. Gap in the policy renewal is always treated as new policy. Coverage of pre existing disease is covered in the mediclaim policy after four years of continuous policy having been taken. The onus is on the insured to prove that he had taken regular insurance policy for over four years. What if insurance company denies the claim for alleged pre existing disease, the insured dies afterwards and the family also does not have proof that they had taken regular mediclaim policy for over four years. In such cases it is always better to keep either policy copies or policy number and policy period at least for four years as evidence. 9.8. Name difference in mediclaim policy In case of mediclaim policy, say in Gujarat as per medical records Anil Bhai had fallen sick and was covered under treatment. While as per mediclaim policy it was Anil Kumar Gajera. This creates problem in settlement of claim process by insurance company. As such adequate precaution should be taken to mention proper name of insured in hospital records if mediclaim policy has been taken else claim settlement may be a problem.

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Meera Ben may be in mediclaim policy as Meera Rawat. Mina ben may be in mediclaim policy as Meena Lal.

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Coverage of family members like son or daughter in the mediclaim policy. It is normally under stood that dependent unmarried son or daughter can be included in the mediclaim insurance policy apart from wife. How ever the definition of dependent is very different in the eyes of the insurance companies for the purpose of mediclaim policy. The definition is not a problem so long as your children are young and studying in school. Problem starts college and onwards. In case of unmarried daughter In case of a daughter, she can be termed as dependent so long as she is not married. What if she starts earning more than Rs. 1500.00 p.m.? While she is not married and still studying in college. She is no more dependent and cannot be part of your dependent family member in the mediclaim policy. Even if you have paid insurance premium and there is a medical claim, it may be turned down. Even if your daughter is not studying and is unmarried, she can be termed as dependent for the purpose of benefit under mediclaim policy. . The moment your daughter is married, she cannot be termed as dependent on you. In case of son At any age, if your son is earning more than Rs. 1500.00 then he cannot be termed as dependent on you. So far as marries is concerned, he is not dependent on you, the moment he is married. Between the ages 21 to 25 your son is dependent on you for the purpose of mediclaim policy only if he is taking full time study course. It means, if he is not taking any full time course, then he is not dependent on you, even if he is without a job. If he is more than 25 years of age then in no case he can be termed as dependent even if he is taking full time study course. 9.9. Age in case of mediclaim policies In case of mediclaim policies age should be properly declared. E.g. your age is 18-5-1957 and as on the date of renewal of your medical policy on 18-42008 your age is 50 years and 11 months. For a family of total four persons, your insurance premium comes to say Rs. 18,000.00 if you age is shown as 50 years. Insurance premium is charged on the basis of highest aged family member. The insurance agent/ development obliges you to charge less premium by showing your age as 50 years in the computer and accordingly create renewal premium notice. At this juncture i asked my agent to reconfirm that the age calculation was correct since 50 years and 11 months cannot be taken as 50 but it should be closer to 51 years. The agent said that he is helping me by charging less premium, whereas actually my age should be 51 years as per actual calculation. Even one day more than 50 years would attract insurance premium on age of 51 years and the premium would be say Rs. 20,000.00. In the event of a claim, the insurance company may repudiate my claim saying that I have understated my age and

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thus cheated the insurance company. They would do the most obvious either charge balance premium or reject my claim. I opted to pay medical renewal insurance premium of Rs. 20,000.00 on my age of 51 years and not break the bond of trust. If the actual age requires medical examination selection procedure for entry into the scheme, then the claim is rejected if wrong age is declared. 9.10. Approval of limit by TPA in case of hospitalisation

These days insurance companies issue cash less mediclaim insurance policy and the third party administrator (TPA) manages approval, processing of the mediclaim claim, what was so far being done by the insurance company? The TPA is manned by experienced doctors and administration staff. It is better to know your TPA while taking mediclaim insurance policy and their working style in advance. Carry your cash less medical identity card and insurance policy in case of emergency visit to hospital for treatment. It may be noted that car accident claim and medical claim are some what similar. Once you visit the hospital for treatment, the doctor would provide you estimate of expenditure. The same has to be sent to the TPA who would approve limit depending on your insurance policy and the disease to be treated. It has been noticed that the hospital doctor may give higher estimate and the TPA may approve less. Awaiting approval, the hospital may also take some advance deposit from the insured. E.g. Estimate for an operation may be Rs. 70,000.00 and the approval may have come for Rs. 50,000.00. The hospital may take advance deposit of Rs. 20,000.00 to cover balance amount of estimate made by them. The TPA gives approval after considering sum insured, nature of disease, whether treated for pre existing disease, type of hospital where treated, whether on approved panel or not, room rent eligibility etc. Normally it takes few hours or a day to get an approval from the TPA. It may take longer hours for approval at night time when skeleton staff may be present in the TPA. The balance amount over and above approval made has to be separately claimed from the insurance company. In case treatment is taken from unapproved hospital, all payments have to be borne by the insured and separately claimed from the insurance company. In case treatment in small cities, care has to be taken that the hospital is govt. Registered. Immediately inform the TPA about treatment taken for the purpose of claim intimation. In case of planned hospitalisation one can visit the hospital say for hernia, heart surgery, cataract etc. And obtain estimate of treatment. Pre authorisation form may be filled and sent to the TPA in advance by the hospital 3-4 days before hospitalisation. The TPA may send approval or rejection or ask for additional information from the hospital. Finally authorisation may be given to hospital depending on benefits payable under the policy. In

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case approval does not come due one reason or the other, one will have spend on his own and claim later on from the insurance company. One must study the insurance policy and its terms and conditions before opting for room rent in hospital. There are restrictions on the room rent. After quoting policy number one can discuss with the tpa about eligibility of room rent. Normally room rent per day is allowed up to 1% of sum insured subject to maximum of Rs. 5,000.00 which ever is less. In case of I.C.U. Not exceeding 2% of sum insured or Rs. 10,000.00 per day which ever is less. For example in case of Rs. 1.00 lac sum insured one may be eligible for maximum Rs. 1,000.00 per day room rent. If one opts for higher room rent, the balance has to be borne by the insured. In case of rejection to give approval, reason is communicated by the TPA. Some companies have started defining zones for mediclaim policies. Mumbai is in zone 1, Delhi is in zone 2 and rest of India is in zone 3. If some one jumps zone to take say better treatment, he will have to be satisfied with settlement of claim less by 10 to 20 %. After 60 years of age no enhancement in sum insured is allowed. After 70 years of age insured may be loaded by say 2.5 % of applicable premium. 9.11 advantages of taking mediclaim policy in groups By way of taking mediclaim policy in groups say at company level or at association level one can avail of many benefits which are otherwise not available to individual mediclaim policy. Bargaining capacity of the policy holder increases at group level, since single cheque of bigger amount is collected by insurance companies at one go with lesser efforts. The bargaining capacity would be much better if insurance by the company for fire, burglary etc. Are also taken from the same insurance company. Maternity benefit, not allowed in individual policies, may be allowed for younger staff in the group. Initial gap of 30 days for first claim may also be waived. For senior staff, higher sum insured may also be allowed. Some insurance companies also allow parents, children, spouse in the definition of dependent members in the mediclaim policy. In case of change of job some insurance companies may also allow conversion to individual policy after some period of working with the old employer. This conversion can be very useful when you are approaching retirement and no company would be ready to issue you medical policy at this old age. At company level one must take care to inform the insurance company about new staff who join the company and pay additional premium by covering them in mediclaim policy.

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Chapter 10
10. Car insurance claims

Being a C.A. I have never handled car insurance claims but I was on the other side of the table being a policy holder and all my experience was as a policy holder and not as a surveyor. In our country the highest selling insurance policy is of car. One cannot drive a vehicle without proper insurance policy. At least one must have third party policy and carry certificate of insurance in the car is legal requirement. But scanty regard is given to the insurance policy by policy holders. For a small claim also doors of insurance company are knocked, surveyor called, estimate made, scrap deposited, claim formalities fulfilled, claim cheque collected. Cash less insurance claims are also made. I am insurance surveyor and have a car for last 16 years but could never take a insurance claim in spite of having insurance policy and many accidents to my credit. The following are my observations:A. Car dickey or bonnet or door hit by another vehicle resulting damage. denting / painting cost Rs. 700.00.

if damaged item was to be changed, it costs say Rs. 12,000.00. Less depreciation say Rs. 3000.00 = net claim Rs. 9000.00. Thus I have to pay Rs. 3,000.00 for the new door and insurance company will pay Rs. 9,000.00 after depreciation. Thus which is cheaper mode Rs. 3,000.00 or Rs. 700.00 for me to bear? Obviously I can simply pay Rs. 700.00 and get the denting and painting done and continue to enjoy no claim bonus as well. These are some of the usual accidents in city roads. The car service company would advice lodging of insurance claim but for an average person the loss is more if claim is lodged and cheaper if he goes in for denting / painting without lodging insurance claim. Remember city roads are very much prone to small accidents every day, due to your own fault or fault of others. Your car can rarely be without dent.

Now, over the years my car insurance policy has 65% no claim bonus. I can transfer the policy to a new car by me and avail huge benefit.

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In a new car say insurance premium Less 65% no claim bonus Pay for insurance of new car

Rs. 20,000.00 Rs. 13,000.00 Rs. 7,000.00

Thus every year I can make savings of Rs. 13,000.00 for no claim bonus. Thus I saved huge amount of time by not visiting insurance companies. The real gainer is the car servicing company who make money at the cost of insurance companies and innocent car owners. 10.1. Car theft cases Another case to point one car was parked next to mine and my car was found with doors opened but not stolen. The car next to mine was found missing and stolen. I had opted for gear lock which is difficult to break / cut. The second car had a remote electronic anti theft lock, even then the car was found stolen. Not to talk of a car getting easily stolen without any anti theft device. It is really time consuming and resulting financial hardship if a car is found stolen. Numerous visits to police / insurance companies for months together till untraced report is received from police and the claim settled. Even then mind it you do not get 100% even if it is a brand new car, you are insured only for 95% of the value. What if the car is old and then you have to bear depreciation portion or loss of value as per similar car in the second hand market. In the meantime you will have to continue to pay car instalment to bank if you have taken car loan else pay penal interest to bank for instalment default. Worst of all if the stolen car is recovered and thief caught, you get it back from the police through the court after you have fulfilled formalities to take the car on superdari and cannot sell the car till court case is settled. 10.2. Insured declared value (I.D.V.) In case of car insurance IDV is basis of settlement of claim in case of total loss. At the time of insurance you can bargain for better IDV for your car and accordingly pay higher insurance premium for your well maintained car. Once the value is accepted and insurance premium accepted, then the insurance company cannot settle the claim for lesser amount in case of total loss. To give an example, 1-1-2007 New car cost Rs. 10.00 lacs Car insurance will be done at 95% value Rs. 9.50 lacs. Say insurance premium comes to Rs. 30,000.00 0n 1-1-2008 the car can be insured for Rs. 9.00 lacs after deducting 10 % depreciation. Insurance premium comes to Rs. 27,000.00. - But the insurance agent applies 20% depreciation and offers to insure the car for Rs. 8.00 lacs and charge insurance premium of Rs. 24,000.00.

