Underwriting is the process of accessing a risk and deciding on the terms, conditions, and rate of premium to apply. Rating on the other hand deals with factors that directly relate to premium which is eventually charged by the underwriter.
The key underwriting factors and rating factors in fire insurance are:
The construction of the building
A building constructed of bricks will be more sound than building constructed of wood. A building construct of concrete roof has a less probability of burning than one which is not protected.
Height of the Building
Many floors enhance the the chance of collapsing of the upper floors in the event of fire in the lower floors. The higher the building the building the more difficult it is to put off fire in the upper floors.
Again, the risk of water damage to lower flows is increased if water is used to distinguish the fire.
Nature of Flooring
A floor constructed by wooden materials becomes a fuel in the event of fire. Upper floors constructed of wooden material may collapse easily during a fire causing damage to property.
Openings in the Floor
Openings in the floor for lifts and belts constitutes a higher physical hazard as the y cause greater chance of ignition of fire and difficult in extinguishing it.
As a rule, the higher the value the higher the loss should it occur.
This refers to the use to which the building is devoted. A building occupied by a residence or an office is a better risk than a retail shop. A building occupied as highly combustible goods is more hazardous from a fire insurance point of view than a grocery shop.
Place and Location
The place where the property is located may greatly influence the fire hazard. Account must be taken by the fire underwriter of the following.
- The nature of adjoining property
- Distance from the fire station
- The source of water
- The degree of congestion in the area
- The use/occupancy of the surrounding building
Fire protection devices
The availability of firefighting appliances such as fire detectors, and water supply in a building means that fire can be distinguished easily and quickly.
Lighting, Heating and Power
The fire may occur due to short circuiting. Combustion can occur due to faulty installation. The system of lighting, whether by gas or oil and use of naked lights may cause more hazards to property.