Hazards in Fire Insurance
The hazards in fire insurance can be grouped into:
Physical Hazards
Physical hazards are concerned with material features or arises from the subject matter of fire insurance can be building, shops, factory, godowns or any houses or any materials etc. Every one of these can be insured. From the proposal form itself, physical hazards can be estimated. For this purpose, the following aspects of the subject matter are to be considered.- Construction of building: knowledge about the structure of the building is to be estimated first. The materials used for construction of walls of the building its terrace, floors, doors etc. are to be considered for this purpose. In addition to this the age of the building / house, its height, number of floors in the building quality and use of woods in the building, etc. are also to be verified. From each of these factors, the physical hazards can be estimated.
- Use of the building or premises: The fire insurance hazards also influence the building or its premises for what purposes. The building or its premises can be used for housing, shop, godown, office, hotel, school, hospital etc. The nature of materials kept in the building or the purpose for which the building is used, may increase or decrease the chances of fire insurance hazards. For example, the building or premises which are used for keeping explosive items, or inflammable materials, etc. increases the hazards.
- Location of the building or premises: The location of the building or the premises influence the occurrence of fire insurance hazards. The use of the house may not increase the hazards, but the location of the building can increases the chance of fire hazards. For example, explosive shop near to a cloth shop. There is very rare chance of fire from the cloth shop. but its nearness to an explosive shop increases the chances of fire.
- Electrification: The method of electrification or its nature can increase or decrease the fire insurance hazards.
- Interior Decoration: At the present time of modern style of living, interior, decoration of the house/ building is a usual matter. The interior decoration is done with the materials like wood, cloth, paper, and paper board, synthetic insulating materials etc. All these materials increase the chances or fire hazards.
Moral Hazards.
Moral hazards are the outcome of nature, behaviour and attitude of people. Carelessness, dishonesty, negligence, insanity, lock of proper education, social and economic structure of the society etc. are the causes of moral hazards. The various causes of moral hazards are:- Dishonesty: With this intention, the insured property sets on fire. This is done to claim higher amount for less costing property. In many occasions such people make efforts in charging claim for higher amount.
- Negligence: In many occasions, due to negligence of the insured or his employees; the fire take places in the building or the goods. By hiding the truth, the claim is received from the insurer.
- Uncordial Industrial Relations: In many occasions, due uncordial relations between the employer and employees, the insured property set on fire. The insured then claims the loss from the insurer.
- Mean Mentality: Sometimes the insurer keeps mean mentality towards the insurer, and in order to exploit the reputation of the insurer claims are made for such losses also.
- Civil Disturbances: Sometimes certain bad elements in the society puts fire on the insured property. The insured becomes successful in getting compensation/ claim for the insurer.
- Non- taste for reducing risks: It is the duty of the insured to take necessary steps to reduce the effects of fire, when a fire, when a fire is broken in the premises/ building. But many insured's never take any suitable step to reduce the risk. These types of risks are categorized as moral hazards in fire insurance.
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