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This is the time to argue for better idv and pay higher insurance premium of Rs. 27,00.00 on idv of Rs. 9.00 lacs. As per the insurance agent you may be fool to offer more insurance premium while he is ready to insure the same car for lesser insurance premium. Should there be total loss say due to theft, you will be a bigger fool to receive Rs. 8.00 lacs in place of Rs. 9.00 lacs. In effect you loose Rs. 1.00 lacs by saving Rs. 3,000.00 premium on idv of Rs. 8.00 lacs. So at the time of insurance renewal spend a few minutes with your insurance agent and check whether you are being penny wise and pound foolish. Period New insurance Ist renewal 2 nd renewal 3 rd renewal 4 th renewal 5 th renewal deduction in value 5% 15% 20% 30% 40% 50%

After wards follow auto valuation book. However in case of repairing charges exceeding 75% of IDV, then it would be treated as a case of total loss. This may happen in case of flood loss, fire loss or damage to an imported car whose parts are not easily available in India.

10.3. Very little car protection from theft These days it is next to impossible to save a car in case the thief wants to steal it. One thief asked for car key from a car owner while the owner was driving it. The car owner was made to stop the car and shot, on showing resistance to hand over the car key. Theft of cars with electronic anti theft system are common cases. You have a gear lock in your car but you go to a shop without locking the gear lock for a minute only to find the car stolen within a minute. You see some one fiddling with your car and by the time you reach the car, its gone for ever. You have to be one step ahead of the thieves. Install GPRS system in your car to find out location of the car in case it is stolen. Install car engine jamming system in case some one tries to open it with duplicate key. Finally your best protection is to have a suitable insurance policy covering proper value of the car.

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10.4. Additional car cover Death or injury to un named private car occupants including car owner are not automatically covered even in the comprehensive car insurance. Only vehicle driver is covered in the comprehensive insurance policy. Coverage is normally taken by the car owner for the damages to the car and not for the occupants. In case of comprehensive car insurance policy, one can take coverage of maximum four unnamed car occupants or more depending on car seating capacity at a premium of say Rs. 100.00 for Rs. 2.00 lacs each for any accident resulting injury or death. Injury or deaths to third party during accident are automatically covered even in the third party car insurance policy but car occupants are not covered in such a case of accident. One should normally take individual personal accident insurance policy to cover risk of accidental death or injury in any thing including INA car or aeroplane or ship or on the road etc. Next time, be aware that you are taking ride in some ones car at your own risk and in case of accidental death or injury you are usually not covered in the car insurance policy. To avoid such risk, take individual p.a. Insurance policy. In case of use of two wheeler vehicles, there is no insurance coverage to the pillion rider or rider on account of accidental death or injury if one uses scooter of say Employer Company owned or scooter of his friend. The accessories of the car should also be properly insured. In case of CNG / LPG kit fitted in a car, one must get it endorsed on the registration certificate (R.C.) Else the insurance company can reject the claim due to fire or accident since they had insured original petrol or diesel car and not CNG or LPG car.

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10.5. Regarding car insurance and sale of car Car insurance policy is issued to the owner and one can transfer the same to a new car bought while selling the old car. The old insurance policy is an asset in the hands of the owner. No claim bonus can be carried indefinitely. Sometimes the car policy holder has not lodged any insurance claims in the last few years. He is eligible for no claim bonus. At the time of sale of old car he can retain the no claim bonus and take the benefit of no claim at the time of taking insurance policy for his new car. He has to give a letter to the insurance company that he is selling his old car and the insurance policy for the balance policy period may be transferred to the new owner and that he intends to retain no claim bonus. He can use no claim bonus in a period of three years. In this way the insurance company is relieved that the old owner has sold his car legally. As an evidence of sale, the insurance company may take copy of form no. 29 / form no. 30, copy of registration certificate (R.C.), delivery slip, old certificate of insurance, and proposal form by new owner. The car under sale has to be brought to the insurance company for inspection and tracing of chassis and engine number. After all the formalities the insurance company will issue new insurance policy in the name of new owner and no claim bonus certificate in the name of previous owner. As of now in case of even a single claim whole of no claim bonus is withdrawn. No claim bonus is now restricted to 50% in new cases. In case of car insurance policy is renewed within policy period then no claim bonus is automatically transferred to new policy. In case of renewal of car insurance policy after expiry, in that case car has to be compulsorily inspected by insurance company and no claim bonus is also allowed if policy is renewed within three months of expiry of policy. In case of renewal of car insurance policy after three months of expiry in that case no claim bonus is not given to the insured but policy is renewed subject to inspection of car.

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10.6. Depreciation in car claims As of now, even for a new car, insurance policy is given only for 95% of the car value and not for full value. As per insurance companies the moment a car comes out of showroom its price goes down by about 5%. And as such coverage is given only for 95% of the value. In case of car claims 50% depreciation is applied on plastic parts such as bumper / light etc. 30% depreciation is applied on rubber parts such as tyre / beadings etc. Nil depreciation on glass items. On metal parts following depreciation is applied: In 1st year of policy 5% depreciation In 2nd year of policy 10% depreciation In 3rd year of policy 15% depreciation and so on. Labour charges is paid in full. Denting and painting charges 100% paid by the company if damage took place in accident. For old damages due to wear and tear and use, denting and painting charges are not paid.

10.7. Car policy exclusions Loss due to driving by invalid licence holder or by driver under influence of alcohol are rejected. 10.8. Status of learners licence for claims However it may be noted that even learners licence is also a valid licence to be able to lodge car insurance claim so long as he not found violating norms as per motor vehicle act as per recent court verdict. In case, the learner driver cannot prove whether he was, say, accompanied by an expert driver, or having l mark on the car at the time of accident, then insurance company will be correct in rejecting the claim for injury or death to pedestrian or damage to another car. The learner driver will be liable to indemnify for such losses.

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10.9. Bargain for better coverage of car insurance and not bargain for less premium Many people compare insurance premium quoted by two different companies forgetting that you cannot buy Maruti Zen at the price of Maruti 800. All companies are basically regulated by IRDA. E.g. In case of car insurance one should take coverage for personal accident (p.a.) Of owner, p.a. Of driver, p.a. Of five un named passengers, insurance of additional accessories, make better bargain for higher value of car ( I.D.V.). Though insurance companies would invariably try to insure for less value. Get immediate endorsement on insurance policy for CNG kit after paying additional premium and obtaining RC duly certified for CNG. In short, no one would like to insure you for greater risks while accepting lesser premium. Only an intelligent policy holder can bargain for better coverage. Should one be ready to pay less insurance premium as well as take benefit of comprehensive car insurance policy, he may opt of higher excess or deductible to pay less insurance premium. E.g. In case he opts for deductible of Rs. 25,000.00 per claim, he will get Rs. 75,000.00 against a claim of Rs. 1.00 lacs.

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10.10. Third party claim for car accidents/ mact claim While driving a car one runs the risk of accidents by the use of motor vehicle. The accident may cause death or fatal injury to a third party. That is why insurance is a must for driving a motor vehicle so that relief by way of compensation may be extended to the victim of road accident. Now consider an example of three persons in motor car accident as per following:Say in case of a motor truck accident three people die. Mr. Ramdin, a peon, aged 40 years, earning Rs. 5,000.00 p.m. Or Rs. 60,000.00 p.a. Mr. Shyam , officer aged 40 years, earning Rs. 50,000.00 p.m. Or Rs. 6,00,000.00 p.a. Mr. Hari , business man aged 40 years earning Rs. 5,00,000.00 p.m. Or Rs. 60,00,000.00 p.a. Though they all of them of about same age and died in the same road accident by a truck but their claim amount would depend on their income earning capacity. They may say get multiplier of 10 after deducting amount spent to earn the amount, loss of love to family members, and adding loss of bread earning member of the family. The third party claim payable by the insurance company of the truck may be as follows:-

Mr. Ramdin, may get Rs. 60,000.00 x 10 = 6.00 lacs Mr. Shyam , may get Rs 6,00,000.00 x 10 = 60.00 lacs Mr. Hari , may get Rs. 60,00,000.00 x 10 = 6.00 crores In case of injury or death to third party, the local police can be approached. In case of fracture etc. To third party, the driver can be released after M.L.C. Of the injured. In case of death of third party, it is bailable offence and one can be released after seizing R.C. Of car, insurance policy and driving licence. The vehicle can be checked for mechanical fault. The local police can arrest the driver to contain law and order and later on release the driver on bail.

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10.11 better to take cash less car insurance policy than ordinary car insurance policy. These days you start getting calls from various insurance companies long before expiry of your car insurance. You are confused where to get the insurance policy renewed. Should you opt for insurance from a company who does not have memorandum of understanding (M.O.U.) With your car service provider, in that case if you have a claim at a later date, then you will have to face the trouble of handling the claim your self as per following procedure:Inform the insurance company about the accident by way of written intimation letter along with policy number and car number. Collect claim form from the insurance company. Get estimate from the authorised car service provider Submit estimate with the insurance company for appointment of surveyor as per financial authority. In case of claim of higher amount the branch office may not have power to appoint surveyor. The divisional office may have to exercise their power to appoint from their panel of surveyors. Get survey done and then only the surveyor would clear the car service company to start repair work. Surveyor would ensure that the claim is genuine and necessary loss minimisation efforts have been by car Service Company. Repair will be allowed where ever possible in place change of part. Car insurance policy, registration certificate (R.C.) of car and licence to drive may have to be shown in original to the surveyor. Claim form has to be filled up with details about the loss, how accident took place, where was the car at the time of loss, which area of the car got damaged and how. Car damage has to be justified. Pre existing damages are not allowed by the insurance surveyor. After completion of repair work surveyor would again come and verify that excess work has not been done by the car repair company. Make payment for repair in full, collect bill and receipt. Submit proof of payment to insurance company in original and photo copy of bill and receipt to surveyor for finalisation of survey report and onward submission to insurance company. Collect scarp from the car service company. Collect salvage memo in duplicate from insurance company to deposit car scrap with scrap godown of the insurance company. Collect salvage memo duly receipted in proof of having deposited scrap with authorised scarp godown and then submit it with the insurance company. Scrap godowns are far from the city and operates at specific time for scrap deposit. You may have to visit twice should you fail in first attempt. Otherwise the insurance company may deduct say 2% for plastic items and say 10% for metal items being value of scrap from your claim.

