Get complete information on the Nature of Fire Insurance
Fire insurance has not a long history. The real establishment of fire insurance came only after the Great Fire of London in 1066. This fire lasted for four days and nights burning over 436 acres of ground and destroying over 13,000 buildings was the most disastrous fire in history and forcibly awakened the people to the necessity for a form of protection against such calamities.
The main cause of its late development was slow progress of trade and commerce. After a certain period when the business and commerce ran high, fire insurance received a real fillip. Previously there was no basis on which the premium could be based.
There were a few concerns which made a remarkable progress. Gradually as they gained experience the data went on accumulating and the premium rates became more equitable and scientific.
The decisions of law court also brought the principles of fire insurance to a standard form. With increasing competition and experience, the fire insurance is evolved in its present scientific form. However, the progress in fire insurance was not as tremendous and categorical as was in the case of life insurance.
Section 2 of the Insurance Act 1938 defines fire insurance as “the business of effecting, otherwise than incidentally to some other class of insurance business, contract of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies.”
The occurrence of a fire will result not only in loss of or damage to material property but also other consequential losses such as loss of production causing loss of profit.
The function of fire insurance is to make good the financial loss suffered as a result of fire. It is not the function of fire insurance to replace the economic loss termed the ‘fire waste’. Such damage apart from causing financial loss to the owners dislocates the economic activity of the community.
In spite of sustained efforts made by human ingenuity to achieve complete mastery of fire, material property continue to be liable in varying degree to destruction or damage by the escape of fire from its contract.
Some of the insurable properties are buildings, electrical installation, contents of building such as machines plant and equipment accessories, etc. goods such as raw materials, goods in process, finished goods, goods in the open or in the premises, contents in dwellings, shops, hotels furniture, fixture and fitting and other movable and immovable properties.
Fire insurance is a device to compensate for the loss consequent upon destruction by fire. Thus the fire insurer shifts the burden of fire losses from their actual victims over to all the members of the society.
It is a cooperative device to share the loss. It relieves the insured from the horror of the fire losses to which he is exposed.