1. Preliminary
Currently, the coverage for various risks against Fire and Allied perils is as per the Standard Fire and Special Perils (SFSP) policy provided for in the erstwhile All India Fire Tariff, 2001.
2. Objective
Through these Guidelines, two new standard products, namely “Bharat Sookshma Udyam Suraksha” and “Bharat Laghu Udyam Suraksha” are being introduced for covering micro and small level businesses respectively as detailed hererunder against Fire and Allied Perils replacing the Standard Fire and Special Perils (SFSP) Policy for the respective applicable risks.
3. General
3.1. These Guidelines for Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha are issued in exercise of the powers conferred upon the Authority under Clause (i) of Sub Section (2) of Section 14 of IRDA Act, 1999 and in continuation of Notification F.No.IRDAI/Non-Life Insurance/5/171/2020 dated 28th December, 2020 issued in terms of Section 64 ULA (1) of Insurance Act, 1938.
3.2. These Guidelines shall come into effect on 1st April, 2021.
3.3. These Guidelines for Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha shall replace the General Regulations, terms, conditions, clauses, warranties, policy, add-ons, endorsement wordings and proposal form under the various sections and relevant annexures of the erstwhile All India Fire Tariff (AIFT), 2001 for the risks being covered under these policies.
3.4. Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha shall be mandatorily issued by general insurers for the respective applicable risks, both fresh and renewal with effect from 1st April, 2021.
3.5. (a). Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha shall fall under the ‘Retail’ category of products.
(b). The definition of ‘Retail products’ as provided for in the Product Filing Procedures for General Insurance Products Ref.IRDAI/NL/GDL/F&U/030/ 02/2016 dated 18th February, 2016 (Product Filing Guidelines) shall stand modified to include Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha.
3.6. Apart from being applicable for Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha as independent standard products, these Guidelines shall also apply when Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha are incorporated as part of Package Policies and other policies offering cover against Fire and Allied perils for the applicable risks.
3.7. The Standard Proposal Form, Standard Prospectus, Standard Policy Wordings, Standard Key Features Document (KFD), Special Clause (Agreed Bank Clause), Standard Add-ons as applicable prescribed herein for Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha respectively shall be adopted by all insurers.
3.8. No insurer shall change or alter any part of the wordings of these documents.
4. Applicability
4.1. Bharat Sookshma Udyam Suraksha is meant for Offices, Hotels, Shops, Industrial/Manufacturing risks, Utilities located outside the compound of Industrial/Manufacturing risks, Storage risks outside the compound of Industrial/Manufacturing risks and Tank farms/Gas holders outside the compounds of Industrial/Manufacturing risks in India where the total ‘value at risk’ does not exceed Rs. 5 Crore (Rupees Five Crore) across all insurable asset classes at any one location at the commencement of the insurance.
4.2. Bharat Laghu Udyam Suraksha is meant for Offices, Hotels, Shops, Industrial/Manufacturing risks, Utilities located outside the compound of Industrial/Manufacturing risks, Storage risks outside the compound of Industrial/Manufacturing risks and Tank farms/Gas holders outside the compounds of Industrial/Manufacturing risks in India where the total ‘value at risk’ exceeds Rs. 5 Crore (Rupees Five Crore) but does not exceed Rs. 50 Crore (Rupees Fifty Crore) across all insurable asset classes at any one location at the commencement of the insurance cover.
4.3. ‘Value at Risk’ at any one location means the value of all property in that location including Buildings, Fittings and Fixtures, Plant and Machinery, Stocks, other contents etc where the proposer has insurable interest.
4.4. If the ‘value at risk’ during the policy period increases above the threshold of Rs. 5 Crore (Rupees Five Crore) for Bharat Sookshma Udyam Suraksha or if it decreases below the threshold Rs. 5 Crore (Rupees Five Crore) or increases above the threshold of .50 Crore (Rupees Fifty Crore) for Bharat Laghu Udyam Suraksha, cover under the existing policy shall continue until expiry of the policy. However, at the time of policy renewal, the applicable policy shall be issued.
