Table Of Contents

Module	Title
1.	INTRODUCTION TO INSURANCE
	Functions of Insurance
	Purpose and Need for Insurance
	Types of Insurance
	Basic Concepts of Insurance
2.	INDIAN INSURANCE MARKET
	Insurance Regulatory and Development Authority of India (IRDAI), 1999
	Insurers or Insurance Companies
	Insurance Intermediaries
	Insurance Brokers
	Insurance Agents
	Point of Sale (POS) Persons
3.	PRINCIPLES AND PRACTISE OF INSURANCE
	Offer (Proposal) and Acceptance
	Consideration
	Competent to make a Contract
	Free Consent
	Legal Purpose
	Principles of Insurance
	Proposal Form
	Sales Literature
	Payment of Premium
	Section 64 VB of Insurance Act
	Premium Receipt
	Insurance Policy
	Endorsements
	Section 41 of the Insurance Act , 1938 (Rebating)
	Insurance Claim
	Intimation of a Claim
	Appointment of a Surveyor
	Survey Report
	Claim Forms
	Section 64 UM of the Insurance Act, 1938
	Discharge Vouchers
	Payment of Claim
4.	POINT OF SALE- GENERAL INSURANCE PRODUCTS INCLUDING HEALTH INSURANCE
	General Insurance
	Stand-Alone Health Insurance
	Categories of POS Products and Salient Features of POS Products
5.	MISECELLANEOUS
	Grievance Redressal Mechanism
	Protection of Policy Holders Regulations, 2017
	AML/KYC Norms
	Point of Sale (POS) Persons
6.	SYNOPSIS
	Introduction to Insurance
	Concept of Insurance
	Terms that Apply to Life and Non-Life Insurance
	Various Constituents of Insurance Market
	Regulators
	Term Insurance in Detail
	Personal Accident Cover
	Health Insurance
	Critical Illness Policy
	Overseas Mediclaim
	Point of Sales (POS) Person
	Module-1
	Module-2
	Module-3
	Module-4
	Module-5

Module -1

INTRODUCTION TO INSURANCE

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. That is, promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity against unexpected or unpredictable losses or expenses. An entity which provides insurance is known as an insurer, insurance company, insurance agent or underwriter. A person or entity who buys insurance is known as an insured or a policyholder. Insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss

Functions of Insurance

Functions of insurance can be divided into parts;

1. Primary functions.
2. Secondary functions.

Primary Functions

Certainty of Compensation of Loss: Insurance provides certainty of payment at the uncertainty of loss. The elements of uncertainty are reduced by better planning and administration. The insurer charges premium for providing certainty.

Insurance Provides Protection:The main function of insurance is to provide protection against risk of loss. The insurance policy covers the risk of loss. The insured person is indemnified for the actual loss suffered by him. Insurance thus provide financial protection to the insured. Life insurance policies may also be used as collateral security for raising loans.

Risk Sharing:All business concerns face the problem of risk. Risk and insurance are interlinked with each other. Insurance, as a device is the outcome of the existence of various risks in our day to day life. It does not eliminate risks but it reduces the financial loss caused by risks. Insurance spreads the whole loss over the large number of persons who are exposed by a particular risk.

Secondary Functions

Prevention of Losses:The insurance companies help in prevention of losses as they join hands with those institutions which are engaged in loss prevention measures. The reduction in losses means that the insurance companies would be required to pay lesser compensations to the assured and manage to accumulate more savings, which in turn, will assist in reducing the premiums

Providing funds for investment:Insurance provide capital for society. Accumulated funds through savings in the form of insurance premium are invested in economic development plans or productivity projects.

Insurance increases efficiency:The insurance eliminates the worries and miseries of losses. A person can devote his time to other important matters for better achievement of goals. Businessman feel more motivated and encouraged to take risks to enhance their profit earning. This also helps in improving their efficiencies.

Solution to social problems:Insurance take care of many social problems. We have insurance against industrial injuries, road accident, old age, disability or death etc.

Encouragement of savings:Insurance not only provides protection against risks but also a number of other incentives which encourages people to insure. Since regularity and punctuality pf payment of premium is a perquisite for keeping the policy in force, the insured feels compelled to save.

Purpose and Need for Insurance

The world we live in is full of uncertainties and risks. Individuals, families, businesses, properties and assets are exposed to different types and levels of risks. These include risk of losses of life, health, assets, property, and so on. While it is not always possible to prevent unwanted events from occurring, financial world has developed products that protect individuals and businesses against such losses by compensating them with financial resources. Insurance is a financial product that reduces or eliminates the cost of loss or effect of loss caused by different types of risks. Insurance is a shield which protects the financial interests of you and your family in case of unseen and unpredicted circumstances.

Benefits to Individual

Capital Formation: As institutional investors, insurance companies provide funds for financing economic development. They mobilize the saving of the people and invest these saving into more productive channels

Generating Employment Opportunities:

Promoting Social Welfare:Policies like old age pension scheme, policies for education, marriage provide sense of security to the policyholders and thus ensure social welfare.