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After scrap is deposited and surveyor has submitted final survey report to insurance company, finally await for reasonable time which can be any time from days to few weeks for processing of claim by insurance company and issue of cheque. Till that time it is your investment in the repair of the car. You may have to take few rounds and calls to the insurance company to ensure that your file is processed. Finally what you get is not the whole of the amount of the claim. Deduction is made to the extent of 50% for plastic items, 10% and above is deducted for metal items depending on age of your vehicle, extra work done not involved in the accident is not paid by the insurance company. For example:Side powered mirror may cost Rs. 5,000.00 by Maruti authorised vendor. You get 50% less claim since it is plastic item. Deduct Rs. 2,500.00 New door may cost Rs. 10,000.00 and it is say 3 years old. Depreciation of 15% is applicable. Deduct Rs. 1,500.00 Applicable excess to be paid by policy holder. For car up to 1499 cc Rs. 500.00 is deducted as excess and for car 1500 cc and above Rs. 1,000.00 is deducted as excess. Deduct Rs. 1,000.00 Total Rs. 5,000.00 Thus from a claim for Rs. 15,000.00, Rs. 5,000.00 may be deducted by the insurance company to pay you finally Rs. 10,000.00. What about the no claim bonus of say 40% availed by you and not available any more? Say on premium of Rs. 15,000.00 you loose no claim bonus of Rs. 6,000.00. Thus your total loss due to accident is Rs. 6,000.00 + Rs. 5,000.00= Rs. 11,000.00. Net claim Rs. 15,000.00 less Rs. 11,000.00 = 4,000.00. Now a days insurance companies are asking car owners to pay to car repair companies by credit card so that you can take benefit of free period of say one month. But what about compulsory 2% credit card charge of Rs. 300.00 on payment of Rs. 15,000.00. This adds to additional cost which can be much more if the insurance company decides to late process the claim. In effect, to take a claim you have to invest time of say week or two weeks apart from investment of Rs. 15,000.00 to take net claim of Rs. 4,000.00 after depreciation and loosing no claim bonus.

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Better to take cash less car insurance policy Would it not be better to take cash less insurance and not suffer any of the above hassles of insurance claim and take several half day leave from your office? One should enquire from the car service company as to which insurance companies have signed M.O.U. With them and cash less facility is available. You simply give the car to the service provider and pay balance amount of claim which is not paid by the insurance company to take delivery of the car duly repaired. Care should be taken to note that surveyor in both the cases will not blindly agree to change whatever your car service man may want to change. Surveyor may insist for repair of certain items in place of out right change. In case of more than two claims cash less facility may be with drawn and you may have to go through non cash less facility and the rigours of normal insurance claim and endless visit to insurance company.

Final lesson in case of car accident, better not claim For all practical purposes it is always better to try all other options to get a car repaired in place of lodging insurance claim. Outside repairing may turn out to be much faster and cheaper, while same quality of repair may be done. In place of two weeks, work may be done in say 4 days. You may not be at the mercy of insurance company, surveyor, scrap godown and weeks of waiting to get claim cheque having already paid by squeezing your budget. In place of expenditure of Rs. 15,000.00 one may be able to get the car repaired for as less as Rs. 3,000.00 only as against Rs. 5,000.00 and retain no claim bonus of Rs. 6,000.00 which keeps increasing in future and is an asset while you sell this car and by a new one.

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Chapter 11
11. General knowledge about insurance claim related matters 11.1. Proposal form

No one knows about a person other than he himself. The proposer / one who wants insurance coverage should fill up the proposal form himself and not sign blank to be filled up by the agent or development officer. All questions asked in the proposal form should be replied so that the insurer can know the insured in a better way. It is expected of the insurer to insure the risk as per proposal form. The insured knows all about himself and wants to cover the risk. The insurer does not know anything about the insured but wants to insure the risk. The knowledge gap is filled up by the proposal form. All material information should be filled up. At a later date on the happening of an incident the insurer should not say that he was not disclosed material fact asked in the proposal form and repudiate his claim. The proposal form is your intention to cover certain risk / assets. The technical part can be discussed with the insurance agent / broker / development officer, then only sign it. A copy of proposal form must be kept by the policy holder so that he can know what he has intended to insure and what wordings are expected in the insurance policy. In case of bank insurance policy proposal form is not filled up mostly. As such insurance company or the bank would not have copy of the proposal form except having insurance policy. 11.2. Letter of intension to insure In case details cannot be accommodated in the proposal form, a separate letter in detail may be enclosed with the proposal form as intention to insure. If the insured has not filled up any proposal form, then he can give a separate letter detailing the coverage sought. In the letter he can mention the item, rate, value, place of insurance and any other coverage that he may like to get. In the absence of a proposal form a letter can also be taken as intension of the insured to insure and the same can be basis of settlement of claim. Many a times there is not enough space in the insurance policy to write, and proposal form has also not been taken, in such cases letter of intension to insure is the sole criteria for settlement of claim. E.g. an event organiser takes insurance policy for the items displayed in tents/stalls by different shop keepers and in case of fire only his letter of intension to insure various stalls not owned by him will clarify the purpose of insurance. In such a case the organiser is not owner of the goods but he is interested in safety of stalls. Leaving important columns blank in the proposal form may also hint towards not disclosing material information to the insurance company. Finally claims if any may also be rejected by the insurance company for want of material information in the proposal form.

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11.3. Insurance policy taken for formality rendering it futile Many people take insurance policy only as formality and find them cornered when insurance claim takes place. They bring bad name to insurance companies. E.g. Mr. Atul Gupta, an engineer by qualification had taken insurance policy worth Rs. 2.00 lacs covering his stock of inverters. In the mean time he had changes his business to CDMA/ GSM phones repairing in big way. He had stock at risk worth Rs. 20.00 lacs. He did not bother to take endorsement on the insurance policy for new items. A burglary took place in his premises for stock worth Rs. 2.00 lacs. Even if the claim was considered, coverage would have been for only Rs. 20,000.00 since only 10% of stock at risk was insured. More over the item lost was not insured, rendering the claim not covered in the policy. Such people at the end suffer loss as well as run huge risk by saving little amount of insurance premium.

11.4. Condition of reasonable care clause applicable to almost all policies Note must be made that in the general condition of insurance policy there is always a clause of reasonable care by insured to safe guard the insured property. For a claim to fall under any of the clauses it must be proved that the insured had taken reasonable care to protect the insured property other wise the claim may be rejected if it is proved that he had not taken reasonable care. Thought the reasonable care clause is quite vague and will carry meaning depending on the circumstances of the case.

11.5. Coverage of items in the insurance policy The items to be covered in the insurance policy should be as wide as possible and not very specific. The reason being that, at the time of a claim the insurance company is at liberty to reject a claim if the items lost are not covered in the policy. The insurance company may argue that they have not covered what is lost since there is no mention of the items lost in the insurance policy. The items lost are different from that of covered in the insurance policy. In case a watch shop takes insurance policy for watches, table clocks, wrist watches in there shop. Then the insurance company will admit a claim only if watches, table clocks, wrist watches are lost / affected. The insured would not get insurance claim if he suffers loss due to burglary / fire of say cassettes or c.d. Which are not covered under the policy. As such it is best to put wordings in the proposal form or letter of intension to insure as wide as possible. The policy holder should also ensure that in the insurance policy desired wording has been mentioned. So far as insurance company is concerned it does not make any difference to them if the items insured is watches, toys, cassettes, c.d.s, games since they all attract same rating of insurance premium.

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So the wording should be watches, table clocks, wrist watches, cassettes, c.d.s, electronic items and any other item related to insureds trade or all types of electronic, non electronic items and various other items related to insureds trade. It may be noted that the insured can later on request for endorsement on the policy if he starts dealing in new items which are not mentioned in the policy. In case of change of business, the insured can make a request for suitable endorsement in the policy. Insurance premium is charged as per business of insured. In case of hazardous items insurance premium is more and separate conditions are attached to the insurance policy. In case the insurance company finds that the items insured and the items that were stolen does not tally as per as insurance policy issued, then they are at liberty to reject a claim. Even if the matter goes to court, it is very difficult to prove that one who deals in grocery items and he suffers loss of cassettes unless the cassettes are found mentioned in the insurance policy or the insured has taken insurance policy for all type of items. However, insurance company can take the plea that they never intended to give coverage of cassettes. As such they are not responsible for the loss. 11.6. Change of business or items. If the policy holder adds any new items in his business, then he should check with his insurance policy whether such an item is covered in the insurance policy or not. If not, then the policy holder should write to the insurance company for adding those new items in the insurance policy and obtain proper acknowledgement of letter followed by proper endorsement in the policy. Addition of new items or obtaining endorsement to the policy does not cost any thing unless sum assured is increased. 11.7. Changes not made in insurance policy If required change is not made in the insurance policy as requested, then a vigilant insured should either vigorously follow it for execution or ask for cancellation of insurance policy and not sit idle. For example, stock kept in the open outside the plant but within factory premises is requested to included in the insurance policy for risk coverage. But insurance company does not act and burglary takes place. Insurance company is not liable for the loss of stock kept in the open, since they never agreed to the amendment. 11.8. Contract of insurance policy Insurance policy is a contract between policy holder and insurance company. Should any loss takes place as per the insurance policy, insurance company would indemnify / compensate the loss to the policy holder as per policy and its terms and conditions. At the time of claim it is duty of policy holder to provide necessary papers in support of the claim to the surveyor appointed for assessment of loss by insurance company. Insurance policy is a contract. Everything has to be looked from the angle of coverage given as well

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as terms and conditions to the policy issued.

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Why papers are not asked for at the time of issuing insurance policy. At the time of issue of insurance policy the proposer is asked to fill up a proposal form for issue of insurance policy. He cannot be asked to produce all the papers / books of accounts purchase bills / ownership proof at the time of issue of insurance policy. Insurance contract is a matter of trust. The insurance company believes that whatever is declared in the proposal form and sought to be covered under the insurance policy is correctly mentioned. Should there be a loss the policy holder can produce relevant papers/documents in support of the claim lodged. Many policy holders asks why at the time of issue of insurance policy, the insurance company did not ask me for bill of say washing machine or fridge or jewellery or stock or machines insured under the policy. At the time of issuing insurance policy they have saliently accepted insurance premium and now they are asking hundreds of questions / papers / documents in support of the claim as if policy holder is himself a thief or burglar and has masterminded the loss. The policy holder has to understand that he has to provide relevant documents in support of his claim. Otherwise insurance companies can reject the claim if the policy holder cannot give relevant papers in support of his claim. How the insurance company can know that his claim is genuine in the absence of relevant papers / documents in support of his claim. The papers and documents required in support of a claim would depend on the nature of loss that has taken place. For lakhs of policies issued by various insurance companies, it is not possible to store all papers not knowing what type of loss may arise. Out of lakhs of policies issued. Claim may arise only in few cases. It is the duty of the policy holder at the time of taking insurance policy that he can take photographs / keep bills / maintain files / keep copy of relevant papers / copy of proposal form etc. In support of items insured. 11.9. Address of insured

The address of the place where the items / stocks / jewellery / cash / machines etc. Are kept and covered as per contract of insurance policy is very important. The insurance company has agreed to cover those specific premises only as mentioned in the insurance policy and no other address. The items cannot be kept at any other place except at the specific address mentioned in the insurance policy. Insurance companies can reject a claim if items covered under the policy are kept at some other address. Should there be a change of address the policy holder should immediately inform the insurance company in writing and duly acknowledged followed by endorsement in policy. Thus the contract of insurance is amended and new site/premises is covered in the policy. It may not always result into payment of extra premium.

