comm insurance

COMMERCIAL INSURANCE

PREFACETHIS PROJECT IS UNDERTAKEN TO FULFIL THE PROJECT WORK COMPONENT OF THE BANKING & INSURANCE PROGRAM IN THE VI SEMESTER. MY PROJECT GUIDE FROM BHAVANS SOMANI COLLEGE IS PROF. ARVIND DHOND. THIS PROJECT SHOWS THE IMPORTANCE OF COMMERCIAL INSURANCE IN THE BUSINESS FIRM & ALSO THE TYPES OF INSURANCE NEEDED FOR THE BUSINESS. COMMERCIAL INSURANCE PROVIDES VALUABLE PROTECTION AGAINST SUCH THINGS AS THEFT, PROPERTY DAMAGE, AND LIABILITY. THIS PROJECT ALSO GIVES AN OVERVIEW OF HOW TO OBTAIN COMMERCIAL INSURANCE & ALSO LEADING COMMERCIAL INSURANCE PROVIDERS.

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INDEXCHAPTER NO 1 2 34

CHAPTER NAME COMMERCIAL INSURANCE DIFFERENT TYPES OF COMMERCIAL INSURANCE PARTICIPANTS OF COMMERCIAL INSURANCE COMPANY OPERATIONS STANDARDS FOR CANCELLATION, RENEWAL

PAGE NO 7-1011-27 28-35 36-39

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AND NON-RENEWAL OF COMMERCIAL INSURANCE POLICIES

40-41

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COMMERCIAL INSURANCE AGENT COMMERCIAL INSURANCE COVERAGES COMPANIES PROVIDING COMMERCIAL INSURANCE DO'S AND DON'TS: BUSINESS INSURANCE COMMERCIAL INSURANCE PLANNING WORKSHEET COMMERCIAL INSURANCE FORM WEBLIOGRAPHY

42-42 43-48 49-53 54-55 56-56 57-58 59-59

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CHAPTER 1 COMMERCIAL INSURANCE2


1.1 INTRODUCTIONCommercial insurance is insurance for a business. In fact, it is one of the most important investments a business owner can make. Commercial insurance can be instrumental in protecting a business from potential loss caused by unforeseen and unfortunate circumstances. Commercial insurance can provide valuable protection against such things as theft, property damage, and liability. It can also provide coverage for business interruption and employee injuries. A business owner who chooses to operate a business without insurance puts his enterprise at risk of losing money and property in the wake of an unfortunate event. In some situations, a business owner may even place personal money and property at risk by failing to secure adequate commercial insurance.

Whether you are contemplating starting a new business, are a new business owner, or have owned a business for many years, commercial insurance can be one of the most important ongoing financial investments you make in the life of your company. Operating a business is 3

COMMERCIAL INSURANCE extremely challenging without having to worry about suffering significant financial loss due to unforeseen circumstances. Commercial insurance can protect from some of the most common losses experienced by business owners such as property damage, business interruption, theft, liability, and worker injury. Purchasing the appropriate commercial insurance coverage can make the difference between going out of business after a severe loss or recovering with minimal business interruption and financial impairment to your companys operations. Commercial insurance performs a critical role in the world economy. Without it, the economy could not function. Insurers essentially protect the economic system from failure by assuming the risks inherent in the production of goods and services. This transfer of risk frees insured companies from the potentially paralyzing fear that an accident or mistake could cause large losses or even financial ruin. Organizations need to reduce both internal and external risks. They also require to safeguard their business against unforeseen circumstances/events. Insurance companies are catering to small, medium and large scale companies to minimize their risk. Good Insurance advice can save time, money and worry. Insurance companies undertake complex procedure to evaluate and review the impact of any change in commercial activity or new ventures. Since the first fire insurance policies were written in the 1700s, it has responded to new types of risk by creating new coverages to protect its policyholders and carving out niche products to respond to the needs of specific industries. Recent examples of this are technology errors & omissions and cyber-risk liability, both of which were developed in the late 1990s to address risks involved in such businesses as personal information data processing. The convincing boom of corporate sector in India has given a new definition to commercial insurance in the country. Proper risk management against any kind of disaster is the mantra of successful business and other commercial ventures. The function of risk management is to provide safety against any kind of internal or external hazard. Commercial insurance companies in India offer products which suit the business and corporate needs and provide the commercial avenues all kind of safety and security. The value of premium for providing coverage to commercial ventures and corporate sectors is determined on the basis of a few factors which include: 4

COMMERCIAL INSURANCE i. Nature of the commercial venture ii. Size of the organization iii. Type of the industry iv. Strength of the employees v. Annual turn over of the business.

1.2 DEFINITION AND MEANING :1. The act, system, or business of insuring property, etc., against loss or harm arising in specified contingencies, as fire, accident, or the like, in consideration of a payment proportionate to the risk involved. 5

COMMERCIAL INSURANCE 2. Coverage by contract in which one party agrees to indemnify or reimburse another for loss that occurs under the terms of the contract. 3. The contract itself, set forth in a written or printed agreement or policy. 4. The amount for which anything is insured. 5. An insurance premium. 6. Any means of guaranteeing against loss or harm. The convincing boom of corporate sector in India has given a new definition to commercial insurance in the country. Proper risk management against any kind of disaster is the mantra of successful business and other commercial ventures. The function of risk management is to provide safety against any kind of internal or external hazard. Commercial insurance can provide valuable protection against such things as theft, property damage, and liability. It can also provide coverage for business interruption and employee injuries. A business owner who chooses to operate a business without insurance puts his enterprise at risk of losing money and property in the wake of an unfortunate event. In some situations, a business owner may even place personal money and property at risk by failing to secure adequate commercial insurance.

CHAPTER 2 DIFFERENT TYPES OF COMMERCIAL INSURANCE

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COMMERCIAL INSURANCE The most common types of commercial insurance are property, liability and workers' compensation. In general, property insurance covers damages to your business property; liability insurance covers damages to third parties; and workers' compensation insurance covers on-thejob injuries to your employees. Depending on your business, you may want additional specialized coverages. Listed below are some of the different types of commercial insurance.

2.1 PROPERTY INSURANCE:Property insurance pays for losses and damages to real or personal property. Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. Property is insured in two main ways - open perils and named perils. Open perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on open peril policies include damage resulting from earthquakes, floods, nuclear incidents, acts of terrorism and war. Named perils require the actual cause of loss to be listed in the policy for insurance to be provided. The more common named perils include such damage-causing events as fire, lightning, explosion and theft. For example, a property insurance policy would cover fire damage to your office space. i. Boiler and Machinery Insurance: Boiler and machinery insurance sometimes referred to as "equipment breakdown" or "mechanical breakdown coverage," provides

coverage for the accidental breakdown of boilers, machinery, and equipment. This type of coverage usually will reimburse you for property damage and business interruption losses. For example, this coverage would cover fire damage to computers.

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COMMERCIAL INSURANCE ii. Debris Removal Insurance:

Debris removal insurance covers the cost of removing debris after a fire, flood, windstorm, etc. For example, a fire burns your building to the ground. Before you can start rebuilding, the remains of the old building have to be removed. Your property insurance will cover the costs of rebuilding, but not of removing the debris. iii. Builder's Risk Insurance:

Builder's risk insurance covers buildings while they are being constructed. For example, a Builder's risk policy would cover losses if a windstorm takes down your partially constructed condominium complex. iv. Glass Insurance: Glass insurance covers broken store windows and plate glass windows. v. Inland Marine Insurance: Inland marine insurance covers property people's premises. in transit and on other your this property For

example,

insurance would cover fire-damage to customers' clothing from a fire at your dry cleaning business.

vi. Business Interruption

Insurance:

Business interruption insurance covers lost income and expenses resulting from property damage or loss. For example, if a fire forces you to close your doors for two months, this

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COMMERCIAL INSURANCE insurance would reimburse you for salaries, taxes, rents, and net profits that would have been earned during the two-month period. vii. Ordinance or Law Insurance:

Ordinance or law insurance covers the costs associated with having to demolish and rebuild to code when your building has been partially destroyed (usually 50 percent). For example, your three-story building is 100 years old. A flood destroys the basement and first two stories. Because more than 50 percent of your building has to be rebuilt, a local ordinance requires that the building be completely demolished and rebuilt according to current building codes. Property insurance covers only the replacement value, not the upgrade. viii.Tenant's Insurance: Commercial leases often require tenants to carry a certain amount of insurance. A renter's commercial policy covers damages to improvements you make to your rental space and damages to the building caused by the negligence of your employees. ix. Crime Insurance:

Crime insurance covers theft, burglary, and robbery of money, securities, stock, and fixtures from employees and outsiders. x. Fidelity Bonds:

A Bond company covers losses due to a bonded employee's theft of business propertyand money.