Helps Controlling Inflation: The insurance reduces the inflationary pressure in two ways, first, by extracting money in supply to the amount of premium collected and secondly, by providing funds for production narrow down the inflationary gap.

Types of Insurance

There are two basic types of insurance

• Life Insurance
• General Insurance

Life Insurance pays the insured/policy holder or your beneficiaries a certain sum of money in case of your death. Since the insurance coverage is more than a year, the insured/policyholder has to pay the premium either every month, every three months or annually. Risks involved: are: your premature death, your source of income during retirement or in case of your illness. Its main products comprise life-time policy, endowment, investment-linked, life annuity plan, and medical and health purposes.

General insuranceis your protection from damages or losses excluded from the life insurance. Coverage period is yearly, so your payment is made on a single-basis only. Risks involved are: loss of your property in cases of thief, fire, and so on, payment for injury or damage the insured/policy holder has inflicted to a third party and your death or injury due to accident. Its main products comprise motor insurance, fire insurance, personal accident insurance, medical/health insurance and travel insurance.

Insurance cover various types of risks and include various insurance policies which provide protection against various losses. There are two different views regarding classification if insurance:

1. From the business point of view; and
2. From the risk points of view

A. Business Point of View

The insurance can be classified into three categories from business point of view

• Life insurance;
• General Insurance; and
• Social Insurance.

Life Insurance: The life insurance contract provide elements of protection and investment after getting insurance, the policyholder feels a sense of protection because he shall be paid a definite sum at the death or maturity. Since a definite sum must be paid, the element of investment is also present.   In other words, life insurance provides against pre-mature death and a fixed sum at the maturity of policy. At present, life insurance enjoys maximum scope because each and every person requires the insurance. Life insurance is a contract under which one person, in consideration of a premium paid either in lump sum or by monthly, quarterly, half yearly or yearly installments, undertakes to pay to the person (for whose benefits the insurance is made), a certain sum of money either on the death of the insured person or on the expiry of a specified period of time. Life insurance offers various polices according to the requirement of the persons -

• Term Assurance
• Whole Life
• Endowment Assurance
• Family Income Policy
• Life Annuity Joint Life Assurance
• Pension Plans
• Unit Linked Plans
• Policy for maintenance of handicapped dependent
• Endowment Policies with Health Insurance benefits

General insurance:the general insurance includes property insurance, liability insurance and other form of insurance. Property insurance includes fire and marine insurance. Property of the individual and business involves various risks like fire, theft etc. This need insurance liability insurance includes motor, theft, fidelity and machine insurance.

Types of general insurance policies available are

• Health Insurance
• Personal Accident Policy
• Group Insurance Policy
• Motor Insurance
• Liability Insurance
• Fire Insurance Policy
• Marine Insurance
• Travel Insurance Policy

B. Risk Points of View

The insurance can be classified into three categories from risk point of view

• Property Insurance
• Liability Insurance
• Other forms of Insurance

Property Insurance:

Property of the individual and business is exposed to risk of fire, theft marine peril etc. This needs insurance. This is insured with the help of

• Fire Insurance
• Marine Insurance
• Miscellaneous Insurance

Fire Insurance:Fire insurance covers risks of fire. It is contract of indemnity. Fire insurance is a contract under which the insurer agrees to indemnify the insured, in return for payment of the premium in lump sum or by installments, losses suffered by the insured due to destruction of or damage to the insured property, caused by fire during an agreed period of time. It includes losses directly caused through fire or ignition.

Marine Insurance:Marine insurance is an arrangement by which the insurer undertakes to compensate the owner of the ship or cargo for complete or partial loss at sea. So it provides protection against loss because of marine perils. The marine perils are collisions with rock, ship attack by enemies, fire etc. Marine insurance insures ship, cargo and freight.

Miscellaneous Insurance:It includes various forms of insurance including property insurance, liability insurance, personal injuries are also insured. The property, goods, machine, furniture, automobile, valuable goods etc. can be insured against the damage or destruction due to accident or disappearance due to theft. Miscellaneous insurance covers

• All risks insurance
• Burglary and theft insurance
• Construction risks
• Credit insurance
• Disability
• Engineering and aviation risks
• Engineering and aviation risks
• Motor

Basic Concepts of Insurance

Proposer/Insured: A proposer is a person or a firm who proposes for insurance cover to the insurance company. Once a proposal along with the premium is accepted by the insurance company a contract in to the form of a policy comes into existence. The proposal for insurance cannot be made by any person. A person who is the owner of a property or has a financial interest in the property can only propose for insurance. For example, in motor insurance only a registered owner of the vehicle or a bank/financier who has financed the vehicle can only propose for insurance.

Insurer/Insurance Company: An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual is known as the insurer/insurance company. An insurer is frequently an insurance company and is also known as an underwriter. An insurance company or the insurer in the Indian context is a duly registered Indian company to transact the general or life insurance business in India by the Government of India through its registering authority Insurance Regulatory and Development Authority(IRDA).