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If the stock is to be kept at various locations, then insurance companies can ask for extra premium and issue a floater policy i.e. the stock can float from one place to the other as per policy up to the amount as agreed. Many people changes houses / factories / offices without information to insurance companies, such cases are ideal for rejection of claim.

11.10. Change of ownership of insured In case there is any change in name of insured / ownership / merger / take over, in such cases proof of insurable interest should be informed to the insurance company and that the business is continuing in a different or same name. A partnership firm or a proprietorship firm taken over by another company may result change of name or ownership of the firm. In such cases due information should be given to the insurance company with acknowledgement followed by endorsement to policy and payment of extra premium if any. In case there is mistake in the name of policy holder on the insurance policy, then immediate notice should be given to the insurance company. E.g. M/s A.G. Enterprises Pvt. Ltd. Is mentioned as m/s A.G. Enterprises only. It may be possible that another firm by the name m/s A.G. Enterprises also exists. There is wide difference between the two names since one is a Pvt. Ltd. Company and another one may be a partnership or proprietorship firm. In the absence of proposal form or old insurance policy it will be difficult to prove that m/s A.G. Enterprises Pvt. Ltd. Was sought to be covered under the policy. It has been noticed that most policy holders do not even bother to look at the insurance policy once they pay premium. They think that having paid insurance premium the loss is covered under the insurance policy. The agent or the development officer will fully take care of interest of the policy holder who forgets that the agent or the development officer are merely part of marketing team of the insurance company and not part of claim settlement team. The same policy holder would read a partnership deed properly or even read a contract properly before signing but would never bother to read a insurance policy since he does not have to sign it. The policy holder may find on reading the policy that the name of the firm is not properly mentioned or items covered is also not properly mentioned in the policy. 11.11. Period of policy. It would be much easier for many a people especially Lawyers / C.A. / Engineers to understand better if we were to say that it is a contract between policy holder and insurance company for a specific period to cover the risk of specific items at a particular address as per terms and conditions annexed to the insurance policy.

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If the period of insurance policy is say 01.04.04 (after midnight) to 31.03.05(up to mid night), in that case the loss has to specifically fall during the period of insurance policy. Any loss that cannot be proved having occurred on or before 31.03.05 cannot be covered in the said insurance policy. E.g. If a burglary takes place between 29.03.05 to 02.04.05 when the factory was not working or house was not inhabited or the loss could not be discovered because the room or godown was not opened during that period. In that case onus is on the policy holder to prove that loss took place on or before 31.03.05 and not later. Otherwise insurance company would not be responsible for the loss. If the insurance policy is in continuance i.e. Old policy had been renewed w.e.f. 01.04.05 to 31.03.06 then it becomes very easy to cover the claim in one of the policies. Problem would arise if the policy is not renewed. 11.12. Policy only signed by insurance company Unlike a usual contract, the proposer signs first on the proposal form. The proposer is the would be policy holder. The insurance company issues insurance policy if the proposal form is accepted and premium is accompanied. The policy document is signed by the insurance company as a token of having accepted the proposal and insurance premium. The insurance policy is subject to terms and conditions accompanied with the insurance policy. The terms and conditions are not signed by the insurance company or by the policy holder, as such no one bothers about it. The policy terms and conditions are the conditions on which the policy is issued. This is a unique contract where the terms and conditions are not signed either by the insurer or the insured unlike usual agreement where the terms and conditions are also signed by both the parties.

In insurance, terms and conditions are normally usual, similar and applicable to all policies of similar kind. The terms and conditions of similar types of insurance policies can not be altered and are universally applicable to one and all equally of a particular type of policy. The insurance polices once drafted are sent to IRDA along with terms and conditions for policy approval. Thats why all terms and conditions of similar type of insurance policy in whole of the country have similar terms and conditions. These terms and conditions must be called for if not accompanied by insurance policy. Even written request may be made to supply terms and conditions which are applicable to the insurance policy. 11.13. Terms and conditions not given by insurance company Sometimes the insurance companies do not enclose the terms and conditions under which the insurance policy is issued. The insurance policy is not complete without the terms and

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conditions. In such cases the policy holder cannot know the terms and conditions governing the policy. If the terms and conditions are not provided by the insurance company in that case the insurance company may be said to be deficient in services and case is tenable in the consumer court. Non observance of terms and conditions or exclusions to the insurance policy by the policy holder may not be a reason to reject the claim if pleaded in the court.

11.14. Bank stock statement It is not necessary that stock register or actual stock must tally to the stock statement submitted with banks for availing bank limit against stock hypothecation limit. It is bare fact that small / medium borrowers does submits stock statements with the bank just to fulfil bank formalities. Banks are additionally covered against stock financed, by collateral security. As such banks though makes advance against stock but the stock details may not tally exactly to the physical stock or stock register. Now a days lot of banks have stopped taking monthly stock statements, rather they are taking quarterly or half yearly stock statements or only final audited balance sheet to assess business of borrower. As such stock statements are loosing their importance. One can argue that loss assessment need not be made as per stock statement given to bank but assessment should be made on the basis of actual stock as per books or as per stock register. But insurance companies are heavily depending on stock statement submitted to bank, for assessment of loss.

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11.15. Sum insured Sum insured under an insurance policy is the amount for which insurance company is responsible should there be a claim. This amount must be closely monitored and examined. In case of under insurance i.e. Total stock was worth say Rs. 10 lakhs but insurance policy has been taken for Rs. 4 lakhs or 40% of stock at risk. In case of a loss of say Rs. 1 lakh, only 40% of Rs. 1 lakh = Rs. 40,000.00 would be payable by insurance company. Many policy holders obtain less sum insured at the time of taking insurance policy. Thus they save small amount of insurance premium while covering the risk. At the time of a claim the policy holder would be at a big loss due to taking less coverage. Insurance premium can always be debited to the profit and loss account and claimed as expenditure. Thus the impact is further reduced after savings of income tax of about 33%. At the time of a claim the insured would raise several points including why he was not advised to take proper coverage but it would lead them no where. Save a penny and loose a pound.

Thus, adequate coverage should always be taken by the policy holder. The sum insured can always be increased by paying extra premium during the policy period. The extra premium is paid for extra cover from the date of coverage and onwards till expiry of policy. If stock as per profit and loss account as on 31-3-2007 is say Rs. 10.00 lacs, then it is quite normal that the agent or the development officer would advise to take insurance policy of Rs. 10.00 lacs only. There is no way to know that during the year highest stock was worth Rs. 30.00 lacs say at the time of peak season in October. In such a case it would be wrong to take insurance policy of Rs. 10.00 lacs. If there is loss in October 07 of even Rs. 6.00 lacs and total stock was worth Rs. 30.00 lacs with the policy holder, then he would be paid only Rs. 2.00 lacs since only 33% insurance cover was taken by the policy holder. Say premium for Rs. 10.00 lacs stock was Rs. 3,000.00 and he would have to pay Rs. 9,000.00 for stock coverage of Rs. 30.00 lacs. Thus by saving Rs. 6,000.00, the policy holder suffered loss of Rs. 4.00 lacs (Rs. 6.00 lacs less Rs. 2.00 lacs). As such it is always advisable to take coverage for a little more than highest stock at any time during the previous year. In case of jewellers or house hold suitable higher sum insured may be taken where prices of gold are regularly increasing. Gold was worth say Rs. 8,000.00 per 10 grams a year back and at time of insurance it is say worth Rs. 12,000.00 per 10 gram, in such a case coverage should be taken for higher amount only. 11.16. Dishonour of insurance premium cheque It may be noted that in case of dishonour of insurance premium cheque for insufficient funds, the insurance company cannot be expected to honour the insurance policy either.

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11.17. First loss basis coverage In case of huge stock, one need not to take coverage of whole of the stock, if whole of the stock cannot be practically stolen at one time. E.g. M/s Verma and company deals in food grains and they have ten godowns in which total stock worth Rs. 10.00 crores having weight of 2000 tonnes (@Rs. 50,000.00 per tonne) has been stored. One big truck can carry about 50 tones of food grains and 5 such trucks can carry total 250 tonnes. Cost of 250 tonnes is Rs. 1.25 crores. In such cases it is advisable to insure stock worth Rs. 1.25 crores on first loss basis against burglary. However against flood and fire insurance can be taken for Rs.10.00 crores since total loss can take place at one time. Similar logic can be applied to various factories and plants spread over different areas. This way one can take coverage logically as well as save insurance premium. 11.18. Short period excess stock During peak season one may opt for specific month / period coverage of the excess stock. Even one month policy can be issued by insurance company. Short term extra policy can be taken to cover the risk. In times of peak season like Diwali or Christmas when the stock is more additional short period of even a months policy can be taken. Thus, huge risk can be covered by paying small premium. Normally it is seen that around Diwali, Dusshera, summer holidays and during new year stock is very high with most of the firms. It would be prudent to take additional cover from October to January.

11.19 last minute insurance Insurance policy of a factory say is expiring on 5-5-2008 at 12.00 hours. On the last day if one is taking insurance policy renewal, he has to ensure that proposal form is filled and signed, payment has either been made by cash or by draft, receipt has been issued, and cover note or policy has been taken. If in this case cheque has been given on 5-5-2008 and the cheque is not deposited by the insurance company on 5-5-2008 or 6-5-2008. On 6-5-2008 the factory suffers major fire loss and insurance company is intimated about the same on 7-5-2008. Now the insurance company has an option not to accept the risk by not sending the cheque in clearing and refuse to insure the factory in view of commercial decision of huge loss on the first day itself. No contract has been made without receiving insurance premium. Mere receipt of cheque is not enough to enforce the claim. By 9-5-2008 the insurance company may return the cheque along with a letter not accepting the risk.

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11.20 Close Proximity Claim In case loss takes place within say 7 days of issue of new insurance policy, the claim needs investigation to ensure that the loss has not taken place before issue of policy. Receipt of premium, exact payment date is verified from bank records, proposal form, serial number of the policy, date of acceptance of the risk, cheque deposit pay in slip, date and time of occurrence of loss is investigated in detail. Effort may be made to verify from witness or neighbour that it is not an old incidence before policy period. Investigation may be made by separate investigator also about the claim. 11.21 Inspection by insurance companies Inspection report about visit to the insured premises by development officer, branch manager, or other officials of the insurance companies is an added advantage at the time of issue of insurance policy. Visit by insurance company officials is made to ensure that whatever is mentioned in the proposal form does exist and is acceptable to the insurance company for the purpose of issue of insurance policy. In case of a claim, the inspection report can be of great help to the insured. Insurance companies cannot deny a claim on flimsy grounds. For example, M/s A & Co. Had a local safe in their jewellery shop. The safe was inspected by development officer and inspection report was issued. The risk was insured by the insurance company on the basis of proposal form and inspection report of development officer. At a later date in case of a claim, insurance company cannot take the plea that the local safe is not of standard make and the claim is rejected. 11.22 Loss minimisation The insured should do everything possible to minimise the loss as if they are not insured. In case of fire claim the insured may separate good stock from damaged goods under fire. Fire extinguishers may be used to control fire from further spreading. In case of flood, the insured may try to minimise the loss by keeping the stock at elevated level. Immediate steps may be taken to drain out flood water. Insured should take all practicable steps to reduce loss. 11.23. Self risk coverage and exclusions Care must be taken to discuss at length exclusion in the policy and must be high lighted. One should do risk analysis before taking a policy. What can be covered under the insurance policy and what need not be? Certain risk are retained and covered by the insured himself and he need not pay insurance premium for these risks to insurance company. He is his own insurer. Exclusions are in a way self insurance. The insurance company is not responsible for such losses covered under the exclusion clause. Loss due to mysterious fire is covered by insured himself.

