Fire insurance

What is fire insurance?

Fire insurance is a general insurance contract that indemnifies the owner of property, or anyone with an insurable interest in it, for physical loss or damage caused by fire and a list of allied perils. In India the cover almost always goes well beyond fire: lightning, explosion, riot and malicious damage, storm and flood, landslide, impact by vehicles and bursting of water tanks are part of the standard wording. That is why the industry calls the line "fire and allied perils" or simply property insurance.

Fire insurance pays for the asset, not for lost income. Loss of profit after a fire needs a separate business interruption cover, sold in India as fire loss of profit (FLOP).

How fire insurance works in India

Three families of products cover almost all fire business today:

The three Bharat products were introduced by IRDAI from 1 April 2021 as standard products, replacing the old tariff wording for homes and small businesses. Since June 2022 insurers may also file alternative fire products for these segments, as long as the standard product's definitions remain the reference.

Pricing has been free of tariffs since general insurance was de-tariffed in 2007. Insurers price using occupancy-wise burning cost data published by the Insurance Information Bureau, which IRDAI has said is a reference and not a mandated minimum rate. The IRDAI Annual Report 2024-25 records that the remaining fire policy-wording tariffs were de-notified with effect from 1 April 2024, so wordings are now insurer-filed products under the IRDAI (Insurance Products) Regulations, 2024.

Key mechanics a buyer meets:

• Basis of value. Buildings and machinery are usually insured on reinstatement value (cost of replacing with new), stock on cost. The choice drives both premium and claim.
• Add-ons. Earthquake, terrorism (backed by the Indian market terrorism pool managed by GIC Re), spontaneous combustion, removal of debris and architects' fees are added by endorsement or are built in, depending on the product.
• Under-insurance. If the sum insured is lower than the true value, the average clause cuts the claim in proportion, except where a product waives it.
• Claims. A licensed surveyor assesses losses above the regulatory threshold, and the insurer settles on the survey report.

Key numbers

Per the IRDAI Annual Report 2024-25, fire premium written within India by general insurers was ₹24,242 crore in 2024-25, down 5.58 per cent from ₹25,667 crore a year earlier. Fire is heavily reinsured: the industry retained only about 34 per cent of fire premium net in 2024-25, with the rest ceded to Indian and overseas reinsurers. Fire claims paid in the year were about ₹12,776 crore across public and private insurers.

What fire insurance means for distribution

• Two very different markets. Large corporate fire is broker-led, tender-driven and priced on reinsurance capacity. Small business and home fire is a retail sale that suits bank branches, NBFCs lending against property, corporate agents and POSPs. Channel design should treat them separately.
• Loan-linked sales. Much SME fire cover is sold at the time of a working capital or property loan. The lender's interest must be noted on the policy, but the customer must still be free to choose the insurer. Forced bundling is a recurring complaint and a theme of IRDAI's September 2026 consultation on distribution reforms.
• Sum insured is where claims are won or lost. Advisers who help the customer set a realistic value at inception prevent the under-insurance disputes that drive most fire claim grievances. A short valuation checklist (building area and construction cost, machinery replacement cost, peak stock) is worth more than a discount.
• Renewal is a service moment. Stock values, new machinery and building extensions change every year. A renewal review that updates values protects the customer and lifts premium honestly.
• Rate cycles hit commission income. Corporate fire rates move with reinsurance markets. Intermediaries heavy in large property accounts see revenue swing year to year, which is one reason brokers chase SME volume.