BeneficiaryBeneficiary is the one whom the insured or policy holder has nominated for the insured amount in case of your death. Beneficiary are of two types: revocable beneficiary and irrevocable beneficiary. Revocable beneficiary’ designation gives right to the policy holder to change the beneficiary name without the consent of the named beneficiary. While in irrevocable beneficiary the policy holder has to take consent of the beneficiary before the name is changed.

Proposal Form Proposal form is the most important and basic document required for life insurance contract between the insured and insurance company This is a prescribed form required to be submitted duly signed and duly filled up along with the premium by the proposer proposing insurance to the office of the insurer directly or online or through its intermediaries like insurance agent or insurance broker. It includes the insured's fundamental information such as name, age, address, education, occupation, and so on. It also includes the person's medical history. Separate proposal forms are prescribed by the insurer for various types of insurance covers. Proposal form is the basis of insurance contract and concealment of material information or wrong information can lead to rejection of insurance claim.

Sum Insured Sum insured is the amount of money that an insurance company is obligated to cover in the event of a covered loss. It is the insurer's limit of liability under an insurance contract. Sum insured represents the sum for which insurance is required by the proposer and agreed by the insurer. It should represent the present market value of the subject matter of insurance. This is mentioned in the cover note and subsequently in the policy document by the insurer. The sum insured amount is dependent upon the premium price that is being paid for the insurance coverage. The sum insured is taken into consideration by insurer at the time of claim settlement.

PremiumAn insurance premium is the amount of money that an individual or business must pay for an insurance policy. Premium is an amount paid periodically to the insurer by the insured for covering his risk. The insurance premium is income for the insurance company, once it is earned, and also represents a liability in that the insurer must provide coverage for claims being made against the policy. The amount of premium varies and depends upon the premium rate, sum insured, subject matter of insurance, the perils covered, hazards involved, the past loss experience and terms and conditions of insurance. Premium can be paid by proposer or policy holder either by cash, cheque, bank draft, bank pay order, credit/debit card,Internet or e-transfer or direct credit through bank transfer or through bank guarantee or cash deposit.

Surrender Value and Paid Up ValueSurrender value is the sum of money an insurance company pays to a policyholder in the event that his or her policy is voluntarily terminated before its maturity or an insured event occurs. The policy ceases as soon as the insured/policy holder withdraws the money, and the insured will lose out all the returns on it. A mid-term surrender would result in the policyholder getting a sum of what has been allocated towards savings and the earnings thereon. Paid-up value is the reduced amount of sum assured paid by the insurance company, in case the policyholder discontinues payment of premiums. After payment of three years of premium in traditional life insurance plans, your policy automatically acquires paid-up value. The sum assured by the insurance company is reduced proportionally depending when insured has stopped paying the premium. The insured or policy holder will get the amount at the end of the term.

No Claim BonusNo Claim Bonus (NCB) is a discount, given by an insurer to a policyholder for making no claims during the policy term. NCB can be accumulated over years and the discount ranges from 20 percent to 50 percent on the own damage premium. No claim bonus is a benefit for those who have not claimed insurance during the preceding year of cover. This discount increases every year, provided, the claim has not been made yet. This will lower the premium on the following year. However, the discount rates are dependent on the age of the policy and when the last claim was made. NCB is applicable only on the own damage premium. It is not applicable on either the third-party liability premium or the add-on coverage.

Insurance CoverageInsurance coverage means, when an individual takes an insurance policy the insured will be covered by insurance company for a specific amount for themselves or the things that he had taken the insurance policy, for which he would be paying premiums to the insurance company. The insurance company will pay the insured in case of damage or claims made by the insured according to their insurance coverage.

PolicyPolicy is a valid stamped document duly signed and issued by the authorised representative of the insurer as a proof of contract to the insured. It is generally an integrated contract, meaning that it includes all forms associated with the agreement between the insured and insurer. It contains schedule showing the name and address of insured and details of property insured. Policy also contains amount of premium paid, all the conditions, warranties and exclusions applicable to the contract besides the period of insurance with the date and time of commencement, and date and time of expiry, details of perils covered. In life insurance, policy also has a mention regarding name of nominee & date of maturity.

Premium Receipt It is a receipt of premium issued by the office of the insurer to the proposer/insured in token of having received the premium.

Certificate of InsuranceA certificate of insurance is a document used to provide information on specific insurance coverage. The certificate provides verification of the insurance and usually contains information on types and limits of coverage, insurance company, policy number, named insured, and the policies’ effective periods. Although the certificate should not be substituted for information contained in the actual insurance policies, it is usually a reliable source of information or proof of insurance coverage. In motor insurance along with the policy an additional document is issued by the insurer as a proof of insurance of the vehicle, as required in the motor vehicles act and is known as certificate of insurance. This is required to be kept in person while driving the vehicle and is to be shown to the police authorities if asked for.

Cover NoteA cover note is a temporary a numbered document issued by an insurance or a duly authorised representative pending issue of policy document to the insured in non-life insurance. A cover note is different from a certificate of insurance or an insurance policy document. A cover note features the name and address of the insured, the insurer, date and time of issue, period of cover, premium, and what is being covered by the insurance. It remains valid for the period of insurance until it is replaced by the policy document

EndorsementsEndorsements are the documents issued by the insurer after the issue of the policy to correct, add, delete, and make amendments in the policy at the instance of the insurer or the insured.