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2.2 LIABILITY INSURANCE:This commercial insurance provides coverage for injuries caused by a business concern or the individual business owner to third parties as a result of which the person or another business concern so affected may sue either the business concern or the individual business owner for personal injuries or property damages. This kind of a commercial insurance policy makes payments towards the insurance claimed by the policy holder for the cost of defending and resolving the law suit brought against him or her. In contrast, a general commercial liability insurance policy will only provide coverage to the policy holder for the common risks such as customer injuries on the premises of the business concern. Liability insurance is a part of the general insurance system of risk financing. With increased globalization the need for liability insurance is gaining importance. Be it manufacturing unit or a service industry, every industry segment is exposed to liability claims. With increased awareness of ones rights, the number of such claims has increased many folds over the years. With Globalization such types of claims, has crossed the geographical limits. Apart from the huge outgo in such types of claims, a huge amount is spent on the litigation process, thereby crippling the companys financials. As such it becomes all the more vital to be properly equipped to fight such unwelcome situations. Liability insurance is designed to offer specific protection against third party claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally and contractual liabilities are not covered under liability insurance policies. When a claim is made, the insurance carrier has the right to defend the insured. If someone sues for 10

COMMERCIAL INSURANCE personal injuries or property damage, the cost of defending and resolving the suit would be covered by the liability insurance policy. A general liability policy will covers common risks, including customer injuries on company premises. More specialized varieties of liability insurance include:

i. Errors and Omissions Insurance: Errors and omissions ("E & O") insurance covers inadvertent mistakes or failures that cause injury to a third party. The act must actually be an inadvertent error, and not merely poor judgment or intentional acts. Legal liability cover for the liability claims by third parties, on account of the bodily injury or property damage arising out of services offered or which should have been offered by the Insured as a part of their profession. The policy is ideal for all those engaged in service industry, including medical practitioners, architects, engineers, software firms etc. For example, an E & O policy would cover damages arising from an insurance agent failing to file policy applications, or a notary forgetting to fill out notarizations properly. ii. Malpractice Insurance: It generally covers the payments which may arise out of a professionals defense costs and/or any judgment or settlement in case the concerned insured professional causes injury to a third party by conducting below par. These kind of professional liability insurances are issued to doctors, dentists, accountants, real estate agents, architects, and all professionals. Malpractice insurance, or professional liability insurance, pays for losses resulting from injuries to third parties when a professional's conduct falls below the profession's standard of care. For example, if a doctor makes a mistake that other doctors of his specialty would not have made, his patient might sue him. A malpractice policy will pay his defense costs and any judgment or settlement. Malpractice insurance is available for doctors, dentists, accountants, real estate agents, architects, and other professionals.

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COMMERCIAL INSURANCE iii. Automobile Insurance: Commercial Automobile Insurance provides insurance coverage for the vehicles used for the purposes of conducting business and also to make payments towards the persons who may be injured by the same. Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident. Commercial automobile policies cover the cars, vans, trucks and trailers used in your business. The coverage will reimburse you if your vehicles are damaged or stolen or if the driver injures a person or property. iv. Directors' and Officers' Liability Insurance : It provides insurance coverage in order to make payments towards the legal cases that may be filed against the directors and officers belonging to corporations and nonprofit organizations.

2.3 WORKERS' COMPENSATION INSURANCE:The Policy covers liabilities falling on the employers for death or injury sustained by his employees who falls in the category of `workman as defined in the Workmen Compensation Act. The Policy covers statutory liability as well as liabilities arising under Common Law. The employees not falling under the definition of `workman can be covered under the Common Law. The Policy primarily includes the liabilities towards the employees, whilst on work. Medical expenses can also be covered at the Insureds options. The premium depends on the annual wages disbursed to the employees and the type of work the employee is engaged in. Workers' compensation insurance covers you for an employee's on-the-job injuries. Businesses with employees are required by various state laws to carry some type of workers' compensation insurance. In most cases, workers' compensation laws prohibit the employee from bringing a negligence lawsuit against an employer for work-related injuries.Most employers purchase workers compensation insurance plans from insurance companies specifically designed to provide workers compensation insurance benefits. In some countries, these are mandatory, with the exception of a few jurisdictions that allow larger companies to insure themselves. Smaller 12

COMMERCIAL INSURANCE companies, however, such as those with just a handful of employees, need not purchase such plans. The goal of workers compensation insurance is to get the injured employee back on his feet and working again as quickly as possible without causing the employer unnecessary hardship or loss of business.

2.4 OTHER TYPES OF COMMERCIAL INSURANCE: I. Agriculture Insurance:Agricultural Insurance provides the farmers insurance coverage and financial help in time of their needs. India is a land of agriculture and a vast majority of people depends on this profession. Agriculture in India is vulnerable to many kinds of damages which are caused by natural calamities like flood, excessive rain and hail-storming, diseases and pests which play havoc on the crops. Agricultural insurance schemes provide the farmers financial support in case they are caught in any undesired situation which proves fatal to their crops. Agricultural Insurance in India mainly covers the agricultural lands which are spread over rainsoaked areas. The farmers in India having their lands in the flood and rain affected regions often bear the brunt of the nature. The agricultural lands are washed away by excessive rain causing flood which damages crops. Sometimes, crops are attacked by pests or they die of diseases. These types of sticky situations often prove very fatal for the farmers. To save the farmers from these kinds of difficult situations, there are several agricultural insurance companies in India. These companies compensate the losses of the farmers done by any natural calamity. Besides, Crop Insurance schemes in India also encourage the farmers for implementing progressive farming techniques through the usage of technologically rich agricultural apparatus and high value in-puts. Agricultural Insurance schemes in India are looked after by Agriculture Insurance Company of India Limited (AIC) which has been formed by the Government of India. The national 13

COMMERCIAL INSURANCE corporation of agricultural insurance was set up in the larger interest of the farmers. Agriculture Insurance Company of India Limited (AIC) promotes 5 other organizations, each of them having individual percentage of share holdings. India is an agrarian society with 75% of the population depending on it, for their livelihood. Agriculture or crop insurance has assumed importance with large scale damage caused due to pest attacks, crop diseases and vagaries of weather. The objective is to provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases. The list of crops being covered for insurance differs from state to state. Generally quite a few Kharif and Rabi season crops are covered. These crops are insured at the community/block/gram panchayat levels. Agriculture insurance schemes are of immense help to farmers, providing them with financial security. Calculation of Agriculture Insurance Amount/Premium: The amount of premium depends on a number of factors like size of land of the farmer, his financial standing, number of crops being insured and the sum insured. Agriculture Insurance Claim Procedure: Farmers can claim from the banks by submitting a claim form. The claim representative will analyze the extent of damage caused to the crops. Based on the report of the surveyor, the claim is given to farmers within a month. Documents Required for Agriculture Insurance Claim: 1. The farmer must approach the designated branch / PACS and submit the proposal form in the prescribed format. 2. The farmer must provide documentary evidence in regard to the possession of cultivable land (copy of the pass book and extract. 3. Land revenue receipt should be enclosed 4. The farmer must furnish area sown confirmation certificate, if required. List of Some of Insurance Companies Offering Agriculture Insurance: Agriculture Insurance Co. of India - Varsha Bima United India Insurance Co. - Rural Policies

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II.Fire Insurance:Fire Insurance is governed by All India Fire Tariff effective from 31.3.2001 issued by Tariff Advisory Committee, a Statutory Body. It is a commercial policy covering building, offices, machinery, contents and personal belongings of the office. It mitigates the risk of loss of customers arising from fire breakout. The insured should take all possible steps to minimize the loss. What are the risks covered under fire insurance? Fire insurance business in India is governed by the All India Fire Tariff that lays down the terms of coverage, the premium rates and the conditions of the Fire Policy. The fire insurance policy has been renamed as Standard Fire and Special Perils Policy. The risks covered are as follows: Fire: Destruction or damage to the property insured by its own fermentation, natural heating or spontaneous combustion or its undergoing any heating or drying process cannot be treated as damage due to fire. For e.g., paints or chemicals in a factory undergoing heat treatment and consequently damaged by fire is not covered. Further, burning of property insured by order of any Public Authority is excluded from the scope of cover. Lightning: Lightning may result in fire damage or other types of damage, such as a roof broken by a falling chimney struck by lightning or cracks in a building due to a lightning strike. Both fire and other types of damages caused by lightning are covered by the policy. Explosion/ Implosion: Explosion is defined as a sudden, violent burst with a loud report. An explosion is caused inside a vessel when the pressure within the vessel exceeds the atmospheric pressure acting externally on its surface. An explosion may cause fire damage or concussion damage. Implosion means bursting inward or collapse. This takes place when the external pressure exceeds the internal pressure. This policy, however, does not cover destruction or damage caused 15