5. Documentation
Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha have the following documents attached hereto (Annexure II and Annexure III respectively)
| Components | Bharat Sookshma Udyam Suraksha | Bharat Laghu Udyam Suraksha |
|---|
| 1. Standard Proposal Form | ✓ | ✓ |
| 2. Standard Prospectus | ✓ | ✓ |
| 3. Standard Policy Wordings | ✓ (including eight in-built covers apart from the basic cover) | ✓ (including seven in-built covers apart from the basic cover) |
| 4. Standard Key Features Document (KFD) | ✓ | ✓ |
| 5. Special Clause (Agreed Bank Clause) | ✓ | ✓ |
| 6. Standard Add-ons | One Standard Add-on (Declaration Policy) | Two Standard Add-ons (Declaration Policy, Floater Cover) |
6. Standard Proposal Form
While the Standard Proposal Form has been prescribed by these Guidelines, insurers shall include questions relevant to innovative add-ons, as the case may be. However, no other questions shall be added nor can the proposal form be modified in any manner.
7. Policy Schedule
7.1. Insurers shall design a standard policy schedule which shall, at the minimum, contain the following information, apart from ensuring compliance with the relevant provisions of IRDAI (Protection of Policyholders’ Interests) Regulations, 2017.
i. Details of Proposer
ii. Details of Policy Period
iii. Sum Insured details
iv. Specific Contents coverage
v. Risk details
vi. In-built Cover details
vii. Details of standard add-ons
viii. Details of innovative add-ons, as applicable
ix. Policy Deductible
x. Premium collected
7.2. The Standard Policy Schedule shall be filed with the Authority for prior approval, along with other required documents following the procedure required under the extant Product Filing Guidelines.
8. Policy Duration
8.1. The duration of Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha shall not exceed 12 months.
8.2. Short period policies may be issued only for specific valid reasons such as coinciding with the financial year or the date of renewal of other policies of the insured.
8.3. Extension of short period policy shall not be permitted and it is to be replaced by an annual policy.
9. In-built Covers
The following in-built covers are available under Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha respectively.
| In-built Covers | Bharat Sookshma Udyam Suraksha | Bharat Laghu Udyam Suraksha |
|---|
| Additions, alterations or extensions | Available | Available |
| Temporary removal of stocks | Available | Available |
| Cover for specific contents | Available | Available |
| Start-up expenses | Available | Available |
| Professional fees | Available | Available |
| Removal of debris | Available | Available |
| Costs compelled by Municipal Regulations | Available | Available |
| Floater Cover for Stocks | Available | Not Available |
10. Standard Add-ons
| Standard Add-ons | Bharat Sookshma Udyam Suraksha | Bharat Laghu Udyam Suraksha |
|---|
| Declaration Policy for Stocks | Available | Available |
| Floater Cover for Stocks | Already an in-built cover | Available |
Note: It is permissible to opt for both Declaration Policy and Floater Cover
11. Terrorism Cover
11.1. Cover against terrorism is in-built. Insurers shall attach the relevant clause reflecting the standard wordings agreed upon in the Indian Market Terrorism Risk Insurance Pool (IMTRIP).
11.2. Insurers to build the agreed rate into the pricing of the products. The same shall be reflected in the Technical Note when the product is filed with the Authority under the File and Use procedure of the Product Filing Guidelines.
12. Basis of Sum insured
12.1. All Building/ Structure, Plant & Machinery, Furniture & Fixtures shall be insured on Reinstatement Value/Replacement Value basis only. There is no option to insure it on market value basis.