Contestable Period and Declaration PageContestable period is usually 1 or 2 years, during which the insurance company holds all the rightto investigate the policy and decide whether to pay or not to pay to the insured. Declaration page’ in insurance policy, bears all the information of the policy holder like name, address, vehicle information, type of coverage and loss payee information.

ClaimAn insurance claim is a formal request to an insurance company for coverage or compensation for a covered loss or policy event. In the event of claim under the policy, immediate intimation in writing by a letter is required to be given by insured to office of insurance company informing the policy number, name of insured, vehicle registration number (in case of motor insurance) date of accident, place of accident, nature of loss, cause of loss/damage. The insurance company validates the claim and, once approved, issues payment to the insured or an approved interested party on behalf of the insured. Insured should submit the duly completed and signed claim form, documents with a covering letter to insurance company and should always obtain acknowledgement from insurance company on photo copy of covering letter, for receipt of documents. If original documents are given to insurance company then a photo copy of claim form and all documents should be kept by insured for his record.

Renewal Notice Normally all the policies in general insurance are issued for a period of one year from the date of insurance except in the case of fire insurance of buildings used for residential purposes and some personal accident policies which can be issued on long term basis by the insurer. The date and time of expiry of the cover is mentioned in the policy and insurer is not liable for any untoward happening after the policy has lapsed. The insurers as a routine are not required to send the renewal notice to the insured in advance regarding the date of expiry of the policy, though insurance companies do send SMS and Email as a reminder for renewal of the existing policy. It is the duty of the insured to keep the track of his general insurance policies and arrange the renewal of the policy through the office of the insurer or his duly authorised representative by remitting the renewal premium before the expiry date positively if the insured wants to continue the cover.

Risk, Peril and Hazard

The words risk, peril, and hazard may seem interchangeable, but they have distinct definitions in the insurance and risk management world

Risk Insurance replaces the uncertainty of risk with a guarantee that reduces the adverse effects of risk. Risk can be defined as the "uncertainty regarding a loss." Losses, such as auto damage due to an accident or negligence regarding your property, can give rise to a liability risk. The loss involved with these risks is the lessening or disappearance of value. Risk is the likelihood that an insured event will occur, requiring the insurer to pay a claim. For example, in life insurance, the insurance risk is the possibility that the insured party will die before his/her premiums equal or exceed the death benefit. Insurance companies compensate for this risk by adjusting premium according to how great the risk is. The process of analyzing exposures that create risk and designing programs to handle them is called risk management

A risk that conforms to the norms and specifications of the insurance policy in such a way that the criterion for insurance is fulfilled is called insurable risk. There are various essential conditions that need to be fulfilled before acceptance of insurability of any risk. In order that a risk be insurable the following requirements must be met

1. The loss to be insured against must be important enough to warrant the existence of an insurance contract
2. Risk must permit a reasonable statistical estimate of the chance of loss in order to determine the amount of premium to be paid
3. The loss should be definite as to cause, time, place and amount
4. The loss is not catastrophic
5. Risk is accidental in nature

For example, the probability (or chance) that a certain vehicle will be involved in an accident in year2011 (out of the total vehicle insured that year 2011) can be determined from the number of vehicles that were involved in accidents in each of some previous years (out of the total vehicle insured those years). The probability (or chance) that a man (or woman) of a certain age will die in the ensuring year can be estimated by the fraction of people of that age that died in each of some previous. The insurance company also must be able to come up with a reasonable price for the insurance. In case of a scenario where the loss is too huge that no insurer would want to pay for it, the risk is said to be uninsurable. A risk may not be termed as insurable if it is immeasurable, very large, certain or not definable.

A risk that cannot be insured, either because the probability of a loss is too high, or because it cannot be measured actuarially is uninsurable risk. Uninsurable risk is a condition that poses unacceptable risk of loss or a situation in which the insurance would be against the law. Insurance companies limit their losses by not taking on certain risks that are very likely to result in a loss. Uninsurable risks are those that would bring down an insurance pool, so they cannot be taken on for regular coverage. The basic concept of insurance is that it spreads risk among a large group of people, so they can protect against a large loss by making a small insurance payment. Insurance companies decline to take on non-insurable risks because they know they will almost certainly lose money very quickly if they do. In other words, assuming risk with such a high probability of loss is bad business. For example, a life insurance company may deem a person who is 70 years old and has lung cancer a non-insurable risk because the likelihood of their death before the policy becomes profitable is simply too high.

Prill Peril is a specific risk or cause of loss covered by an insurance policy. A peril is an event or circumstance that causes or may potentially cause a loss. Examples of perils include fire, flooding, hailstorms, tornadoes, hurricanes, auto accidents, or home accidents, such as falling. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded

Hazard Insurance hazard means the condition or situations that are likely to increases the chances of a loss arising from a peril. The probability of happening of the undesired event may become more certain or prominent if the subject-matter of insurance presents some peculiar characteristics facilitating the causation of the event. Sometimes the causation of the event may not be due to some peculiar characteristics of the subject matter itself but may be due to the peculiar character of the insured. Whatever it is, this hazard, in fact, indicates a danger (or risk), which danger influences the possible happening of the insured event, that is to say, which indicates the aggravation of the risk so as to make it somewhat different than normal. There are two elements to hazard that an insurers needs to carefully consider, that is, the physical hazard and the moral hazard. Both contribute to the chance of a loss.