COMMERCIAL INSURANCE to the boilers (other than domestic boilers), economizers or other vessels in which steam is generated and machinery or apparatus subject to centrifugal force by its own explosion/ implosion. These risks can be covered in a Boiler & Pressure Plant Insurance Policy, which is specially designed to handle these risks. Bush Fire: This covers damage caused by burning, whether accidental or otherwise, of bush and jungles and the clearing of lands by fire, but excluding destruction or damage caused by Forest Fire. Calculation of Fire Insurance Amount/Premium: The market value of the property is considered while insuring the sum. The amount of premium depends on a number of factors and individual policies of different insurers. Fire Insurance Claim Procedure: Individuals/corporates must inform insurer as early as possible, in no case later than 24 hours. Provide relevant information to the surveyor/claim representative appointed by the insurer. The surveyor then analyzes the extent/ value of loss or damage. The claim process takes anywhere between one to three weeks. Documents Required for Fire Insurance Claim: 1. True copy of the policy along with schedule. 2. Report of fire brigade. 3. Claim Form 4. Photographs 5. Past claims experience List of Some of Insurance Companies Offering Fire Insurance: ICICI Lombard - Fire and Special Perils Policy (Material Damage) United India Insurance Co. - Standard Fire and Special Perils Policy

III.Industrial Insurance:

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Industrial insurance is a comprehensive policy covering a gamut of products. This is a specially designed policy covering any kind of loss or damage caused to the products it covers. This policy is a Comprehensive Package Policy which covers almost all risks and perils, which a large industry may face during its operation. This policy covers Buildings, Machinery, Furniture, Fixtures, Fitting & electrical installations on Reinstatement value, while the stock is covered on market value basis. Underinsurance on each item of the schedule will be ignored if it does not exceed 15% of sum insured. Policy also covers equipments and machinery sent for repairs outside the premises for a period of 60 days. Transit risk inside the compound of an industry is also covered. Covered Risks: Bursting and overflowing of water tanks, apparatus and pipes, Deterioration of stocks due to power failure following damage to premises of public power stations and electric service feeders (for Cold Storages), Forest fire, Leakage and Contamination cover, Spoilage Material Damage cover, Sprinkler leakage cover, Subterranean fire, Spontaneous and Landslide cover, Burglary (other than Larceny), Machinery Breakdown/Boiler explosion/Electronic Equipment, Business Interruption following fire, Business Interruption following Machinery Breakdown.

Major Exclusions: Damage to the property caused by faulty or defective design materials or workmanship, inherent vice, wear and tear etc. Interruption of water supply, gas, electricity or fuel systems. Collapse or cracking of the building. Willful act or gross negligence. War, Invasion, mutiny, rebellion, 17

COMMERCIAL INSURANCE revolution etc. Damage direct or indirect by nuclear weapons material and contamination by radioactivity. Calculation of Industrial Insurance Amount/Premium: The sum insured is generally equal to the market value of the equipment/machinery being insured. The insured amount also includes cost of installation, duty, taxes, freight etc. If the amount insured is less than the market price, then the claims are paid proportionately. Industrial Insurance Claim Process: Insured should inform the insurer's office by phone, letter or fax. Necessary steps should be taken to minimise the loss. Obtain estimate of repair from repairer of your choice. The claim process takes anywhere between one to three weeks. Submit this repair estimate and claim form to the surveyor deputed by the insurance company. After getting clearance from the surveyor, proceed for repairing machine or ordering for replacement. Submit actual bills of repair/replacement with proof of payment to the surveyor The claim process. Documents Required for Industrial Insurance Claim Process: 1. Copy of FIR 2. List of loss/damage of stock/equipment 3. Claim Form List of Some of Insurance Companies Offering Industrial Insurance: ICICI Lombard - Industrial Plan United India Insurance Co. - Industrial Plant & Machinery Policy The New India Assurance Co. - Industrial Products

IV.Marine Insurance:Since time immemorial, merchants engaged in maritime commerce have explored ways to ensure the security essential for the transportation of their 18

COMMERCIAL INSURANCE merchandise. The onslaught of the perils of the sea has always threatened the safe passage of goods across the seas and frontiers. Respite from this burden of trade was only possible through mutual aid and assistance. Traders pooled together a fund that could be utilised in the contingency of their partner. Thus became the foundation of what today is popularly known as Marine Cargo Insurance. Marine Insurance is the oldest form of insurance in the world. In the olden days, London as the centre of the British Empire, had the greatest share of the world's trading and commercial activities and it was here that marine insurance principally developed. Marine insurance falls under commercial insurance. The policy is taken to reduce business risks. It caters to small scale business organizations to large corporates. Policy does not cover loss or damage due to willful misconduct, ordinary leakage, improper packing, delay, war, strike, riot and civil commotion. Different types of Marine Insurance are available: 1. Marine import transit insurance 2. Marine export transit insurance 3. Marine inland transit insurance 4. Marine insurance claim procedure Calculation of Marine Insurance Amount/Premium: Amount of premium depends on factors like nature of cargo, scope of cover, packing, mode of conveyance, distance and past claims experience. Premium can be paid on a monthly/quarterly/half-yearly/yearly basis.

Marine Insurance Claim Procedure: In case of loss/damage in transit, a monetary claim should be lodged with the carrier within the time limit to protect recovery rights Appointment of surveyor or claim representative in agreement with the insurer to determine the nature, cause and extent of loss/damage The surveyor informs the insurer of the approximate value of loss incurred Documents Required for Marine Insurance Claim: 19

COMMERCIAL INSURANCE 1. Original Invoice & packing List - if forming part of Invoice 2. Document of declaration of consignment 3. Damage Certificate from the carrier List of Some of Insurance Companies Offering Marine Insurance: ICICI Lombard - Marine Import Transit Insurance Policy United India Insurance Co. - Marine Cargo The New India Assurance Co. - Marine Cargo Policy.

V.Shop Insurance:Shop Insurance is specially designed to meet the needs of small shopkeepers. For any retailer, the shop is not only an asset but also is his/her main source of income. Retailers shudder to think about anything that could go wrong with their premises. But calamities do happen and it is very important for 20

COMMERCIAL INSURANCE them to safeguard their premises. The shopkeeper insurance policy is specifically designed to cover all the risks and contingencies faced by small or medium-sized shop owners. It provides protection for the property and the interests of the insured (and their partners) in the business venture. As a shop owner, once you buy a shop insurance policy, the insurer agrees to cover you for losses incurred in natural and manmade calamities. The sum insured depends on the value of your shop and the value of the contents of the shop. The value of the shop is calculated on the basis of the estimated cost of rebuilding it completely. The contents of the shop are assessed according to their value at the time of purchasing the shop insurance policy. The valuation would also include electrical and mechanical appliances in the shop. It is a comprehensive insurance, catering to different insurance needs of shopkeepers. One policy per shop is generally given by insurers. It covers damage/ loss to shop due to fire, burglary, riot, strike, loss of money in transit, fraud committed by client's employees etc. The policy is meant for shops only, hence restaurants and tea /coffee shops cannot be insured under this insurance policy. Covered Risks : The coverage provides for damage to the building against fire and its associated perils due to natural or man-made calamities. Natural calamities include fire, lightning, earthquake, fire, landslide and rockslide damage, floods, inundations, storms, tempests, typhoons, hurricanes, tornados, or cyclones. Man-made calamities include explosion of gas in domestic appliances, bursting and overflowing tanks or pipes, damage caused by aircrafts, riots, strikes, malicious or terrorist acts, and impact damage. Exclusions : Insurance companies are selective about the risk covers they offer in shopkeepers' insurance policies. For instance, some may charge an additional price for cover against terrorist activities. Others may enforce deductibles that expect you to pay a portion of the claim amount. Loss, destruction or damage caused by: War, invasion, foreign enemy hostilities, war-like operations, civil war, mutiny, civil commotion Nuclear activity Pollution or contamination. Calculation of Shop Insurance Amount/Premium: 21

