Insurance is meant for indemnification of loss and not for prevention of loss although every reasonable step can be taken to eliminate it or minimise it through the agencies engaged in prevention of loss. Thus, insurance may help in two ways 1. Indemnification and 2. Preventive efforts.
1. Indemnification or curative efforts:
According to doctrine of indemnification, the financial loss suffered by the perils insured against will be compensated in full, not more than this and not less than this. The insurance provides protection by indemnifying the financial loss suffered by insured person who occurred beyond the control of insured and insurer.
2. Preventive efforts:
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The loss cannot be prevented by insurance. But, the insures help those who are engaged in the preventive efforts by granting financial and other assistance.
This will benefit insurers as well because if the loss of society is reduced, they can charge lesser premium which will stimulate the public for purchasing more insurance policies because of cheaper rate of insurance.
Fire insurers stimulate the installation of protective devices and better types of construction through granting credit. They help in installation of fire-fighting apparatus, water supply and engineering services.
Preventive efforts are divided into two parts
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(i) Private activities and
(ii) Public activities.
(i) Private Activities
Private activities are those which include those activities which the property owner may engage in for the purpose of preventing fire loss. Insurers given sincere advice of financial help to property owner on the following factors.
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(a) Construction:
In construction of building, fire resistive materials, fire proof construction, greatest care in exercising selection of the type and planning of the construction, availability of fire extinguisher, water supply, proper passage in emergency are various activities which reduce the chance of fire. For these activities, the insurers provide advice and assistance.
(b) Fire Services:
The important thing is to extinguish fire before it reaches large proportions. The owner should consider equipping his building with an automatic sprinkler system. Similar firefighting equipment may be established. Such services can be provided by insurers with the help of fire fighting associations.
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(c) Occupation:
There are considerable hazard in certain occupation e.g. in oil or coke or chemical industry. Insurance in these concerns is available at higher rate. Insurers help by stimulation and charging lesser premium in fire fencing occupation.
(d) Management:
Good management of property may reduce the chances of fire. Carelessness and indifference cannot be over-emphasized because these increase the chance of fire.
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(e) Exposure:
Fire insurance rates are determined on the basis of possibility of exposure. Fireproof services may reduce the chances of exposure to a greater extent.
(ii) Public Fire Prevention Activities:
Fire insurers have performed numerous important services to reduce the fire waste with the help of public institutions which are engaged in fire fighting activities.
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(a) Community Surveys:
Engineering survey of the cities and localities is made. As a result of its investigation many have improved their fire departments, water supplies and other facilities involved in the protection against fire.
(b) Standard schedule for grading cities:
Under this schedule a number of cities, town, or Mohall’s are divided, according to fire preventive devices. The deficiency in each part is sorted out and attempts are made to remove them.
(c) Underwriters’ laboratories:
The laboratories are to find out the possible causes of fire losses. Every time research or investigation is made to find out the possible attempts to prevent fire losses.
(d) Equipment:
Fire can be properly checked only through the possession and maintenance of adequate equipment, personnel fire alarm system and water supply. Fire fighting apparatus and equipment for any city or “town can be determined by the Fire Protection Association.
(e) Salvage Corps and salvage works by fire departments:
The chief aim of the corps is to protect property from unnecessary smoke and water damage. The protective benefits are extended to all those who suffer fire damages. The protective benefits are extended to all those who suffer fire damages regardless of whether they are insured or not.
Training school and colleges are, sometimes, engaged in giving general education to all and particular education too few students to train them in fire fighting methods and fire preventive methods.
(f) Legislation and Regulation:
National Board of fire underwriters’ fire brigade and other such associations are engaged in fire preventive and protective efforts under a certain law. The property owner and the fire protection engineer must keep in mind the numerous legal requirements relating to the various phases of fire prevention.
(iii) General Devices:
Apart from the above contribution to prevention protection, the following devices are utilised for preventing the losses.
(i) The insurer compensates loss at a reasonable cost.
(ii) Serious hazards are to be cooperatively reinsured.
(iii) Loans are provided for better construction and building.
(iv) Fire insurers stimulate the installation of protective devices to reduce losses.
(v)Fire fighting methods are organised with public utility concerns.
(vi) Insurers investigate the causes of loss and attempts are made to reduce the causes,
(vii) Insurers study various devices for fireproof, protection and problems of special processes.
(viii) Periodical examination of insured property is made and instructions are issued for the purpose of investigation.