Moral hazards are concerned with the attitude and conduct of people. They indicate those dangers which relate to character, integrity and mental attitude of the insured. They are losses that result from dishonesty or indifference. Insurance companies suffer losses because of fraudulent or inflated claims. These are not visible and cannot be identified by mere inspection of the risk or subject of insurance. In every risk, an element of moral hazard may be to some degree, always present. For example, carelessness is the cause of most of the accidents and when the insured behaves carelessly, an unsatisfactory moral hazard is created; excessive over insurance is apparently an instance of bad moral hazard; a very unsatisfactory moral hazard exists when a person wants to take out a policy with the intent to make a profit.

Physical Hazards are physical conditions that increase the possibility of a loss. They indicate the dangers of the subject of insurance which can be identified by inspection of the risk. Physical hazards indicate those dangers of the subject matter of insurance which can be ascertained or identified by mere inspection of the risk. The hazards are apparent in the subject- matter itself. The dangers are visible from the very nature, construction and situation of the subject-matter. For example, in motor insurance, the age, make, condition previous accidents, are all examples of physical hazard; in burglary insurance, the construction of the house, condition of doors and windows, existence or otherwise of burglar alarms, nature of contents, reputation or otherwise of the area are all examples of physical hazard; in personal accident insurance, physical hazard relates to age, occupation, health, physical condition and so on, of the proposer.

Risk, peril, and hazard are terms used to indicate the possibility of loss, and are often used interchangeably, but the insurance industry distinguishes these terms. A risk is simply the possibility of a loss, but a peril is a cause of loss. A hazard is a condition that increases the possibility of loss. For instance, fire is a peril because it causes losses, while a fireplace is a hazard because it increases the probability of loss from fire. Some things can be both a peril and a hazard. Smoking, for instance, causes cancer and other health ailments, while also increasing the probability of such ailments.

Module -2

INDIAN INUSRANCE MARKET

Insurance Regulatory and Development Authority of Indian (IRDAI), 1999

The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory body tasked with regulating and promoting the insurance and re-insurance industries in India. It was constituted by the IRDAI Act, 1999, an Act of Parliament passed by the Government of India. The powers and functions of the Authority are laid down in the IRDAI Act, 1999 and Insurance Act, 1938. The key objectives of the IRDAI include promotion of competition so as to enhance customer satisfaction through increased consumer choice and fair premiums, while ensuring the financial security of the Insurance market. The Insurance Act, 1938 is the principal Act governing the Insurance sector in India. It provides the powers to IRDAI to frame regulations which lay down the regulatory framework for supervision of the entities operating in the sector. Further, there are certain other Acts which govern specific lines of Insurance business and functions such as Marine Insurance Act, 1963 and Public Liability Insurance Act, 1991.

IRDAI adopted a mission for itself which is as follows:

• To protect the interest of and secure fair treatment to policyholders
• To bring about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation.
• To bring about speedy and orderly growth of the Insurance industry (including annuity and superannuation payments), for the benefit of the common man, and to provide long term funds for accelerating growth of the economy
• To ensure speedy settlement of genuine claims, to prevent Insurance frauds and other malpractices and put in place effective grievance redressal machinery;
• To promote fairness, transparency and orderly conduct in financial markets dealing with Insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players
• To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates
• To take action where such standards are inadequate or ineffectively enforced;

Entities regulated by IRDAI

1. Life Insurance Companies - Both private and sector companies
2. General Insurance Companies - Both private and public and sector companies
3. Re-Insurance Companies
4. Agency Channel
5. Intermediarieswhich include corporate agents, brokers, Third Party Administrators (TPAs),surveyors and loss assessors.

Insurers or Insurance Companies

Insurance companies lead to economic development by mobilizing savings and investing them into productive activities. Indian insurance companies are able to mobilize long-term savings to support economic growth and also facilitate economic development by providing insurance cover to a large segment of our people as well as to business enterprise throughout India. Role of insurance companies in economic development of India

Capital Formation and Insurance: The contribution of insurance companies in the process of capital formation appears at all these stages. Insurance services act as a tool to mobilize saving, function as financial intermediary and at times also indulge in direct investment. Also govt. has made regulations under which every insurer carrying on business of life insurance shall invest 25% of funds in Govt. securities and not less than 15% in infrastructure and social sector.

Encouraging Financial Stability and Reducing Anxiety: Insurer promotes financial stability in economy by insuring the risks and losses of individuals, firm and organizations. Because of uninsured large losses, firm may not be able to compensate for it leading to its insolvency which may cause loss of employment, revenue to supplier & Govt., loss of products to customer, etc. Moreover, it relieves the tensions and anxiety of individuals by securing the loss of their lives and assets.