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Small claims can be self insured and does not need insurance policy. Loss due to pilferage by insiders or outsiders and discovered during stock taking can be covered by self insurance. In every company certain % of stock is always found short during annual stock taking. In case of stock worth Rs. 1.00 crore shortage up to Rs. 1.00 lac being one percentage of stock may be considered normal. Such shortages are covered by self insurance. Loss due to infidelity of staff in burglary policy is covered by insured himself. One has to take separate insurance policy for loss due to involvement of staff. One may be over confident that there are security guards and CCTV for 24 hours and hence no chance of loss due to infidelity of staff. In such a case the staff may empty the factory of stock worth Rs. 1.00 crores in connivance with security guards. Such losses due to infidelity of staff are covered by self insurance. In case of cash in safe policy cash not kept in safe is covered by insured himself. The insured may have kept cash worth Rs. 20.00 lacs in a drawer duly locked. In case of burglary of cash, such loss is covered by self insurance only. In case of burglary policy loss due to theft by not applying force is covered by insured himself. In case of fire or burglary loss in a factory loss of profit is covered by insured himself. A factory running in profit of Rs. 1.00 crore a year results fire and it takes one year to re start it. You are the insurer in such circumstances for loss of profit of Rs. 1.00 crore. Loss of data in the computer in case of fire is covered by insured himself. Man days to feed data or source the lost data may need say Rs. 50.00 lacs. In such a case insured is insurer for the value of data lost. By taking higher deductibles or excess one can increase self insurance. In case of car insurance one can opt for higher deductibles of say 15,000.00 per claim and pay less insurance premium. It is a case of self insurance by Rs. 15,000.00. You are the insurer in such circumstances for the deductible of Rs. 15,000.00. By violating law, you are substituting your self as insurer. In case of drink / drive or driven by unlicensed driver or driven by learners license holder not accompanied by proper license holder violating of motor vehicle rules causing accident in the car worth Rs. 1.50 lacs, you are the insurer in such circumstances. In case of insurance policy taken on depreciated value, difference between reinstatement value and depreciated value is self insurance. In case of fire reinstatement value of a machine may be Rs. 20 .00 lacs but depreciated value at which insurance has been taken is worth Rs. 5.00 lacs. In such a case 25% is covered by insurance company and 75% is covered by way of self insurance.

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Under insurance is self insurance. You may have taken insurance policy for Rs. 40.00 lacs but stock risk was worth Rs. 100.00 lacs. In such a case 40% is covered by insurance company and 60% is covered by way of self insurance. Risk of items written off in the balance sheet is covered by insured himself. Machines worth initially of Rs. 2.00 crores after say ten years on straight line depreciation @10.00 % p.a. Are written off in the balance sheet will have nil value in fixed assets schedule and accordingly insurance policy taken for nil value. Most of the companies consider fixed assets schedule for insurance purpose. The market value for such a machine may be say Rs. 50.00 lacs and good for production for another 5 years. You are self insurer for this written off machine worth market value of Rs. 50.00 lacs in case of fire loss.

In case of first loss basis insurance, balance loss over and above sum insured is covered by insured himself. You have five godowns having stock worth Rs. 5.00 crores and first loss insurance of Rs. 1.00 crore since you assume loss due to say burglary cannot exceed Rs. 1.00 crore at a time. In case of loss of stock worth Rs. 1.50 crores, you are self insurer worth Rs. 50.00 lacs. Merely taking insurance policy does not mean that you have taken 100% coverage against all possible risks. Even in case of all risk policy there are exclusions for which insurance company is not responsible and you are considered as its self insurer. It is almost impossible to take 100% insurance and the proposition may be too costly. One has to weigh cost in terms of premium and benefit of claim analysis. One has to consider what risks are involved and which ones need out side insurance.

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11.24. Burglary / fire once in a life time experience Burglary or fire is once in a life time experience for many people. Getting a burglary experience or suffer fire loss cannot be cherished by anyone. Even such experience can be enough for an average person in a life time. After specially burglary one gets feeling of insecurity and unprepared ness. Now, think of the reverse, the insurance company gets many a cases of burglary or fire every now and then. They are well experienced with such type of losses. It is day to day affair for them. Same is the case with insurance surveyor who are well versed with such type of losses. It is day to day business for them. The surveyors are well trained / experienced / technically qualified to assess a loss of burglary / fire. The common policy holder does not know what is expected of him to provide papers / documents in support of the claim, should there be a loss. He is caught unaware after the loss. And he does not know whom to look upon for advice. The surveyor submits survey report to the insurance company. The surveyor can be a c.a., engineer, doctor or qualified to be a surveyor as per technical degree with him. So he is quite technically qualified and experienced in handling insurance claims. But what about the common policy holder who is sometimes not qualified, no experience, no degree, no understanding of insurance related technical matters. Let such policy holders be armed with the knowledge of insurance. 11.25. Insurance advisor of industries The industries and big insurance policy holders can afford to keep insurance advisors who have wide experience in insurance field. The industries can avail of services of these experienced people while dealing with insurance companies for their claims. But the small industries / small businessman / common insurance policy holders have no such advisors since they cost a lot.

For big industries, the insurance companies consider their proposal seriously and give them expert advice in view of the fact that these clients pays them huge amount of insurance premium. But what about a small businessman who pays say Rs. 1000.00 only as insurance premium or a small house holder who pays only Rs. 400.00 as insurance premium, he has no one to fall back upon for advice. The number of such small people is huge or to say in thousands and lakhs in every city. By obtaining insurance related knowledge they can become their own advisor.

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11.26. Development officers v/s claim department The development officer is basically a marketing person who sells insurance policies. He does not process a claim when a loss takes place. The claim processing department is a technical department headed by technically qualified persons. The development officer is good in calculating proper insurance premium as per insurance company norms. What the development officer can advice is a little more than a layman. He is not trained to handle insurance claims. He can at best remind you about renewal of insurance policy. He will meet you while taking insurance policy; ask you details of coverage sought. So it is better for the insurance policy holder to educate himself and be an intelligent insurance policy holder who can be best advisor for his own needs. Such an intelligent policy holder is good for the society. He will adequately cover his assets and risk, pay proper insurance premium and not save them at the cost of risk / coverage. At the end, the insurance policy holder can be his own development officer as well as surveyor should there be a claim. 11.27. New regime of brokers Now a days insurance brokers have been authorised by IRDA and their services can be of great help to policy holders. The brokers have good infrastructure in terms of servicing by way of technical help to take a policy, changes in policy after it has been issued, help and guidance in case of a claim. Brokers are of good use specifically in case of corporate customers. The brokers are having good expertise in the field of insurance and can be accessed in case of any problem. Now a days there are brokers in every city. They work as per guide lines of IRDA and are in touch with more than one insurance company and are INA position to bargain better coverage at reasonable insurance premium. The brokers are attached to various companies and are technically sound. Their exposure is of good use to policy holders. Proper intention letter and proposal form is taken and suitable policy is issued to policy holders at competitive rate by insurance companies. The offices of insurance brokers are manned by technically qualified staff like Engineers/C.A. And insurance qualified staff. As a result there is good quality in issue of insurance policy and quantitative increase in business of insurance companies. w.e.f. 01.01.07 the insurance market is detariffed to a large extent. The premium can be liberally decided by insurance companies and discounts given to good customers. The broker can be very useful in this context of presenting deserving cases to the insurance companies. Brokers are in way very good advisors. IRDA has very good control over brokers to ensure their technical expertise. CA/MBA/Engg./ businessmen from all sectors have been issued brokers license for acting as quality link between insured and insurer.

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11.28. Insurance policy taken by banks on behalf of borrowers Now a days most of the banks are themselves taking insurance policy covering their advances. They have tied up with one insurance company and paying them all the premium. This way banks get huge amount of brokerage as corporate agent / broker. This is termed as bank assurance. This ensures banks hefty brokerage on the insurance premium paid. Thus it is a source of income which was so far not going to their pocket. It is quite common that banks, who lends a borrower, obtains insurance policy on behalf of the borrower to protect interest of the bank. If bank has given loan of Rs. 10 lakhs on the stock of a company, then bank obtains insurance policy covering the stock. Though banks do take collateral security / personal guarantee etc. But above all they obtain suitable insurance policy to cover losses against risk of burglary or fire of the stock which is financed by the bank. In case of loss / claim, all the formalities of insurance claim will be responsibility of the policy holder / borrower. Now, even if due to any reason what so ever, a claim say for burglary is rejected by the insurance company on the ground that what is insured is grocery items and what is burgled is electronic items. The bank is some how safe since collateral security / personal guarantee is enforceable if the borrower cannot repay the loan amount. In such cases it is in the interest of the borrower to obtain a copy of the insurance policy from the bank and check the relevant coverage. If any alteration is required to the items covered or address of factory in that case it must be informed to the insurance company by way of a letter and obtain suitable policy endorsement. The borrower cannot plead that I would not repay the loan since bank has taken a wrongly worded insurance policy. In all the cases, insurance premium is debited out of the account of the borrower by the bank. It is the money of the borrower that is paid to the insurance company as insurance premium. Suppose the insured has borrowed Rs. 10.00 lakhs from the bank but his stock is worth Rs. 50.00 lakhs. As per bank stock statement the borrower has declared only Rs. 20.00 lakhs stock which is enough to cover the borrowed amount or drawing power. In such cases the bank would take insurance policy of Rs. 20 lakhs only. However it is in the interest of the borrower to either increase the insurance policy amount to Rs. 50.00 lakhs or obtain another insurance policy of Rs. 30.00 lakhs without bank clause, so that in case of any loss the borrower is not paid less claim by insurance company because of under insurance. Banks give huge loan against stock / property but insurance companies charge small premium for covering huge risks. In case of huge claim, there is no other friend or relative or even banks who will come to rescue of the borrower since he is no more financially sound. At bad time involving financial crisis due to fire or flood or burglary of stock it is only insurance company who will and can come to rescue of the borrower /

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policy holder if proper insurance coverage has been taken. Insurance company is your best partner in times of need by insuring your losses at such a small premium. Mostly, it is seen that the client is not involved in the process of obtaining insurance policy. Proposal form is not filed up. Intension is not marked in the covering letter, as to what is sought to be covered in the insurance policy. It is more of a formality for the bank to obtain insurance policy against their mortgaged property. Banks may have interest in a pa1cular factory where stock is financed and that also only in finished stock. If loss takes place in raw material or in any other factory of the insured, then such a loss is not covered in the policy. Some stock might be with other fabricators or processors but these stocks cannot be said to be covered in the policy, should loss take place because they are not at the insured premises. Banks comes to know of high stock only after month end and by that time if any incidence takes place, then full coverage may not be there, since heavy underinsurance will be applicable. Should their be a loss and claim is not settled by insurance company due to one reason or the other, the borrower cannot say that insurance policy was banks liability and hence not his responsibility to settle bank liability. Bank will keep on charging penal interest for short stock / excess borrowing. Bank may even resort to taking over the collateral property or invoke personal guarantee of borrower. As such policy holder must look minutely in the insurance policy whether it serves his purpose or risk coverage or not.