COMMERCIAL INSURANCE The shop is generally insured on a market value basis less the depreciation cost. Articles in the shop are insured on cost price. Premium amount may vary from insurer to insurer and the number of sections a person is availing under the policy. Discount in premium is sometimes given by companies depending upon the number of sections opted for by the insured. Premium can be paid on a monthly/quarterly/half yearly/ yearly basis. Shop Insurance Claim Procedure: Take necessary steps to minimize the loss/damage. Report the claim to insurer. A surveyor appointed by the company will analyze the damage /loss incurred. The claim process takes anywhere between 7-21 days. Documents Required for Shop Insurance Claim: 1. Copy of FIR in case of theft 2. List of articles loss/damage 3. Proof of ownership of shop 4. Claim form List of Some of Insurance Companies Offering Shop Insurance: ICICI Lombard - Shop Cover The New India Assurance Co. - Policy Package For Shop United India Insurance Co. - Protection Against Damage of Shop Bajaj Allianz - Shop/ Showroom Insurance

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CHAPTER 3 PARTICIPANTS OF COMMERCIAL INSURANCE3.1 INSURANCE PROVIDERS:The providers of commercial insurance are extraordinarily diverse. They vary in size, specialty and role in the industry. Insurance Companies: Insurance companies can be categorized in many ways. One is by the size of their policyholder surplus or capital. The larger the policyholder surplus the more risk they can assume. The smallest companies have less than $1 million in surplus and the largest more than $2 billion. Most fall into the $250 million and under policyholder surplus category. Insurers can also be divided according to premiums, which are roughly equivalent to revenues. The largest have premiums in excess of $10 billion. Most commercial insurers are stock companies owned by their stockholders, but some are mutual, which are owned by their policyholders, and a few are reciprocal insurance exchanges. Reciprocals are an old form of insurance entity where members or subscribers provide insurance to one another; share profits, losses and expenses; elect a board; and appoint an attorney-in-fact, which may be an individual or a corporation, to manage the operation. An insurance company may be a single entity or a holding company with subsidiaries. Subsidiaries may be organized to operate in a single state, sell different insurance products from the parent organization or cater to a nonstandard market. Some parent companies are domiciled outside the United States and some insurers have non-insurance related parents. Large commercial insurers generally operate in most states and some have global operations. Smaller or specialized insurers may focus on a specific geographical area or specific states. With so many different kinds of businesses seeking insurance, its not surprising that insurers tend to specialize. Specialization facilitates the accumulation of expertise. In addition, insurance works best where an insurer has a large number of policyholders with similar exposures to loss. The more policyholders of the same type there are, the better the insurer is

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COMMERCIAL INSURANCE able to predict losses for that type and price the coverage accurately, according to a mathematical premise known as the law of large numbers. The law of large numbers works best for personal lines insurers with thousands of similar auto and homeowners policies and in commercial lines for small Main Street type businesses. These smaller firms tend to be similar in size and loss exposures and are generally covered by a standard policy known as a Business Owners policy. By contrast, larger firms vary widely in their exposure to loss. Nevertheless, many commercial insurers concentrate on certain types of businesses or insurance coverages or both. They may target firms in the energy or transportation fields, for example, building contractors or financial services institutions. They may be specialists in directors and officers liability insurance, medical malpractice liability insurance, surety bonds, crop insurance or workers compensation, sometimes covering other incidental risks as well. Many personal lines insurance companies offer commercial insurance but generally only to typically small, low-risk, kinds of businesses and many commercial insurance companies offer personal lines insurance as well as life insurance and other Financial services products. Commercial insurers that have been licensed or admitted to do business in a state by the state insurance department are generally willing to cover most business risks. (The term risk in the insurance industry can mean a peril insured against, such as the risk of fire, and also the entity insured.) However, some risks are hard to place in the standard market because they dont meet licensed companies underwriting criteria. Among the most difficult to place are: unusual or unique risks that are hard to price if the insurance industry has no prior experience with them, such as tattoo and body piercing shops when they first began to appear; risky or substandard risks, such as fire coverage for a business with a prior history of fires; businesses whose operations are very complex, such as an offshore oil rig; and exposures that require higher limits than most companies are willing, or able under regulatory guidelines, to provide. (To safeguard an insurers financial stability in the event of a total loss, insurers cannot devote more than a certain amount of their underwriting capacity to insure any one risk.) In such cases, part of the risk may be insured in the standard market and the remainder, or excess in the surplus lines market.

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COMMERCIAL INSURANCE Surplus Lines: The surplus lines market, a group of highly specialized insurers that includes Lloyds of London exists to assume risks that licensed companies decline to insure or will only insure at a very high price, with many exclusions or with a very high deductible. To be eligible to seek coverage in the surplus lines market, a diligent effort must have been made to place insurance with an admitted company, usually defined by a certain number of declinations or rejections by licensed insurers, typically three to five. Many states provide an export list of risks that can be insured in the surplus lines which obviates the diligent search requirement. The terms applied to the surplus lines market - non-admitted, unlicensed and unauthorized - do not mean that surplus lines companies are barred from selling insurance in a state or are unregulated. They are just less regulated. Each state has surplus lines regulations and each surplus lines company is overseen for solvency by its home state. More than half of the states maintain a list of eligible surplus lines companies and some a list of those that are not eligible to do business in that state. In addition, depending on the state, the surplus lines agent or broker, who must be licensed, is responsible for checking the eligibility of the company. In a number of states, surplus lines companies are also monitored by surplus lines organizations, known as Stamping Offices, which, among their many functions, assist their states department of insurance in the regulation and oversight of surplus lines insurers. They also evaluate insurers for eligibility to do business in the state and review insurance policies obtained by surplus lines agents or brokers for their clients. The amount of business insured in the surplus lines market has grown over the years but also tends to fluctuate, depending on the insurance cycle. Not surprisingly, surplus lines companies thrive in hard markets when certain kinds of coverage those are available in soft markets from standard insurers, such as nursing home insurance, may be more difficult to obtain. (In the insurance industry, in a hard market the price of coverage increases and insurers are more selective about the risks they assume because capital and, hence, underwriting capacity is limited.) During the most recent hard market, growth in surplus lines premium far exceeded growth in the property/casualty insurance industry as a whole. In 2003, when the hard market was reaching its peak, surplus lines premiums represented about 13 percent of the commercial lines market, according to A.M. Best, a rating agency. Surplus lines represented only about 6 percent of the commercial lines market in 1993 and less than 4 percent in 1983. In 2003 surplus 25

COMMERCIAL INSURANCE lines premiums grew 28 percent from the previous year, following an extraordinary 62 percent jump in 2002. By contrast, growth for the total property/casualty insurance industry was 12 percent and 14 percent in 2003 and 2002, respectively. The Residual Market: Businesses that cannot obtain insurance in the standard market may have another choice, depending on the type of insurance they need, where they are located and why they have been rejected for coverage. If they are looking for property coverage and are considered high risks because of conditions beyond their control, they may be eligible for insurance under state-run programs known collectively as the residual, involuntary or shared market because all property insurers doing business in the state share in the premiums and losses. In addition, since auto liability insurance is mandatory in all states, all 51 jurisdictions provide auto insurance programs for businesses that have difficulty obtaining auto insurance in the standard market. Most are assigned risk plans, where all auto insurers in the state are assigned residual market applicants on a rotating basis according to their market share. A few states have somewhat different arrangements to ensure that nobody has to drive without liability insurance.

Workers compensation insurance is also available from the residual market. The mechanism used to handle the workers compensation residual market varies from state to state. In the six states with a monopolistic state workers compensation fund, where the state provides workers compensation insurance to all employers, all businesses are insured through that fund. In most states with a competitive state fund (an entity that competes for business with private insurers), the fund accepts all risks rejected by the voluntary market, thus eliminating the need for assigned risk plans. In states without a competitive fund, insurers may be assigned applicants based on their market share and service those employers as they would employers that came to them through the voluntary market, through a system known as direct assignment. They may also participate in the residual market through a pooling arrangement in which all participating workers compensation insurers share the premiums and the losses.

3.2 REINSURERS:26

COMMERCIAL INSURANCE Just as businesses are able to transfer risk to insurers, known as primary insurers in the insurance community, insurers are able to transfer or cede some of the risk they assume in insuring businesses to other insurance companies, known as reinsurers. By transferring some of the risk primary insurers reduce their liability for losses, which allows them to write more insurance. Some insurers are heavily reinsured, others are not. Reinsurers reimburse primary insurers for losses, according to the terms of the reinsurance contract, either on a shared or proportional basis, with the primar y insurer and reinsurer sharing both the losses and the premiums collected from the commercial policyholder, or on an excess-of-loss basis, with the reinsurer assuming losses above a certain level for a fee. Reinsurers also spread the risk they have assumed as a result of the reinsurance transaction by selling off slices and layers of risk to other reinsurers all over the world. Reinsurance is an international business. Six countries were represented among the 10 top global reinsurers in 2003. The top two are German and Swiss, each with more than twice the premium volume of the next two, which are U.S. companies.