Insurance as Financial Intermediary:The insurance companies perform extremely useful function in economy as financial intermediaries. Insurers help in reducing transaction cost in economy by collecting funds from policyholders and investing the same in different projects scattered over different regions. It is a specialized and time consuming job. The policyholders, in case of loss, are not required to wait for a long period for the amount of claim. It improves their liquidity. Insurers are in the position of financing large projects, railways power projects, etc. These large projects create economies of scale, facilitate technological innovation and specialization and thus promote economic efficiency and productivity.

Obligation to Rural and Social Sector: In India, the insurance companies are required to fulfill their obligation towards rural and social sector. For this, Life insurers are required to have 5%, 7%, 10%, 12%, and 15% of total policies in first five years respectively in rural sector. Likewise General Insurers are required to have 2% 3% and 5% thereafter of total gross premium income written in first five financial years respectively in rural sector.

Promotes Trade and Commerce:The increase in GDP is positively correlated to growth of trade and commerce in economy. Whether it is production of goods and services, domestic or international trade or venture capital projects, insurance dominates everywhere. Even banks demand insurance cover of assets while granting loans for purchase of assets. Thus insurance covers, promotes specialization and flexibility in the economic system that play contributory role in healthy and smooth growth of trade and commerce.

Reducing Burden on Government Exchequer:Insurance companies, particularly life insurers provide a variety of insurance products covering needs of children, women and aged etc under social security network and thereby reduce the burden on Govt. exchequer in providing these services. This Govt., saves expenditure on these items and amount can be utilized for more productive projects. To conclude, we can say that insurance companies play an important role in economic development of country.

Saving and Insurance:Insurance companies lead to economic development by mobilizing savings and investing them into productive activities. Indian insurance companies are able to mobilize long-term savings to support economic growth and also facilitate economic development by providing insurance cover to a large segment of our people as well as to business enterprise throughout India.

Insurers/Insurance Companies in India

The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. In addition to these, there is sole national re-insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims. Out of 33 non-life insurance companies, five private sector insurers are registered to underwrite policies exclusively in health, personal accident and travel insurance segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more specialized insurers belonging to public sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance.

Life insurance companies offer coverage to the life of the individuals, whereas the non-life insurance companies offer coverage with our day-to-day living like travel, health, our car and bikes, and home insurance. Not only this, but the non-life insurance companies provide coverage for our industrial equipment’s as well. Crop insurance for our farmers, gadget insurance for mobiles, pet insurance etc. are some more insurance products being made available by the general insurance companies in India. The life insurance companies have gained an investment prospectus in the recent times with an idea of providing insurance along with a growth of your savings. But, the general insurance companies remain reluctant to offer pure risk cover to the individuals.

Insurance Intermediaries

An insurance intermediary acts either on behalf of the client or the insurance company. Insurance intermediaries have been defined in the IRDAI Act, 1999 and section2 (1) (f) of the act states: Insurance intermediaries serve as a bridge between consumers and insurance companies, and includes individual agents, corporate agents including banks and brokers, insurance marketing firm. Insurance intermediary also includes surveyors and third party administrators but these intermediaries are not involved in procurement of business. Surveyors assess losses on behalf of the insurance companies. Third party administrators provide services related to health insurance for insurance companies through the insurance sector has been privatized the insurers can deal with intermediaries only if they are holding valid license issued by the authority and the authority has laid down the norms for licensing of intermediaries

Traditionally, insurance intermediaries have been categorized as either insurance agents or insurance brokers. The distinction between the two relates to the manner in which they function in the marketplace. The role of insurance intermediaries in the overall economy is, essentially, one of making insurance – and other risk management products – widely available, thereby increasing the positive effects of insurance generally – risk-taking, investment, provision of basic societal needs and economic growth. There are several factors that intermediaries bring to the insurance marketplace that help to increase the availability of insurance generally:

Dissemination of Information to Consumers: Intermediaries provide customers with the necessary information required to make educated purchases/ informed decisions. Intermediaries can explain what a consumer needs, and what the options are in terms of insurers, policies and prices. Faced with a knowledgeable client base that has multiple choices, insurers will offer policies that fit their customers’ needs at competitive prices.

Dissemination of Information to the Marketplace:Intermediaries gather and evaluate information regarding placements, premiums and claims experience. When such knowledge is combined with an intermediary’s understanding of the needs of its clients, the intermediary is well-positioned to encourage and assist in the development of new and innovative insurance products and to create markets where none have existed. In addition, dissemination of knowledge and expansion of markets within a country and internationally can help to attract more direct investment for the insurance sector and related industries.

Innovative Marketing:Insurance intermediaries bring innovative marketing practices to the insurance marketplace. This deepens and broadens insurance markets by increasing consumers’ awareness of the protections offered by insurance, their awareness of the multitude of insurance options, and their understanding as to how to purchase the insurance they need.