11.29. Bank assurance Now a days lot of banks and insurance companies have joined hands to sell insurance policies. But the banks do not have expertise to handle the queries of the policy holders or advise them in case of a claim. In many a cases premium charged for insurance policy issued by such bank assurance is less than if separate policies were to be obtained singly/separately from the insurance company. The banks / insurance companies gives huge discount ranging up to even 50% for issuing mass insurance policies. This discount is passed on to the policy holders in many cases. This discount cannot be availed if single policies were to be taken individually. Such tailor made policies can be taken by common people at a lesser premium if he is insurance educated and he knows exactly how to cover his risk and properly handle the claims should their be a loss. An account holder at say oriental bank of commerce can approach the bank to issue say mediclaim policy out of its tailor made policies through oriental insurance co. Limited. Being existing account holder of the bank he is eligible for the same. The premium can be

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debited from his savings bank account. Had he taken separate policy it would have say cost Rs. 15,000.00 for his family of four for floater sum insured of Rs. 5.00 lacs, how ever through bank assurance it would say cost him Rs. 10,000.00 at 33% discount and same coverage. Such is the use of insurance knowledge. Similar group insurance policies for house hold or personal accident policies can also be taken by the account holder at discounted price and same risk coverage.

11.30. Further benefits of bank assurance Mr. Verma runs a factory and is over occupied in executing his huge order. He has already availed bank limit against machines and stock. All of a sudden flood takes place due to heavy rain fall and blockage of drains or there is fire in the factory at night. He has never believed in insurance policy and curses his bad luck. In the morning he meets his bankers informing them about the incidence and his folly of not taking insurance policy. His bank informs him that he is already insured through the bank to his surprise. There are many such examples i have come across during my life. In such a case at least you have insurance company as your saviour due to bank assurance in bad days. 11.31. Insurance premium pool The insurance industry runs on the principle of accumulating premium from many to pay claim of few. Say one thousand people pays premium of Rs. 100.00 each totalling to Rs. 1.00 lakh and out of this fund if there is a claim of Rs. 75,000.00 then it is paid out of the total pool of Rs. 1.00 lakh. The more the awareness of insurance spreads, the more policies will be issued resulting more funds at the disposal of insurance companies to pay in case of claims. In this way it will give boost to the insurance industry who can cover higher risks. So far lot of people have risks to cover / assets to cover and they have funds to pay for insurance premium but their is lack of insurance awareness and information. They are afraid of insurance companies, thinking that in case of a claim, it will surely be rejected by insurance companies. The average man is honest and wants to properly cover his risk / asset against losses. He does not mind paying insurance premium whole of his life and never suffer a loss due to fire / burglary. I think he will be the luckiest man that he did not have to take insurance claim but he was always covered against unforeseen risk. In case of a loss he should be able to resort to insurance claim since he had taken proper insurance policy covering his assets by paying small amount as insurance premium. He can now become an intelligent policy holder who has taken a suitable cover against risks and knows in advance what to do should there be a claim.

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11.32. Insurable interest for own stock and held in trust Insurance companies expect that insurer must have insurable interest in the property insured by him. Either he should own it or he should have some sort of insurable interest in it. The policy holder can insure something in which he has insurable interest. One may have interest in the stock purchased by him and insure it. In case of a claim due to say burglary he has to prove by way of purchase bills that he is owner of the stock and he has taken insurance policy for stock owned by him. Similarly, stock received by him from someone for fabrication / some additional work / processing can be insured by him since he holds it on trust. In case it is lost, he is bound to compensate the supplier. As such, while lodging insurance claim he has to prove that he has taken insurance policy for stock held in trust but not owned by him. E.g. M/s d & company takes five computers on rent for use in business and fire destroys all the five computers. M/s d & company can declare to the insurance company that they have ten computers of their own and another five computers received on rent, thus held in trust by him. Thus the risk increases to 15 computers. No. Rate Pcs Rs. 20,000.00 30.000.00 value Rs. 2,00,000.00 1,50,000.00 3,50,000.00

own computer 10 held in trust 5

Thus d & company can take coverage of 15 computers worth Rs. 3.50 lakhs as per above details. A simple letter to insure as above may be adequate. Should another 20 computers be added during the policy period, he should ask insurance company for additional coverage and sum insured by paying suitable premium. At the time of taking insurance policy, policy holder may declare how much stock is owned by him and how much stock is received by him for processing etc. For which he needs insurance for stock held in trust. Separate declaration is required for stock held in trust otherwise they are not deemed to be covered in the regular insurance policy. Stock / machinery received for processing / repair are called stock held in trust in insurance language. 11.33. Stock given in trust to others The policy holder may be in a business of renting out computers to various clients. In such a case he can also cover the computers in his insurance policy stating that they will be in the clients premises at various sites as per agreement. In such a case the person

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who takes the computers on rent, need not cover them in his insurance policy since he is being charged rent and insurance premium by the owner / lessor of the computers. 11.34. Temporary godown It is observed that during policy period the policy holder may have to shift his godown temporarily to new premises due to many reasons including repair of old premises, new premises taken to store excess stock etc. In such cases it is utmost important to inform insurance company in writing with acknowledgment apart from taking endorsement in the policy after paying the necessary additional insurance premium. Item / value of stock / address / date of shifting / period of coverage sought, may mentioned in the covering letter. 11.35. Excess clause So as to avoid processing of small claims or so that policy holder also gets pinch of loss, in some policies there is provision for deduction of minimum amount from the assessed loss. This compulsory deduction is called excess clause or the minimum amount to be borne by the policy holder. E.g. In fire claims Rs. 10,000.00 is minimum excess means that if there is a claim up to Rs. 10,000.00 then insurance company would not pay any claim. In case of claim of Rs. 90,000.00 after deduction of excess of Rs. 10,000.00, the claim would be settled for Rs. 80,000.00.

11.36. Substandard When there are certain violation of policy terms and conditions but the claim fully does not merit repudiation. In such cases insurance companies can settle the claim on sub standard basis e.g. at 75% of assessed loss is paid to the policy holder on sub standard basis. This way court cases can also be avoided. 11.37. Automatic insurance with banks for stolen cheques/ theft from bank lockers In case unsigned cheque is stolen and some one withdraws cash from your bank account on the basis of forged signature, in that case one can lodge claim with the bank for the amount of the cheque u/s 85 of negotiable instrument act. The bank is at fault and deficient in service for cash payment against a cheque without order from the actual account holder and is liable to compensate the actual account holder. The bank cannot plead that the signature on the cheque was so accurate that they could not discover the forgery or why the account holder did not keep the cheque book under lock and key or why he did not discover loss of cheque in time. The bank cannot also argue that the signature of the account holder has always little variation and they cannot be expected to be hand writing expert or they have to pass say 1000 cheques within clearing time of two hours leaving no time to cheque signatures in minute detail. The signature forgery can be pictorial copy but forgery is forgery and bank is liable to reimburse the actual account holder. Forged signature on the cheque can be established only by hand writing expert

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appointed by bank or by police through central forensic science laboratory. One cannot easily prove author of the forged signature to arrest him for forgery unless caught red handed at the time of encashment of cheque. Neither any purpose would be served in blaming the bank staff for involvement in the forged withdrawal. In case of non settlement of claim by bank one can approach the banking ombudsman for such claims for early settlement in place going to civil courts. Similarly banks are not liable for say jewellery contents of the bank locker. No purpose would be served in blaming the bank staff unless caught by police for making duplicate key or otherwise by bank staff. The bank would be liable if the bank locker is found tampered or broken or found open and the contents are missing from it. One should cover risk of his jewellery and valuables by taking suitable house holders insurance policy for jewellery kept in the bank lockers as well as at home. Banks do not accept any declaration for the articles kept in the locker; neither have they maintained any stock register for locker contents. These days cheque deposited in banks are stolen from the bank to encash else where. Change the date, open a new bank account, remove account payee and endorse to a forged bank account to encash. Writing bank account number of the payee and affixing a cello tape on the amount and payee is as good as self insurance against fraudulent use of cheques and drafts. e.g. Pay to Atul Gupta A/c No 2714 at SBBJ, Naraina Vihar, New Delhi. Affix a cello on the payee. One can also write bank account number of the payee on the reverse of the cheque and affix cello tape on the writing while depositing the cheque in the bank. E.g. For credit to Atul Gupta A/c no 2714 at SBBJ, Naraina Vihar, New Delhi if the cheque is simply payable to Atul Gupta. Mere obtaining pay in slip with round stamp on it is no proof that the cheque was deposited at the bank. The bank can always take the plea that such round rubber stamp lies loosely in the bank through out the day. There are no signature of the staff who received the cheque. Affixing of branch address rubber stamp on the reverse of the cheque by the bank clerk is proof that the cheque was deposited with the branch in clearing and there is no way to cancel the rubber stamp. 11.38. Preliminary report v/s main surveyor appointment Surveyors are appointed as per financial authority, depending on claim amount. Miscellaneous burglary claim up to Rs. 10,000.00 may be appointed by local branch manager, while burglary loss up to Rs. 75.00 lacs may be appointed by general manager at head office of the insurance company. The insurance surveyors are independent and are not employees of insurance companies. They hold surveyors licence issued by I.R.D.A. The insurance companies maintains panel of surveyors out of whom surveyor as per suitable technical know how is appointed by insurance company to assess loss. In case of loss to building civil engineer, in case of car claim mechanical engineer, in case of burglary chartered accountant, in case of chemical loss chemical engineer, in case of mediclaim doctor may be appointed as surveyor. Sometimes main surveyor appointment

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is delayed since claim may be at a different places and needs immediate verification of incidence of loss or physical stock taking, while as per financial authorities surveyors appointment may take sometime since say H.O. / R.O.Is in different city. In such cases preliminary surveyors is appointed by local insurance company. The duty of preliminary surveyor is to visit the site immediately and take stock of the loss, take photographs of say forcible entry, safe broken, stock taking of balance stock saved etc. He may submit his report by the time main surveyor may join in. 11.39. Role of investigator in insurance claims Many a times insurance company appoints investigator in case of complicated claim which may need thorough investigation. The investigator may be retired police officer or retired from C.B.I. Or experienced insurance surveyor. It may be noted that the role of investigator is not to assess the loss but his findings may have impact on the assessment of a loss. Normally investigator goes deep inside the incident of loss to find out the root of the loss. He may start with: Visiting the site To find out whether such an incident had really taken place there. He may make a map of the place. Visit nearby people/shops/road side people to find out exactly what had happened and tries to get to the bottom of the case. Whether the claimed incidence is true or fabricated. Had some one witnessed the incidence? The police records, register of no. 100 call and the time of call from police log book may be verified. The police jeep staff who had first responded to the call in response to 100 call may be interviewed. Family member/business associates/staff may be interviewed to find out financial back ground/business of the claimant and its impact on the claim. Is the insured financially sound enough. Bank of the insured may be approached to find out bank dealings, whether there was huge liabilities on the head of the insured. The suppliers may be approached to find out authenticity of bills/suppliers. Whether only bills were issued without sending goods e.g. 10 ton stock cannot be dispatched without truck and its freight payment. Who had paid the freight may be verified apart from investigation with the transporters. The investigator will finally comment about genuinity of the incident in his report. In case he finds any negative observation then he will go in deep and prove his point of view duly supported by evidence. In case his observations are negative, then the claim may be affected accordingly.

