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Fire Fighter Industry & Anthola Group
Managing Your Business' Fire Insurance Cost
As a business owner, you're constantly thinking about how you can grow your business and manage your costs. What is often not thought about, especially in the early days of growing your business, is how you should manage business risks – physical and financial.
There are many risks faced by a business, and the most common but also most severe risk of all is fire.
If you run a business with a physical location, your business premise, assets, equipment, and stock are at risk of being damaged by an unforeseen fire event. You can reduce or mitigate this risk by purchasing a Fire Insurance policy. When you purchase a Fire Insurance policy from an insurance company, you are effectively transferring the risk to them.
What does this mean?
In exchange for paying a yearly premium, the insurance company will accept the risk, and effectively pay for the potential losses your business should suffer from a valid fire damage. However, there are conditions required by the insurance companies before they decide to pay for your claims. One of the reasons behind this is the possibility of a “moral hazard”, which occurs when individuals don’t take actions to minimize the loss, or try to falsify and over-claim for the insurance.
Now, how is the insurance premium calculated? These are three main factors:
1. The Type of Business You Run
Insurers evaluate different types of companies using different risk assessments. Naturally, business operations or premises with more fire hazards will be charged a higher insurance premium. For example, if you manufacture wooden furniture, a fire incident will result in a more significant loss than an office with no stock, heavy machinery or flammable materials.
When you speak to your insurance agent or insurer, do ask them to provide you with your business’ trade classification code and its corresponding fire tariff rate. This rate represents the likelihood of a fire occurrence and is used to calculate your final insurance premium. The fire tariffs are fixed rates by the General Insurance Association of Malaysia (PIAM), which is governed by Bank Negara Malaysia.
2. Your Fire Risk Management Score
On top of that, insurers will also assess the fire safety measures and risk management in your building to determine a rate for your fire insurance. The more measures there are, the lower the likelihood of a fire event, the cheaper your insurance cost.
For instance, if your business premise has water sprinklers, in most cases, insurers will view the risk of fire to be low. As a result, insurers will reward you with a lower and more attractive premium.
However, the type and design of water sprinklers depends on the type of business you run, as well as the size of your premise. In certain cases, you may need more than water sprinklers as the nature of the business premise may not allow for water sprinklers to be installed. For example, a data center would want to mitigate and reduce loss of data. Hence, they would want a fire safety solution that would not damage equipment that is not on fire.
For sensitive equipment such as hard disks, a gaseous system is preferred. The gaseous systems use either inert gas and clean agent gas. An inert gas system uses a mixture of argon and nitrogen gases to decrease oxygen levels present in the room which naturally puts out the fire. A drawback to inert systems is they have a large footprint due to the amount of gas cylinders needed to effectively saturate the given area. An example of gaseous systems are clean agent gas systems such as Novec 1230 and FM-200.
3. The Total Amount of Assets Insured
Lastly, the total cost of your premium will also be calculated based on the total “sum insured”. This is the total value of the assets you would like to insure.
For instance, if your building cost is RM500,000, and your machinery and stock in hand has a RM500,000 value, a 0.01% fire rate will cost RM1,000,000 x 0.01% = RM100 (before tax).
The Basics of Legal Fire Safety Requirements
The most elementary fire safety protection is the need for fire extinguishers. Fire extinguishers come in different shapes and sizes but the most important factor is the Fire Rating of these extinguishers. The Fire Rating is the extinguishing power tested by SIRIM on multiple materials over a specific time.
To calculate the number of fire extinguishers that are needed for your premises, take the area of your business premises (in square meters) and multiply it by the value of 0.065. That will derive the Fire Rating needed for your premises.
For example, if your premise is 900 square meters, multiply that with 0.065, your Fire Rating will be 58.5. The most common fire extinguisher (The 9kg ABC Dry Powder Fire Extinguisher) has a Fire Rating of 27.
To calculate the number of fire extinguishers needed, take the Fire Rating (58.5) and divide it by 27. This will give you 2.1677 (rounding down to 2).
This means your premise will need a minimum of 2 units of the 9KG ABC Dry Powder Fire Extinguisher.
While the calculations provide the minimum needed to comply with the law., the rule of thumb suggested by the BOMBA- is 2 units of 9kg ABC Dry Powder extinguisher for every 1,000 square feet.
When do you need more than fire extinguishers?
As mentioned, fire extinguishers are the most fundamental tool required in fire safety. After a certain threshold, your premise will need more than extinguishers and will need to have a Fire Certificate. Fire Certificate Malaysia is a certificate issued to premises that are classified as designated premises. All designated premises must have a Fire Certificate issued by the Malaysian Fire and Rescue Department. The designated premise categories are:
New premises must apply for a Fire Certificate upon obtaining a Certificate of Fitness (CF), Temporary Certificate of Fitness (TCF) or Certificate of Completion and Compliance (CCC).
An application can be made at the State Headquarters of Jabatan Bomba dan Penyelamat Malaysia (JBPM) or Fire Zone Office,
Applicants must apply by submitting Form I and provide the following information: –
1. Copy of CCC or CFO
2. Building Plan (which has been approved by JBPM during CCC / CFO production)
3. Latest property ownership letter
4. Land ownership
5. Copy of door tax
6. Business license
A date will be determined by the Jabatan Bomba dan Penyelamat Malaysia (JBPM) to the applicant to examine the premises. If all Fire Safety Installation systems are in good condition and are satisfactory, the certificates will be issued within 5 days from the date the payment is made.
The period of validity of a Fire Certificate Malaysia for premises is twelve (12) months.
All designated premises will also need to be connected electronically or by telephone to the nearest Fire Station by switched switchboards to provide an immediate automatic alarm in case of emergency.
To learn more about fire insurance and how it applies to your business, visit our insurance partner, Anthola Group's website. For any fire safety matters, please leave us an enquiry or call us to speak with one of our consultants.