Insurance Brokers

An insurance broker is seen as one of the intermediaries who operate in the insurance market. In the Indian context, the insurance broker is a person who will represent the insured and add value to the transaction. An insurance broker is a professional who offers, negotiates, and sells policies. He acts as intermediary between insurers and customers and receives compensation. An important role of brokers is to help insurers to assess the types of risks they face. At the same time, brokers act on behalf of and in the interest of customers. They do comparison shopping to find the best deals and offer policies from more than one insurance company. Brokers also help their clients to outline risk management strategies, which are suitable for their profile. Insurance brokers consult clients and gather information for them. This is important as to understand their specific needs. Brokers help individuals and businesses to find the right accident, health, life, casualty, and property insurance. They offer a wide array of services such as claims assistance, consulting services, and resolving benefit issues. They also help clients to stay updated on legislative and regulatory changes.

Roles and Responsibilities The role and responsibilities of the insurance broker has multiplied in the sense that he not only has to get the right price for the insured to enable him to take informed decision to select the right underwriter, but he also has a duty towards the underwriter to ensure that all parameters of rating a risk have been rightly applied. This is only to ensure that a clear balance is maintained so that one does not impinge on the other in the event of a catastrophe. They negotiate with insurance companies to be able to offer the best terms and premiums to clients. In addition, they help clients to mitigate risks and come up with working risk management strategies. In addition to advising clients, brokers handle policy renewals and amend policies, if required. They maintain relationships with engineers, photographers, surveyors, financial institutions, and insurance companies. Thus they can act on behalf of clients and deal with administrative tasks such as correspondence with insurers and other professionals, paperwork, etc.

The functions of a broker shall include any one or more of the following.

• Acting promptly on instructions from a client and providing him written acknowledgements and progress reports.
• Assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4 of 1938).
• Assisting in the negotiation of the claims and familiarizing himself with the client's business and underwriting information so that this can be explained to an insurer and others.
• Maintaining detailed knowledge of available insurance markets, as may be applicable.
• Maintaining proper records of claims.
• Obtaining detailed information of the client's business and risk management philosophy.
• Providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover.
• Providing services related to insurance consultancy and risk management.
• Rendering advice on appropriate insurance cover and terms.
• Submitting quotation received from insurer/s for consideration of a client.

Degrees and certificates requirements for brokers would depend on the country or state ofresidence. Without a degree, brokers usually hold an administrative or support position until theygain experience. Successful brokers have good interpersonal, communication, and written skills. They negotiate with and consult insurers and customers and should be able to develop andmaintain relationships with different professionals. They also have business acumen, IT andadministrative skills, as well as customer service skills. Brokers read specialist journals and press to stay updated and attend seminars. Brokerages usually offer training in legal and insuranceissues, and there are other training schemes. Individuals who seek to become insurance brokers should have a clean background. Misdemeanors and offences reduce one’s chances of becoming one.

Categories of Insurance Brokers

IRDA has permitted 3 types of Brokers to operate in India:

• The Direct Broker (between end-users and primary insurers only)

Direct (Life Insurance)

Direct (General Insurance)

Direct (Life and General Insurance)

Re-insurance Brokers (between primary insurers and re-insurers only) and

Composite Brokers (both the above).

Direct BrokerDirect broker means an insurance broker who for the time-being licensed by the Authority to act as such, for a remuneration carries out the functions as specified under regulation 3 either in the field of life insurance or general insurance or both on behalf of his clients. Life insurance brokers are instrumental in assessing needs and establishing the type of life insurance most suitable to address those needs. Life insurance brokers search the market on your behalf, helping secure the most suitable cover, at the most affordable price possible. General Insurance brokers sell non-life insurances. There are two types of general insurance brokers who specialises in different covers and policies. Retail general insurance brokers are professionals who act on behalf of companies and individuals. They offer policies such as health, travel, home, and car insurance, along with private and public liability and employer’s liability plans. Commercial general insurance brokers specialise in areas such as gas, oil, marine, and aviation and offer complex and high value policies. Commercial insurance policies cover equipment, machinery, and real estate in the event of theft or damage.

Functions of a Direct Broker

• Obtaining detailed information of the client's business and risk management philosophy
• Familiarising himself with the client's business and underwriting information so that this can be explained to an insurer and others
• Rendering advice on appropriate insurance cover and terms
• Maintaining detailed knowledge of available insurance markets, as may be applicable
• Submitting quotation received from insurer/s for consideration of a client
• Providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover
• Acting promptly on instructions from a client and providing him written acknowledgements and progress reports
• Assisting clients in paying premium under section 64vb of insurance act, 1938 (4 of 1938)
• Providing services related to insurance consultancy and risk management
• Assisting in the negotiation of the claims
• Maintaining proper records of claims

Reinsurance Broker

A reinsurance broker is a person who acts as an intermediary between an insurance company and a reinsurance company. Reinsurance brokers work for the insurance company and their job is to acquire reinsurance for it. This can involve negotiating rates and finding the best policies. Many insurance companies use reinsurance brokers because the process of purchasing reinsurance can be complicated. They rely on reinsurance brokers' specialized skills to help them get the best deals possible. After all, reinsurance policies will only really help insurance companies if they provide adequate coverage at reasonable rates. Otherwise, the companies could be paying too much for too little protection.