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Sometimes one may be in heavy debt and loan liabilities and in pressure to pay his debts. Such people need to be examined whether the claim has been lodged or exaggerated to help pay his loan. In case of jewellery claim in household, it is to be investigated whether the policy holder had the means to own the claimed lost jewellery. The investigation report is considered by the final surveyor while finalising claim assessment. 11.40. Avoid smaller claims One should avoid smaller claims to improve image in the eyes of insurance company of bad claim experience. One may be termed as bad client, if his claims are quite frequent. Formalities of insurance company are same for small as well as big claim. To take insurance claim is no joke/easy process. Plethora of formalities as already mentioned has to be compiled with. One must protect the property insured to the best of his capability. Insurance policies can be cancelled by giving 14 days from either side. In case of heavy claims ratio and frequent claims, insurance companies can cancel the policy. At the time of renewal, insurance co. May not accept renewal premium if the risk is very high or about to take place. Insurance companies can load additional premium in case of bad claim experience. To avoid processing of smaller claims and let the insured get pinch of the claim, excess clause or co insurance clause is provided in the policy, so that insured has to bear some portion of the claimed amount. 11.41. Follow one company for insurance Insurance Cos are also there for business and earn reasonable profit. They always give due regard to people who are their regular customers and pay substantial insurance premium. As such it is always good to take all insurance policies from same insurance company over the period and be their loyal customer. In a family all the policies may be taken from the same insurance company. In case of business the associates, group companies, all staff may be covered with the same insurance company. This way they become good customer for the insurance company and due regard is given in case of claim. In business houses one may come across cases where the CMD/DGM/RM of the insurance company goes to collect insurance premium cheques. A function is organized

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when insurance company pays a cheque of insurance claim and local press is briefed about quick disposal of claims. Insurance companies always compare how much insurance premium has been generated from the group/person vis a vis the claim and claim ratio in a year or till claim period. They always give due weightage where claim ratio is less. For example if one client/ group/ industry/ company had given say Rs. 25.00 lacs as insurance premium in one year and they had been paid only Rs. 10.00 lacs by way of claims, it is a profitable venture since profit of Rs. 15.00 lacs was generated from the client. What if the client had resulted profit in crores. Such clients or policy holders are always chased by insurance companies and are given best of service. It is better to follow insurance company whose head office is in your zone. One can easily approach the head office in case of big loss or problem in claim settlement.

11.42. Renewal of insurance with same company. It is always better to renew insurance policy with the same company. This has many advantages apart from loyalty. Many a times initial policy is properly issued mentioning correct address, items covered etc. And in subsequent renewal policies some error may have crept in. The insured gets benefit of first policy if insurance continued with the same company. Some times same policy containing error is taken over by some other company and then the problem starts in case of claim with the new company. I have not come across many people who read policies after issue of the same. Policies should be taken without breakage in the policy period, so that benefits can continue. In case of medical policies after a few years, even pre existing diseases are covered. With every renewal, one must explore the prospect of taking wider coverage, additional securities measures etc. Renewal of policy after lodging a claim should always be done with the existing company so that one gets benefit of loyal customer. 11.43. Claim settlement process In the event of settlement of a claim after finalisation of survey report scrutiny of survey report is done by insurance company at appropriate level. Then voucher is sent to the insured in duplicate for sign/stamp/revenue stamp fixed. Should there be bank lien in that case voucher may have to be discharged / signed by bank also.

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In case of burglary etc. Insurance company holds the right to obtain goods from the police, if recovered later on after settlement of a claim. E.g. After a claim of Rs. 30,000.00 has been settled by the insurance company, the local police recover the stolen stock, in such a case the stock would be taken by the insurance company and not by the policy holder who has already taken the claim. In this way insurance company enters into the shoes of the owner and this is called subrogation right. After a claim is settled all the rights are transferred to the insurance company.

Apart from voucher, indemnity bond and subrogation bond has to be given on stamp paper of Rs. 100.00 before final cheque is received from insurance company. Matter of these two bonds is provided by the insurance company, only amount has to be filled on it and signed / stamped by insured. In case the insurance policy was issued with bank lien clause i.e. Finance had been made by the bank in that case cheque is issued in the name of bank a/c of the insured e.g. Pay to say bank of India a/c Verma & co. Current a/c no 23445 at Naraina Vihar, New Delhi. 11.44. Adhoc payment against a claim In case of large claims, sometimes it may take lot of time in police final report/challan/court procedures. In such case if it is proved beyond doubt that the claim is genuine, but claim settlement is pending for some formalities, insurance companies can make ad hoc payment of say 25-50-75%. On finalisation of the case with the police/court, the balance amount may be released. This way business of the insured is not affected and insured is given timely relief by insurance company. Insured may be able to restart his business faster and may not have to pay bank interest on the loan taken. 11.45. Consent letter Before finalising survey report, the surveyor may obtain consent letter from the insured of having accepted assessed loss. This is of prime importance especially when loss assessed is less than claimed amount. Dispute in quantification of loss would not be there if consent letter is obtained from the insured. Insurance companies do prefer to obtain consent letter from the insured before settlement of a claim. This way they make sure that the claim assessment has been discussed with insured in detail by the surveyor and there are no disagreements in assessment of loss. This way court cases can be avoided. Normal language in the consent letter is as follows:Addressed to the insurance company or to the surveyor

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Subject: ---policy no, claim no., claim amount, date of loss, nature of loss, insured. we hereby give our consent if the above claim is settled for a sum of say Rs. 5.00 lacs in full and final settlement subject to policy terms and conditions and that the claim assessment has been discussed with us in detail and we agree with the assessment. Signed and / or stamped by insured. However in extreme cases, the policy holder can dispute the consent letter in court stating that he had no option but to sign the consent letter. His claim was unreasonably delayed and assessment has been done far below genuine claimed amount. Had he not signed the consent letter the claim could have been further affected and/or he was under compulsion to pay huge bank interest on loan liability from bank. 11.46. Letter to police to hand over future recovery to bank. Before settlement of claim insurance company may ask the insured to get a letter acknowledged with sign and stamp by concerned police station that in case of any future recovery rights are with insurers. To The S.H.O. Police station date

Sub. F.I.R. No. And date, policy no. Subject: --- F.I.R. No. And date of F.I.R. And date of loss, policy no, claim no., claim amount, date of loss, nature of loss, insured. Dear sir, The captioned claim has been settled by the following insurance company. In future if there is any recovery kindly hand over the same to the insurers. Name and address of the insurance company.

Thanking you, Name and address of insured.

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11.47 whether to contest full and final claim payment In case consent given, indemnity /subrogation bond given, full and final payment voucher signed, and cheque received by insured, the insured cannot later on contest that he has been paid less by the insurance company. The insured should weigh all factors before accepting cheque in full and final settlement of a claim even if the amount is far too short of his claim amount. Against a claim say of Rs. 1.00 crore, the insurance say wants to settle the fire claim for Rs. 20.00 lacs only due to under insurance, highly depreciated assets, non production some purchase bills, and high value of salvage. There is loan of say Rs. 50.00 lacs on the factory of the insured. If the claim is accepted, there is still out standing bank loan of Rs. 30.00 on the insured. On the other hand if claim amount is not accepted, the bank may sell the factory land of the insured for say Rs. 30.00lacs. In such a case if the insured accepts payment of Rs. 20.00 from the insurance company and feels that he was forced to accept less payment, he may not get relief from any forum having accepted full and final payment and subrogation rights transferred to the insurance company. On the other hand if he does not accept full and final payment of Rs. 20.00 lacs, it may take years to settle the court case, and the court may finally allow say only Rs. 25.00 lacs as final claim. By that time the bank may not await court order and sell the factory land to recover its NPA loan. It is wise to pursue the insurance company at all levels for reasonable claim settlement and give due proof in support of higher amount of claim before accepting full and final payment. The insurance company may take lesser time to listen to reasons for higher claim amount.

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11.48. Business of insurance company re-insurance The insurance Cos receives premium in advance at the beginning of the policy period. Should a claim arise, the insured is paid claim amount after completing all relevant formalities. In this time gap from receiving the premium to settlement of claim, insurance companies use the premium amount at no cost. This is why insurance business is so lucrative all over the world. Rich people are involved in reinsurance business in which insurance premium is taken by them by assuring share in the claim, its called reinsurance. The cost of funds is nil till a claim is paid. In case of no claim, the funds fully belong to the insurers or re-insurer. That so why insurance companies are some of the biggest investors in the share market over long period of time. Some times their gains from the share market is much more than the gains from insurance business of premium verses claim settled. 11.49. Cancellation of insurance policy The insurance companies or the insurer can cancel the policy at 7 or 15 days notice. The balance unutilised premium may be returned. The insurance company does make such cancellation in case of huge claim ratio, false claims, loss of trust of insured etc. In such cases the insured has no option but to look for some other insurers. 11.50. Not having R.O.In cities. Some insurance company are allowing even 1 crores sum insured under shopkeepers policy so as to make insurance easy matter. However the process to settle a claim at D.O. Level headed by divisional manager is not more than Rs. 4.00 lacs even if it is a claim of fire. In some companies fire claim are also governed by miscellaneous claim power in shopkeepers policy. To circumvent the situation, separate policies for burglary and fire are issued. Thus even a fire claim of Rs. 10.00 lac would now fall within power of divisional manager. Since now the claim would be settled by D.M. Under his financial authority which is more in case of fire policy. Thus the insured looses benefit of theft, C.I.T., infidelity, fire coverage and low premium in shopkeepers policy. In cities where regional officers are not situated people try not to take shop keepers policy, since there are good chances of dealing in settlement of claim by their distant situated R.O. If claim exceeds D.O. Level power.

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Chapter 12 12. Hierarchy of insurance companies. A) - AAO - Branch Manager - Sr. Branch Manager These people are at branch level. Normally there is one or more branch under a divisional office. Development officers handle marketing of policies at branch. Claims are processed at the concerned policy issuing office. Final decision of a claim is given by concerned authority as per financial power. Claims are referred to divisional office only if claim amount exceeds financial authority of the branch incharge.