3.3 DISTRIBUTORS:Distribution At the retail level, commercial insurance is distributed by insurance agents and brokers who work for organizations that are part of the distribution system, insurance agencies and brokers. Recently, however, the lines between agencies and brokers have become blurred. Traditionally, agents have represented the insurance company and brokers have represented the client. Agents and brokers are known as producers. Agents may be captive agents selling policies written by a single insurer, the agents employer, or an independent agent selling policies from a number of different insurers. Independent insurance agencies have a larger portion of the commercial lines business than captive agencies -- about two-thirds. For personal lines, the ratio is reversed. It is the brokers responsibility to seek out appropriate insurance coverages for the client and obtain the best overall price, terms and conditions. Brokers are most often associated with large or complex commercial lines risks. Brokers may also become wholesalers who act as intermediaries between retail brokers or agents and insurance company underwriters. To be able to transact business with surplus lines 27

COMMERCIAL INSURANCE insurers, wholesale brokers must be licensed as surplus lines brokers in the state where the policyholder or the risk to be insured is located. Wholesale brokers may also work with other wholesale brokers in the London Market, or elsewhere to secure coverage. Wholesale brokers may also be managing general agents, who are given authority by insurers to underwrite and bind insurance -- provide temporary coverage until an insurance policy can be issued. Managing general agents, who have a close relationship with the insurance companies they work with, may also handle claims and even help in the placement of reinsurance contracts. Managing general agents may also arrange so-called program business which is specialty insurance for homogeneous groups of policyholders, such as members of a specific industry. These programs, often offered and endorsed by trade associations, may provide coverage at lower prices. As insurers seek out niche products, programs are increasingly available to a wide range of businesses and organizations from bed and breakfast inns to churches. Programs may also provide specially tailored liability insurance for professionals, such as vocational or physical rehabilitation specialists who work part or full time out of a home office. To be successful, a program must generate a sufficient volume of premium and the risks within each program must be relatively homogeneous. Compensation Insurance company employees, whether they work for standard, surplus lines or reinsurance companies, are compensated the same way that employees in other industries are compensated, with bonuses and other incentives in many companies for outstanding contributions to the organization. Producers and others in the retail and wholesale distribution system are compensated in a variety of ways. Captive insurance agents are compensated by their insurance company employers, while independent agents are compensated by the insurers with whom they have placed business. Independent agent commissions may be calculated based on the business received, and percentages may differ among insurers and for different types of coverage. Independent agents may also receive contingent commissions, not unlike incentives provided in other industries to their sales force, for a high volume of business or business that was especially profitable. 28


Brokers may receive compensation from several sources: fees paid by their policyholder clients; commissions paid by the insurer with whom business is placed, calculated as a percentage of premium charged; and contingent commissions paid by insurers based on the profitability and/or volume of the business. Some of the largest commercial lines brokers have recently discontinued the practice of using contingent commissions as incentives. Since the broker represents the client not the insurer, the existence of commissions paid by the insurer must be disclosed to the client. Managing general agents are compensated entirely by the insurer, often based on the outcome of the business generated.

3.4 RISK MANAGERS:Risk management deals with loss exposures -- circumstances that exist inside or outside a companys operations that have the potential to cause a loss. A major incident such as a fire or explosion at a manufacturing plant or hurricane force winds that lift the roof off the building could shut down operations. On the liability side, a lawsuit, if successful, could jeopardize a companys financial well-being. Large companies generally employ risk managers to manage the risk of loss. It is the risk managers responsibility to anticipate, evaluate and minimize the adverse impact of all possible losses. Strategies for controlling losses include avoidance -- avoiding the activity that could produce a loss altogether if the activity, product or service cant be modified; loss control techniques, such as limiting access to warehouses to reduce the incidence of theft; and transferring the financial consequences of potential losses to an insurance company. Once a decision has been made to purchase insurance, the risk manager selects an appropriate agent or broker to solicit bids. In the process, the risk manager must supply the broker with all the necessary information about the company that commercial lines underwriters might need to evaluate the risk. The risk manager is also responsible for all other aspects of implementing the insurance contract, from handling claims as a representative of the company to dealing with adjustments to loss sensitive programs, Where the company decides to retain some of the risk itself rather than buy insurance, the risk manager may hire actuaries to determine appropriate

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COMMERCIAL INSURANCE loss reserves, a claims adjustment service to manage claims and legal experts to deal with litigation. The risk manager generally reports to the companys chief financial officer. In a large organization, there is generally a risk management department. In small companies, the risk management function may be handled by the treasurer or owner of the business.

3.5 RATING AGENCIES:Rating agenciesprivate firms that evaluate insurance companies financial strengthplay an important part in the insurance marketplace. The ratings issued by these agencies represent their opinions of an insurers' financial condition and its ability to meet its obligations to policyholders. Rating downgrades are watched closely and can significantly affect an insurer's ability to attract and retain business. Among the factors they consider are: 1. Company earnings over a period of years to assess stability and sources of profits and control over expenses 2. Capital adequacy and operating leverage (Capital is the cushion that allows a company to keep its commitments even if the value of its assets falls or its liabilities increase.) 3. Investment performance and investment risk management 4. The strength of an insurers reinsurance program (an important cushion in the event of a catastrophe.) 5. Managements ability, experience and integrity.

CHAPTER 4 COMPANY OPERATIONS30


4.1 COMMERCIAL UNDERWRITING :Insurance companies protect businesses from financial loss by assuming billions of dollars in risks each year. It is the underwriters responsibility to evaluate a businesss risk of loss and decide whether to insure the business and if so, at what price. Evaluating risks involves considerable research. Information on applications is often supplemented with reports from loss control consultants, medical reports, information from data vendors, and actuarial studies. For example a factorys application may require an engineering survey, a fire hazard survey or other investigations. The Internet has greatly enhanced the resources available to underwriters doing research on a business. Based on its research, the underwriting department may require the applicant to make changes to improve safety, or decide not to provide coverage. Technology plays an important role in an underwriters job. In addition to using the Internet for research, underwriters use specialized computer applications to manage risks more efficiently and accurately. Depending on the nature of the risk and the complexity of the insurance policy, these systems automatically analyze and rate insurance applications, recommend acceptance or denial of the risk, and adjust the premium rate in accordance with the risk. The greater the risk and complexity of an operation, the more likely that the policy will be specifically tailored to meet the policyholders needs. In making all these decisions, underwriters serve as the main link between the insurance company and the insurance broker or agent. Underwriters also work closely with claims personnel. For example, information from claims adjusters, such as a businesss failure to take certain loss control measures, might affect the underwriters decision to offer coverage in the future. Many insurance companies employ field underwriters and claims specialists who are assigned to agents in specific localities, giving underwriters first hand knowledge of a companys business and geographic environment. These field underwriters often work closely with loss control specialists who help evaluate a company. Most property/casualty underwriters specialize in either commercial or personal lines. In cases where insurance companies provide insurance through a single package policy, covering 31

COMMERCIAL INSURANCE various types of risks, the underwriter must be familiar with different lines of insurance and different types of risks.

4.2 CLAIMS:When an insured business suffers a covered loss, it submits a claim seeking compensation. Insurance claims departments handle a wide variety of claims for property damage, liability, and bodily injury. Their main role is to investigate the claims, negotiate settlements, and authorize payments to claimants. They must determine whether the customers insurance policy covers the loss and how much of the loss should be paid to the claimant, depending on deductibles or retentions, co-payments and other risking sharing provisions in the policy. . Insurance company claims adjusters plan and schedule the work required to process a claim that would follow a loss, for example, an accident at processing plant or damage to a business property caused by a hurricane. They investigate claims by interviewing the claimant and witnesses, consulting police and hospital records, and inspecting property damage to determine the extent of the insurers liability. Adjusters may also consult with accountants, architects, construction workers, engineers, lawyers, physicians and other experts. Most claims are easily settled. When claims are contested, adjusters will work with attorneys and expert witnesses to defend the insurers position. When adjusters or examiners suspect fraud, they refer the claim to an investigator specially trained to detect and investigate fraud. New technology making use of the Internet, digital cameras and sophisticated software have greatly speeded the claims handling process, and improved the quality of adjusters estimates. High tech advances have also made it easier for policyholders to submit claims. Customers at many insurers, for example, can submit claims directly to claims professionals via an Internet reporting tool. Prompt reporting allows the insurer to respond quickly to a claim, ensuring that appropriate steps, such as medical attention or securing a building, are taken as soon as possible.