12.2. Stocks of raw material shall be covered on Landed Cost at the insured’s premises. Stocks in process shall be covered at Input Cost of the stock. Finished goods shall be insured for the Manufacturing Cost. In respect of finished goods sold but not delivered, where under the conditions of sale, the sale contract is cancelled by reason of any damage insured under the policy either wholly or to the extent of the damage, the Sum Insured shall be based on the Contract Price.
12.3. If the proposer does not wish to cover goods held in trust, it needs to be specifically declared before inception of cover; else it shall be deemed to be covered.
12.4. Valued policies can be allowed only for properties such as Curios, Works of Art, Manuscripts, Obsolete machinery and the like subject to the valuation certificate being submitted and found acceptable by the insurers.
13. Partial Insurance
13.1. It is not permissible:
(a) to issue a policy covering only certain portions of the Building.
(b) to issue a policy covering only specified machinery (except Boilers), parts of machine or accessories thereof housed in the same block/ building.
14. Silent Risk
A silent risk denotes Industrial/Manufacturing risks and Utilities located outside the compounds of industrial/manufacturing risks where no manufacturing/storage activities are carried out continuously for 30 days or more.
15. Premium
15.1. The premium collected under Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha shall be accounted under the Fire line of business.
15.2. Where short-period scales of rates are laid down, it shall be stated clearly in the Prospectus. Similarly, the scales of refund payable to the insured when the insured requests for cancellation of the policy shall be mentioned in the policy wordings against the relevant clause provided for. The scales shall be part of the filing under the extant Product Filing Guidelines.
15.3. It is not permissible to split sum insured of the same property under various policies for different periods of insurance to derive advantage of deferred instalments for payment of premium.
16. Compulsory Excess/Deductible
16.1. Compulsory Excess/Deductibles shown under this policy will be applicable and cannot be increased by the insurers by any means.
16.2. Excess/Deductible for in-built cover for Terrorism will be guided by Indian Market Terrorism Risk Insurance Pool (IMTRIP).
17. Add-on Covers
17.1. All add-ons currently being used by insurers for the Standard Fire and Special Perils (SFSP) Policy for risks that fall under what Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha seek to cover respectively shall be deemed withdrawn with effect from 1st April, 2021.
17.2. Innovative add-on covers may be filed by insurers for both Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha.
17.3. However, these add-ons shall be filed in tranches. Not more than 5 add-ons shall be permitted to be filed on or before 31st March, 2021. Subsequently, within the first 6 months of launch of the product, i.e., by 30th September, 2021 the second tranche, which shall again not exceed 5 in number, may be filed. The rest may be filed subsequent to that.
17.4. Premium for the add-ons should not exceed 50% of the base premium for both Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha.
18. Filing Procedure:
18.1. The basic product along with the standard add-ons shall be subject to the File and Use procedure as stipulated in the Product Filing Guidelines.
18.2. Insurers shall carry out the filing (which includes the pricing approach) for the basic product along with standard add-ons on or before 28th Feb 2021.
18.3. Innovative add-ons shall be filed in accordance with Clause 17.3 above.
19. Underwriting Policy
Insurers shall carry out the required modifications in their Underwriting Policy bearing in mind the introduction of these policies.
20. Training and Distribution
Insurers shall ensure that the agents, intermediaries and other permitted distribution channels have the necessary information and skills to explain and market the product. The required training needs to be imparted to them. For all online/ digital sales, the extant regulatory framework that is applicable shall be scrupulously followed.
21. Extant Product Filing Guidelines
Other than what has been provided under these Guidelines, all extant provisions as per guidelines Ref. IRDAI/NL/GDL/F&U/030/02/2016 dated 18th February, 2016 shall be applicable.
22. Technical Audit
The Technical Audit Department of insurer shall ensure oversight over the underwriting of these products to ensure compliance with these Guidelines, apart from compliance with the extant Product Filling Guidelines.
23. Miscellaneous
Insurers violating any of the provisions of these Guidelines shall be subject to regulatory action in accordance with provisions of the applicable laws/other framework.