B)

- Divisional Manager - Sr. Divisional Manager These people are at divisional office level. The sr. Branch manager when posted at divisional office is called divisional manager. There can be one or more D.O. Under Regional Office. Development officers handles marketing of policies at divisional office as well. If policy is issued from the divisional office then claims are processed at the concerned divisional office. Claims are referred to regional office only if claim amount exceeds financial authority. The divisional office may also refer a claim in case they seek technical input from regional office. Divisional coordination committee (DCC) can have three members from the divisional office to form DCC to handle claims beyond power of divisional manager.

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C)

Regional office - Asst. Manager - Dy. Manager - Chief manager+ - Regional manager - Chief regional manager - Dy. General manager These people are at R.O.Level. There can be several ro. Under head office. Smaller R.O.Can be headed by chief regional manager and the bigger one by dy. General manager. Some times important policies requiring technical expertise are issued from regional office. The regional office may have chief manager separately for miscellaneous claims or for fire claims. Claims are referred to head office only if claim amount exceeds financial authority. Regional coordination committee (rcc) can have three members from the regional office to form rcc to handle claims beyond power of dy. General manager.

D)

Head office - dy. Manager - Chief manager - Dy. General manager - General manager - Cmd - Board of directors These people are at head office - The claims at h.o. Are dealt as per power/financial authority. At h.o. They have chief manager / Dy. General manager / general manager Separately for miscellaneous claims or for fire claims. The head office is the highest office so far as claim settlement is concerned. Head office Coordination committee (hcc) can have three members from the head office to form hcc to handle claims beyond power of cmd.

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12.1. Financial authority for misc. Claim settlement Financial authority are little different in different companies. The claim are settled as per final miscellaneous assessed loss recommended.

Authority AO AM/BM SBM/DM SDM/Manager DCC Chief Manager RCC-1 Dy. General Manager Rcc-2 (R.O.Headed DGM) GM CMD Board /HCC

Amount In Rs Unto 10,000.00 20,000.00 2,00,000.00 4,00,000.00 7,50,000.00 10,00,000.00 15,00,000.00 20,00,000.00 by 25,00,000.00

75,00,000.00 2,00,00,000.00 Actual

The above is an indication how insurance companies financial powers operate and are always subject to change as per their notifications.

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12.2. Financial authority for fire claim settlement Authority Amount In Rs

AM/BM SBM/DM SDM/Manager DCC Chief Manager RCC-1

. 2.50 lacs 10.00 lacs 25.00 lacs 40.00 lacs 75.00 lacs 1.00 crores

Dy. General Manager 1.50 crores RCC-2 (R.O.Headed by 2.00 crores DGM) GM CMD Board /HCC

4.00 crores 10.00 crores

Actual

The above is an indication of financial power to deal with fire claims. The financial power may differ from company to company a little bit.

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Chapter 13 13. What if claim not settled If the policy holder is not satisfied about settlement of a claim, he has following doors open to him:13.1. Consumer courts Now a days even companies /commercial firms can also approach consumer courts regarding deficiency of service by insurance companies including insurance claims. Consumer courts can be easily accessed at any small town for grievances. Consumer courts have their court in various parts of the country. These days their powers / limits have been enhanced to cater to large cases. Quick disposal is given. They are now a days time bound and one does not need help of lawyer, if insured so desires. For important cases, lawyers can also be asked to represent. The consumer protection (amendment) act, 2002 brought into force from 15th march, 2003 The consumer protection act, 1986 was encated to better protect the interest of consumers. With globalisation of economy and enhancement of consumerism, the importance of the act has multiplied under the act, consumer forums at districts, state and national level are established to provide simple, inexpensive and time bound justice to consumer complaints against any defect in goods or deficiency in services including unfair/ restrictive trade practices adopted by any person. The act was amended in 1991 and 1993 to make the consumer protection act more functional and purposeful, a comprehensive amendment was carried out recently by the government and brought into force from 15th march 2003. The amendment act is expected to greatly strengthen the consumer movement in the country. Highlights of the important amendments Revision of pecuniary jurisdiction in respect of redressal agencies at different levels, i.e., District forum State commission : up to Rs. 20.00 lakhs : above Rs. 20.00 lakhs Up to Rs. One crore

National commission : above Rs. One crore Provision for issue of interim orders by redressal agencies.

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Prescribing time-frame for admission, issue of notices and disposal of complaints/ appeals. Provision for service of notices by courer, fax, speed post etc. Provision for senior most members to preside the consumer forum in the absence of president for any reason. Provision for creation of benches in the national commission and state commissions and holding of circuit benches. Recovery of compensation amount ordered by the redressal agency through certificate case in the same manner as arrears of land revenue. Establishment of consumer protection council at district level.

List of documents required in case of consumer complaint;1. Index 2. Complaint with affidavit 3. Supporting documents in favour of complaint e.g. Survey report, policy copy, letter from insurance company etc. 4. Limitation (2 years from cause of action) 5. Required fees. Note: no. Of copies to be filed 1+3 copies + no. Of opposition parties (with file cover)

One can log on to www.ncdrc.nic.in to locate the consumer redressal forum in your area. National consumer toll free help line 1800 11 4000 Address of ministry of consumer affairs Department of ministry of consumer affairs Krishi Bhawan, New Delhi 110001 Web site www.fcamin.nic.in

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13.2. Insurance ombudsman To avoid long delays in courts, ombudsmen have been appointed in various states to sort out cases pertaining to insurance. The decision of the ombudsman is binding on both the parties viz insured and insurer. How ever the insured if not satisfied can go to other forums for his grievances. Quick disposal of files is given by insurance ombudsman. The only demerit is that the office of ombudsman is only in few capital cities. It is difficult for far off places policy holders to visit their office.

On need not take help of lawyer to contest his claim in the ombudsman office. Mere representation is enough.

Who can approach? (a) any individual insurance policy holder (or his legal heirs) who has taken insurance on personal lines e.g. Personal accident insurance, insurance of property of the individual such as motor vehicle, household articles etc., and mediclaim insurance (not for partnerships, co-operatives, association, trusts, etc.) (b) Sole proprietor (if the policy stands in the name of the proprietary concern). Complaints pertaining to repudiation of claims totally or partially, 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 premiums paid/payable and non-issue of insurance documents are covered. How to approach? The complaint can be given on a plain paper. When the complaint falls within the terms of reference, the ombudsman will issue prescribed forms to the complainant.

Non-renewal of a policy by the insurer cannot be represented. No fees/charges are required to be paid. No lawyer required. Time limit: within one year of the rejection by the insurer of the representation of the complaint or the insurers final reply to the complainants representation. If youve already complained to the consumer forum, you cant approach the ombudsman. The complaint amount should be upto Rs. 20.00 lacs only. Before approaching the ombudsman the insured should have made representation to the insurance company and received a reply which is not acceptable to him or there is no reply within a month.
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Complaint with the ombudsman can be filed against private or public sector insurance companies.

13.3. What to do in case of delay in settlement of claim In such cases insured should approach divisional office, regional office, head office with his grievances. Going to court should be the last option and not the first. There are grievances cell at different levels in insurance companies. Insurance companies do organise claim clearance week at regional office level. One can approach them in case of delay in settlement of claim during this period when special emphasis is made to settle deserving cases. - A claim may have been repudiated or lesser amount may have been paid by the insurance company. The insured can approach the grievance department of the insurance company for reconsideration of the claim. Letter with full facts may be addressed to the deputy general manager / chief regional manager at regional office or chair man cum managing director at head office of insurance company. -normally every Thursday of the month one can approach the region head for grievances matters.

13.4. Arbitration The insured if not satisfied about claim settlement, can ask for arbitration. A committee is constituted for hearing grievances and suitable decision is given by the arbitration committee. This way delays in court etc. Can be avoided. Arbitration request is made at head office of the insurance company. These requests are beneficial where large seems are involved and apparent technical error has been made by insurance companies in settlement of claim.

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13.5. Right to information act ( R.T.I.) These days R.T.I. Is an important tool to enforce rights of insured. Each insurance company is supposed to have a public information officer at head office. Application can be made by paying Rs. 10.00 as application fees by demand draft drawn on public information officer. The four nationalised companies have their head offices at respected cities and accordingly application of R.T.I. has to be made at their head office who in turn asks the concerned branch/divisional office/regional office to provide necessary details related to the claim as requested. Under RTI one can ask why his claim is being delayed. One can ask for reasons of rejection of claim, policy copy, proposal form copy, any amendment made in policies, basis of insurance, preliminary survey report copy, final survey report copy etc. These papers can be obtained by paying nominal fees for photo copies as asked by public information officer of the insurance company. 13.6. Insurance regulatory and development authority, One can approach IRDA at Hyderabad to persuade insurance company to provide survey report, early settlement of claim, and wrong issue of policy resulting rejection of claim. The representation can be made in specified format or by a letter. IRDA is a regulatory body constituted under insurance act. They have direct control over insurance companies. 13.7.Rights of policy holders to obtain a copy of survey report under IRDA rules If the policy holder is not satisfied with the assessment of a claim, they can ask for a copy of survey report from the surveyor or concerned policy issuing office. As per IRDA, insurance company is supposed to provide copy of survey report to the policy holder on demand. As per the insurance regulatory and development authority (protection of policyholders interests) regulation, 2002. a copy of the report being furnished to the insured, if he so desires. 13.8. Ministry of public grievances Policy holder can approach for his grievances against dissatisfaction in settlement of claims through the ministry of public grievances at New Delhi. There are no charges and simple application in format is enough.

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13.9. Ministry of finance Policy holder can approach the ministry of banking and insurance under ministry of finance for his grievances against all matters relating to general insurance companies in the country including settlement of a claim. Insurance division Director of public grievances Ministry of finance Department of economic affairs Jeevan deep building, Parliament street, new delhi 110001 E mail : gbhujbal@hub.nic.in Phone 23365809, fax 23344605 The ministry of banking and insurance controls all the insurance companies and can ask for replies from insurance companies against grievances of a policy holder. 13.10. Civil courts Finally civil courts are last resort to sorting out claim related matters. There are courts all over the country. The only problems are of delay. As such all other avenues should be exhausted before approaching civil courts. Moreover 1% of claim amount may have to be deposited as court fees. Court fees is not refundable. In case of big claims court fees can be substantial. In case of consumer courts fees is very small.

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Conclusion
Preface as conclusion Had I not read the book I would have said I had lodged a fire insurance claim and it was turned down by the insurance company. The address where the loss took place was not covered in the policy. I had shifted to the new premises, without informing the insurance, a week before the loss took place. I must admit the insurance company has all the rights to repudiate my claim, since I never treated them with the importance they deserved. I took the bank very seriously but not the insurance company. Now I am paying to bank double instalment for old loan restructured after fire and new loan on my new factory constructed after fire. This is what would have happened had I not read the book.

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