4.3 LOSS CONTROL:Loss control activities aimed at preventing or reducing the size of losses due to accidents and theft have been integral to the insurance industry as far back as 1752 when Benjamin Franklin, 32

COMMERCIAL INSURANCE founder of the first U.S. fire insurance company, launched a fire safety campaign to teach property owners how to recognize and remove fire hazards. Insurance companies, agencies and brokerage firms may provide safety inspection and engineering services as part of the services they offer to industrial and business clients. The insurers safety engineer or loss control expert may also be called on by an underwriter to perform a safety audit before an insurance policy is written. Loss control produces widespread benefits. For instance, a loss control professional's recommendations for controlling fire hazards in a particular factory benefit not only the factory owners, but also protect the financial security of employees and their families by enhancing worker safety. In addition, owners and occupants of adjoining buildings are protected from spreading fires. Businesses, having avoided ruin by fire, continue to contribute taxes and other benefits to their community. Some insurance companies have established extensive loss control departments to help their clients control losses. For example, one large industrial insurer has established a multimillion dollar research facility to provide its insurance clients and building supply manufacturers with information about how materialsranging from power turbine housings to applesauceburn, and how to reduce fire losses. Other companies provide an array of online risk management tools, such as using the Internet to access extensive loss control libraries that can help customers minimize financial losses. The insurance industry also funds loss control organizations to promote product safety. One such organization, Underwriters Laboratories, now operates independently. Calculation of Commercial Insurance Amount/Premium: Insurance companies keep quite a few factors in mind while calculating the premium amount to be paid by the client. Nature of business, size of the organization, number of employees, the type of industry, the organization is a part of, annual turnover of business etc. The premium is paid on a monthly/quarterly/half yearly/ yearly basis, as the case may be. Companies also provide with instant commercial insurance quotes for the ease of their customers. Commercial Insurance Claim Procedure: 33

COMMERCIAL INSURANCE The insurer needs to submit all the original documents of the commercial in the case of any financial or non financial loss. The surveyor calculates the approximate value of the loss so incurred. Based on the report submitted by the surveyor, insurance companies pay the amount of loss incurred. The claims are generally cleared from 7-21 days. Documents Required for Commercial Insurance Claim: 1. Claim Form 2. List of things or items lost or damaged 3. Proof of ownership of business List of Some of Insurance Companies Offering Commercial Insurance: Bajaj Allianz - Corporate Insurance ICICI Lombard Commercial Insurance The New India Assurance Co. Commercial Products United India Insurance Co. - Business Policies

CHAPTER 5 STANDARDS FOR CANCELLATION, RENEWAL AND NONRENEWAL OF COMMERCIAL INSURANCE POLICIESAre There Specific Rules on Commercial Insurance Cancellation and Non-renewal?

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COMMERCIAL INSURANCE Commercial insurance companies must follow the rules set out in the insurance code regarding commercial insurance cancellation and non-renewal. There are separate insurance code sections covering cancellation and non-renewal for workers compensation, auto, ocean marine, surplus line, reinsurance policies, and other commercial insurance lines. 1. These standards apply to all lines of commercial property and casualty insurance. 2. Any policy may be cancelled at any time for fraud, material misrepresentation or non-payment of premium by mailing a 10-day notice of cancellation to the insured. Insurers should conduct their initial underwriting during the first 90 days in which a policy is in force. A new policy may be cancelled for any reason not prohibited under current law by mailing 30days' notice of Cancellation (10 days for fraud, material misrepresentation or non-payment of premium) to the insured before the policy has been in effect 90 days.

3. After a policy has been in effect more than 90 days, cancellation should be based only on certain Specified reasons. After a new policy has been in effect for more than 90 days, and at any time during the period of renewal policy, an insurer will cancel only for the following reasons, with the indicated amount of notice: (a) Non-payment of premium, fraud or material misrepresentation -- 10 days. (b) Change in the risk which substantially increases any hazard insured against, except to the extent that the insurer should reasonably have foreseen the change or contemplated the risk in writing the contract -- 30 days. (c) Failure of the insured to comply with reasonable safety recommendations -- 20 days. An insurer may exempt itself from these restrictions on mid-term cancellation by filing a notice with the Insurance Commissioner that compliance with these restrictions would cause it to suffer significant financial impairment jeopardizing its solvency. 4. Notice of non-renewal should be mailed at least 45 days in advance. An insurer may non-renew a policy by mailing to the insured at least 45 days in advance of expiration a notice of its intent not to renew. In the

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COMMERCIAL INSURANCE case of a continuous policy or a policy for a term of more than one year, an insurer may refuse to extend the policy by mailing notice to the insured at least 45 days in advance of the anniversary date of the policy. 5. Renewals should be sent to insured sufficiently in advance of expiration to allow an opportunity to seek alternative coverage. (a) Continuous policies and policies written for a term of more than one year. If an insurer elects to continue a policy past its anniversary date, the insurer shall endeavor to have the insured receive the extension or a firm quotation for the extension period at least 30 days before the anniversary date of the policy. If the extension or quotation is not received 30 days in advance, the insured will have the option to continue coverage for up to 30 days from the date of receipt, so long as the insured pays the premium for the extended period of coverage in advance. The premium for the 30-dayextension will be computed pro-rata based upon the rates, credits, and debits which applied to the policy during the period prior to the anniversary date. (b) Annual term policies. The insurer shall endeavor to provide the insured with a renewal policy or firm quotation at least 30 days prior to expiration. Otherwise, the insured will have the option to continue coverage for up to 30 days from the date the renewal or quotation is received, so long as the insured pays the premium for the extended 30-day period of coverage in advance, with the premium being computed pro-rata based upon the rates, credits and debits which apply to the expiring policy.

CHAPTER 6 COMMERCIAL INSURANCE AGENTThe Commercial Insurance Agent is a professional who assists a business owner in making one of the most important investments in the form of Commercial Insurance in order to protect his or her business from the potential losses that may be caused by unexpected and unfortunate circumstances. A Commercial Insurance Agent (or a business insurance agent) provides valuable advise to business owners regarding the most profitable Commercial Insurance policies which not only 36

COMMERCIAL INSURANCE protect the businesses against such things as theft, property damage, and liability but also provide coverage for businesses against all sorts of interruptions and employee injuries. The business owner should never run his or her business without commercial insurance as that would subject the specific business to the perils of losing money and property simultaneously in cases of fateful events which can never be predicted in advance. It may also happen that a particular business owner commits his or her individual cash and/or property to unforeseen danger by not securing sufficient commercial insurance. In such cases the business owners desperately require the advice of a dependable Commercial Insurance Agent who insists the business owners to subscribe to the most suitable Commercial Insurance policy available. Commercial Insurance Agents are reliable insurance agents who specialize in commercial insurance policies that enable all kind of business concerns to run and progress freely without constraints. Commercially insured business concerns can operate and grow freely without the fear of any kind of danger that might hamper its existence. All business owners are advised to select their personal Commercial Insurance Agent only after talking with as many as licensed and knowledgeable Commercial Insurance Agents as possible. The Commercial Insurance Agent that the business owner has decided upon should be capable of discussing different types of commercial insurance policies with him or her and thereby assist the business owner in selecting the most suitable Commercial Insurance policy that fulfills all or most of the individual requirements of the business owner.

CHAPTER 7 COMMERCIAL INSURANCE COVERAGES7.1 Commercial Property Coverage :Property Insurance is any type of insurance that indemnifies an insured party who suffers a financial loss because property has been damaged or destroyed. Property is considered to be any item that has a value. Property can be classified as real property or personal property. Real property is land and the attachments to the land, such as buildings. Personal Property is all property that is not real property. The Building and Personal Property coverage form is the form 37

COMMERCIAL INSURANCE used to insure almost all types of commercial property. The insuring agreement in the Building and Personal Property coverage form promises to pay for direct physical loss or damage to covered property at the premises described in the policy when caused by or resulting from a covered cause of loss. The following is a brief outline of coverages and how they are used within the Commercial Building and Personal Property coverage form.

7.2 Buildings and Business Personal Property:Coverage for the building includes the building and structures, completed additions to covered buildings, outdoor fixtures, permanently installed fixtures, machinery and equipment. The building material used to maintain and service the insured's premises is also insured. Business Personal Property owned by the insured and used in the insured's business is covered for direct loss or damage. The coverage includes furniture and fixtures, stock, and several other similar business property items when not specifically excluded from coverage. The policy is also designed to protect the insured against loss or damage to the personal property of others while in the insured's care, custody or control.

7.3 Coverage Extensions and Additional Coverage:In addition to the limits stated in the Building and Personal Property coverage form, the policy has a coverage extensions section and an additional coverages section. The coverage extensions section provides limited coverage for newly acquired or constructed property, property of others, certain outdoor property, and the cost to research and reconstruct information on destroyed records. When coverage is placed on the all risk form, two additional extensions are added for property in transit and coverage for certain repair costs related to damage caused by water. The two additional extensions are covered by certain perils only. The additional coverage section provides coverage for indirect losses that result from a direct loss. The coverage applies to removal of debris, preservation of property, fire department service charges and pollutant cleanup and removal. The coverage extensions and the additional coverages have limitations and are subject to certain conditions. Limit of Insurance The most the insurer will pay for loss or damage in any one occurrence is the limit of insurance stated in the policy declarations. Deductible 38

COMMERCIAL INSURANCE The standard deductible is $250. However, other deductible amounts are available and the deductible applies only once per loss. Causes of Loss The term peril is used when discussing losses. A peril is a cause of loss. Basic property insurance policies are written to cover the perils of fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Other property insurance policies, often referred to as the broad form policy, add coverages for water damage, weight of snow, ice or sleet, breakage of glass and coverage for falling objects. The broadest coverage is the special form, which is best known as the all risk form. All risk covers all causes of loss, except those specifically excluded from coverage. It is possible for a commercial property policy to have more than one cause of loss form. Replacement Cost and Actual Cash Value Property can be valued in several different ways. Insurance companies commonly use two approaches to determine value, which also determines how a loss will be paid; the replacement cost method and the actual cash value method. Insurers consider replacement cost of a property item to be the cost to replace it with new property of like kind. Actual cash value is replacement cost, minus the accumulated depreciation for age and condition.

7.4 Commercial General Liability Coverage:The Commercial General Liability Policy provides the insurance protection needed to pay damages for bodily injury or property damages for which the insured is legally responsible. The policy provides coverage for liability arising from personal injury and advertising injury. Coverage for medical expense is also provided. The policy also covers accidents occurring on the premises or away from the premises. Coverage is provided for injury or damages arising out of goods or products made or sold by the named insured. The insured is the named insured and the employees of the named insured. However, several individuals and organizations, other than the named insured, may be covered, depending upon certain circumstances specified in the policy. In addition to the limits, the policy provides supplemental payments for attorney fees, court costs and other expenses associated with a claim or the defense of a liability suit. There are two commercial general liability coverage forms available, the occurrence form and the claims-made form. Both forms are somewhat identical in the coverages offered. The main 39

COMMERCIAL INSURANCE difference is in the way claims are handled under the two forms. The occurrence form covers bodily injury or property damage claims that occur during the policy term, regardless of when the claim is reported. The claims-made policy form only covers claims made against the insured during the policy term. A claim made after the policy expires is not covered by a claims-made policy unless the claim is covered by an extended reporting period. The claims-made policy will only have the extended reporting period. The following terms reflect both forms. General Aggregate The General Aggregate Limit is the most money the insurer will pay under certain coverage for all claims occurring during the policy term. Premises/Operations Coverage is provided for damages arising out of ownership or occupancy of the insured premises when not maintained in a reasonable manner. This also covers damages arising out of operations performed by the insured business. Products/Completed Operations Products coverage is provided for damages arising out of products manufactured, sold, handled or distributed by the insured. Completed Operations covers damages occurring after operations have been completed or abandoned, or after an item is installed or built and released for it's intended purpose. Medical Expense Limit Medical payments coverage pays medical expenses resulting from bodily injury caused by an accident on premises owned or rented by the insured, or locations next to such property, or when caused by the insured's operations. These payments are made without regard to the liability of the insured. Fire Damage Limit The fire damage limit provides coverage for fire damage caused by negligence on the part of the insured to premises rented to the named insured. If a fire occurs because of negligence of the insured and causes damage to property not rented to the insured, coverage would be provided under the occurrence limit. Personal Injury Personal Injury means injury other than bodily injury. Coverage is provided for injury resulting from offenses such as false arrest, malicious prosecution, detention or imprisonment, the

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COMMERCIAL INSURANCE wrongful entry into, wrongful eviction from and other acts of invasion, or rights of private occupancy of a room. Coverage for libel and slander is also provided in the policy. Advertising Injury This coverage pays for damages done in the course of oral or written advertisement that disparages, libels or slanders a person's or organization's goods, products or services. Coverage for these offenses is provided under advertising injury coverage only if they occur during the course of advertising the named insured's own goods, products or services.

7.5 Commercial Automobile Coverage:Liability Coverage The liability coverage of the commercial auto policy provides protection against legal liability arising out of the ownership, maintenance, or use of any insured automobile. The insuring agreement agrees to pay damages for bodily injury or property damage for which the insured is legally responsible because of an automobile accident resulting from the ownership, maintenance, or use of a covered auto. The insuring agreement also states that in addition to the payment of damages for which the insured is legally liable for, the insurer also agrees to defend the insured for all legal defense cost. The defense cost is in addition to the policy limits. Medical Payments Coverage The insuring agreement states that the insurer will pay all reasonable and necessary medical and funeral expenses incurred by an insured because of bodily injury caused by an accident. The insured is the named insured, the insured's employees and guests, and any other person occupying a covered auto. These payments are made without regard to fault. Uninsured/Underinsured Motorist Coverage Uninsured Motorist: This insuring agreement pays for bodily injury to an insured who is injured by an uninsured motorist, a hit-and-run driver, or a driver whose insurer becomes insolvent. These benefits are paid under the named insured's policy. Underinsured Motorist: This coverage is added to supplement the Uninsured Motorist Coverage, the coverage applies only when the other driver has liability limits at the time of an accident, but the liability limits 41

COMMERCIAL INSURANCE carried may be insufficient to pay for damages for which the driver is responsible. This is when the insured's underinsured motorists coverage would apply and payment for the difference could be made. The two coverages are mutually exclusive and do not overlap or duplicate each other. Any Automobile Coverage is provided for any auto, including autos owned by the insured, autos the named insured hires or borrows from others, and other non-owned autos used in the insured's business. Owned Auto Coverage is provided for all autos owned by the named insured. The owned auto symbol is used for liability insurance only. Non-Owned Autos Coverage is provided only for autos not owned, leased, hired, or borrowed by the named insured. Coverage includes autos owned by the insured's employees or members of their households, but only while used in the named insured's business or personal affairs.

Hired Auto Coverage is provided only for autos leased, hired, rented or borrowed for use in the named insured's business.

7.6 Physical Damage Coverage:Collision Coverage: This coverage provides protection against loss or damage to a covered auto or a non-owned auto resulting from the impact with another vehicle or object. Collision losses are paid regardless of fault. Comprehensive Coverage: Comprehensive coverage provides protection against loss or damage to a covered auto resulting from loss other than a collision or upset. This coverage also provides for supplemental payments for transportation expenses in the event of total theft of a covered auto or a non-owned auto. Coverage begins forty-eight hours after the theft.

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CHAPTER 8 Bottom of Form COMPANIES PROVIDING COMMERCIAL INSURANCE8.1

ICICI Lombard General Insurance Company Limited is a joint venture between ICICI Bank Limited and the US-based $26 billion Fairfax Financial Holdings Limited. ICICI Bank is India's second largest bank; while Fairfax Financial Holdings is a diversified financial corporate engaged in general insurance, reinsurance, insurance claims management and investment management. ICICI Lombard General Insurance Company received regulatory approvals to commence general insurance business in August 2001. ICICI Lombard figures among top commercial insurance companies of India. The company covers business products which include: 43

COMMERCIAL INSURANCE Fire Insurance Marine Insurance Industrial Insurance Commercial Vehicles Corporate Insurance Credit Insurance Liability Insurance Shop Insurance

8.2

Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Auto Limited and Allianz AG of Germany. Both enjoy a reputation of expertise, stability and strength. Incorporated on 19th September 2000 Bajaj Allianz General Insurance Company received the Insurance Regulatory and Development Authority (IRDA) certificate of Registration (R3) on May 2nd, 2001 to conduct General Insurance business (including Health Insurance business) in India. The Company has an authorized and paid up capital of Rs 110 crores. Bajaj Allianz is one of the leading commercial insurance companies in India. It offers various commercial insurance plans which include areas like: Aviation Project Insurance Marine Hull Insurance Sports and Entertainment Insurance Employees Insurance 44


Some of the highlights of the Employees Insurance Scheme of Bajaj Alliance are as follows: Group Personal Insurance Group Health Guard Group critical Illness Workmen's Compensation Group Travel Insurance

8.3 T he New India Assurance Co.

Established by Sir Dorab Tata in 1919, New India is the first fully Indian owned insurance company in India. New India was a pioneer among the Indian Companies on various fronts, right from insuring the first domestic airlines in 1946 to satellite insurance in 1980. The latest addition to the list of firsts is the insurance of the INSAT-2E. With a wide range of policies New India has become one of the largest non-life insurance companies, not only in India, but also in the Afro-Asian region. Largest number of Offices - In India and Abroad Trained and technically qualified staff 1068 fully computerised offices across India. "A-" (Excellent) rating by A.M.Best & Co (Europe) First domestic company to be rated by an International Rating Agency Rating based upon following factors: Superior capital position Strong operating performance Strong market position Only

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COMMERCIAL INSURANCE company to develop significant International operations, long record of successful trading outside India. First company to set up an Aviation Insurance Department in 1946. First company to handle the Hull Insurance requirements of the Indian Shipping Fleet. First company to establish its own Training School. First company to introduce the concept of 'Model Office Training'. First company to create department in Engineering insurance. Pioneer in Satellite insurance

8.4 United India InsuranceUnited India Insurance Company Limited was incorporated as a Company on 18th February 1938. General Insurance Business in India was nationalized in 1972. 12 Indian Insurance Companies, 4 Cooperative Insurance Societies and Indian operations of 5 Foreign Insurers, besides General Insurance operations of southern region of Life Insurance Corporation of India were merged with United India Insurance Company Limited. After nationalization United India has grown by leaps and bounds and has 18300 work force spread across 1340 offices providing insurance cover to more than 1 Crore policy holders. The Company has variety of insurance products to provide insurance cover from bullock carts to satellites. United India Insurance is one of the leading insurance companies in India. The famous United India Insurance Company Limited (UIIC) is often called united India Insurance and it is also regarded as one of the four Public Sector Insurance Companies in India. The main corporate office of this insurance company is located at Chennai. The workforce of United India Insurance includes some well-trained and professional managers and engineering professionals. Besides these, the products offered by United India Insurance are also great and profitable for all. On 18th February, 1938, the united India Insurance Company Limited was emerged as an insurance company and gained huge popularity in the General Insurance business sector in India. 46

COMMERCIAL INSURANCE This company has 18300 work force including total 1340 offices across the nation providing insurance policies to the one crore policy holders. Commercial policies offered by United India Insurance: Marine Insurance: It includes Cargo and Hull insurance policies. Fire Insurance: It includes S.F.S.P. and L.O.P. insurance policies. Industrial Insurance: It includes I.A.R., C.P.M., B.P.P., and M.B. Insurance policies. Motor insurance or Vehicle Insurance: It includes Motor - A insurance policy. Liability Insurance: It includes Public, Product, Profession and Workmen insurance policies.

List of non-life insurance companies operating in the market as on date:NameBajaj Allianz General Insurance Co. Ltd. Cholamandalam MS General Insurance Co. Ltd. HDFC Chubb General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd. i IFFCO-Tokio General Insurance Co. Ltd. National Insurance Co. Ltd. New India Assurance Co. Ltd. Oriental Insurance Co. Ltd Reliance General Insurance Co. Ltd Royal Sundaram Alliance General Insurance Co. Ltd. Tata AIG General Insurance Co. Ltd.United India Insurance Co. Ltd.

ShareholdingPrivately Held Privately Held Privately Held Privately Held Privately Held Public Sector Public Sector Public Sector Privately Held Privately Held Privately HeldPublic Sector

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CHAPTER 9 DO'S AND DON'TS: BUSINESS INSURANCEThe day you start a business is the day we need commercial insurance. There is more to purchasing commercial insurance than signing an application. By following a few Dos and Don'ts we can make sure to purchase and maintain the kind of insurance we need and can afford while minimizing business risks and losses.

9.1 THE DOs:DO find an insurance agent who has some experience with your type of business. DO shop around for the best price and ask for written coverage recommendations from various agents -- they should be happy to provide you with one for no cost. DO take notes while you are taking to various agents. DO check on insurer solvency before purchasing a policy. The following publications rate insurance companies for financial solvency: Bests Insurance Reports Moody's Bank & Financial Manual Duff & Phelps Standard & Poor's.

DO read any proposed policy carefully.

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COMMERCIAL INSURANCE DO buy a policy that will cover the replacement cost of the property. Actual current value coverage could leave you with a significant lack of funds when you have to replace your damaged property. DO consider purchasing "Building Ordinance Coverage" if you do business in an older building. When rebuilding you will most likely have to upgrade to comply with various building codes and ordinances that didn't exist when the building was constructed. DO consider purchasing a renter's commercial policy if you lease your business space, even if your lease doesn't require it. The owner's policy probably doesn't cover damages resulting from the negligence of your employees. If you are renting, DO make sure that there is a mutual waiver-of-subrogation clause in your lease. This should keep the landlord's insurance company from suing you to recover the money it has paid to the landlord. DO confirm that your independent contractors carry their own workers' compensation and liability insurance for their own employees. If they get injured they may be considered your employee, and if they injure one of your customers, your policy may not cover it. DO keep a list of all of your business property both at work and somewhere off the premises; you will need it for comparison purposes if you suffer a loss. DO inform your agent of changes to your business, so that your policy always provides adequate coverage.

9.2 THE DONTs:DON'T hire an agent who wants to sell you a package and refuses to tailor a policy to your needs. DON'T hide unusual risks from your agent. The insurer could later claim that you made misrepresentations and you probably won't get the kind of coverage that you need. DON'T buy a policy that is significantly lower in cost than all of the others -- the company could be unstable or you may have received a quote that doesn't include everything that you need. DON'T accept a policy without making sure that it covers all of the risks of your business. DON'T underinsure to get a reduced premium. If you do, you could end up covering around 80 percent of your property replacement value because of a co-insurance clause in your policy.

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COMMERCIAL INSURANCE DON'T agree to buy an insurance policy that covers the landlord's liability as well as your own, if you are renting. This is usually considered unreasonable; try to negotiate out of it. DON'T depend on your employee's automobile insurance providing coverage for damages incurred while the employee is using a personal vehicle for your business purposes. DON'T assume that your theft policy will cover the personal equipment of your employees. DON'T assume that your homeowner's policy will cover business-related damages, if you run your business out of your home. There may be exclusions for business-related property and injuries in your homeowner's policy. DON'T exaggerate the extent of your damages. You could be accused of engaging in insurance fraud.

CHAPTER 10 COMMERCIAL INSURANCE PLANNING WORKSHEETTypes of Insurance 1. General Liability Insurance 2. Product Liability Insurance 3. Errors and Omissions Liability Insurance 4. Malpractice Liability Insurance 5. Automotive Liability Insurance 6. Fire and Theft Insurance 7. Business Interruption Insurance 8. Overhead Expense Insurance 9. Personal Disability 10. Key-Employee Insurance 11. Shareholders or Partners Insurance 12. Credit Extension Insurance 13. Term Life Insurance 14. Health Insurance 15. Group Insurance 16. Workers' Compensation Insurance 17. Survivor-Income Life Insurance 18. Care, Custody and Control Insurance 19. Consequential Losses Insurance 20. Boiler and Machinery Insurance 21. Profit Insurance 22. Money and Securities Insurance Required? (y/n) Best price after comparison Annual Cost

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COMMERCIAL INSURANCE 23. Glass Insurance 24. Electronic Equipment Insurance 25. Power Interruption 26. Rain Insurance 27. Temperature Damage Insurance 28. Transportation Insurance 29. Fidelity Bonds 30. Title Insurance 31. Water Damage Insurance Total Annual Cost

CHAPTER 11 COMMERCIAL INSURANCE FORMTop of Form

Phone Number(s) Email(s)

1

Address, State, Zip Type of Coverage: Current Insurance Company Insurance Required from (Date)Selec t -->

,

,

Real Estate / Habitational Year Built Construction FireSprinkler BuildingSelect --> NO

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COMMERCIAL INSURANCE Amount Content Amount Property Ded Amount Liability Limit Building Improvement s: Roofing Year Building Improvement s: Wiring Year Ground Area NO. Of Floors

Select --> Select -->

Other Coverages and DetailsSubmit

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WEBLIOGRAPHY

http://www.surfindia.com/finance/shop-insurance.html http://www.icicilombard.com/app/ilom-en/Businessproducts/Fire-Perils.aspx http://www.bajajallianz.com/BagicCorp/index.jsp

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