Functions of a Reinsurance Broker

• Familiarising himself with the client’s business and risk retention philosophy
• Maintaining clear records of the insurer's business to assist the reinsurer(s) or others
• Rendering advice based on technical data on the reinsurance covers available in the international insurance and the reinsurance markets
• Maintaining a database of available reinsurance markets, including solvency ratings of individual reinsurers
• Rendering consultancy and risk management services for reinsurance
• Selecting and recommending a reinsurer or a group of reinsurers
• Negotiating with a reinsurer on the client’s behalf
• Assisting in case of commutation of reinsurance contracts placed with them
• Acting promptly on instructions from a client and providing it written acknowledgements and progress reports
• Collecting and remitting premiums and claims within such time as agreed upon
• Assisting in the negotiation and settlement of claims
• Maintaining proper records of claims
• Exercising due care and diligence at the time of selection of reinsurers and international insurance brokers having regard to their respective security rating and establishing respective responsibilities at the time of engaging their services.

Composite Insurance Broker

Composite broker means an insurance broker who for the time-being registered by the Authority to act as such, for a remuneration or fee,arranges insurance for its clients with insurers and/orreinsurance for its client/s with insurers and reinsurers located in India and abroad. A composite broker shall carry out any one or more of the functions mentioned for a direct brokers and reinsurance broker

Insurance Agents

An insurance agent’s role is primarily that of a communicator, counselor and facilitator. The prospective customer can buy the best insurance products and services for his/her varied requirements viz. life, property, health, burglary insurance from the insurance agent. An agent is a primary source for procurement of insurance business and as such his role is the corner stone for building a solid edifice of any life insurance organization. An agent must be equipped with technical aspects of insurance knowledge, he must possess analytical ability to analyze customers’ need, he must be abreast with up to date knowledge of merits or demerits of other instruments of investment available in the financial market, he must be endowed with a burning desire of social service and over and above all this, he must possess and develop an undeterred determination to succeed as an insurance salesman. In short he must be an agent with professional approach in insurance salesmanship. Such an agency force is expected to be helpful not only in proper field underwriting but also after sales servicing, concomitant and essential elements for higher retention of business.

Agents and brokers act as intermediaries between the insurance buyer and the insurers. Each has a legal duty to help you obtain appropriate coverage at a reasonable price. Each must have a license to distribute the type of insurance he or she is selling. An agent or broker must also adhere to the regulations enforced by your state insurance department. The main difference between a broker and an agent has to do with whom they represent. An agent represents one or more insurance companies. He or she acts as an extension of the insurer. A broker, on the other hand, represents the insurance buyer.

Point of Sales Person(s) (POS) Persons

IRDAI has also permitted distribution of life insurance through corporate agents and brokers. Some of the NBFCs, who have a network of branches and customer base became corporate agents and offered life insurance products along with their core products. Brokers are specialist entities, who represent the interest of the customers and can work with multiple life insurers. Despite of all these channels of distribution, the insurance penetration of India continues to be low; indicating a large section of the population is still uninsured or underinsured. IRDAI, regulator for the industry has been proactive and continuously engages with the industry in development of distribution of life insurance products, while ensuring the protection of consumer interest. One such new initiative of IRDAI is the Point of Sale (POS) person for distributing insurance products. IRDAI has allowed POS person to sell basic insurance products to increase insurance penetration in the country. This is a newer channel for distributing of insurance products and IRDAI has issued guidelines for POS’P and also on products that can be offered through this POS channel.

The POS person can sell only simple and easy to understand products wherein each and every benefit under the product is predefined and disclosed upfront clearly to the customer. POS can solicit and market only certain pre-underwritten products approved by the authority. The POS can sell comprehensive motor insurance, third-party liability, personal accident cover, travel insurance policy, home insurance policy and any other policy specifically approved by Irdai. Every policy sold through POS will be separately identified and pre-fixed by the name POS. The insurer will have to file the product with the regulator under the file-use guidelines for information. POS model will help the insurers to increase the breadth and depth of their distribution capability and it is expected that POS will make significant contribution in distributing insurance in the coming years. As far as the customers are concerned, POS will make insurance available at a place closer to them and also help in better servicing capability. Since the products offered through POS are easy to understand with clearly defined benefits, the scope for mis-sale has been substantially minimized.

Any individual aged above 18 years with 10th standard pass qualification can become a POS person and has to undergo a simplified training and pass the examination. Every POS will be identified by the Aadhaar Card Number or his PAN Card. IRDA has dispensed mandatory training and certification for point of sales person. Earlier, it was mandatory to take training and certificate from the National Institute of Electronics and Information Technology. The persons soliciting and marketing such pre-underwritten products approved by the authority as POS will have to be at least a matriculate. The POS will be made liable to a penalty as per the provisions of Section 102 of the Act. Wherever sales are done through the insurance intermediary, the latter will record the Aadhaar card number or the PAN of the POS in the proposal form. Also, the POS when engaged by the insurer, POS will place business with that insurer subject to compliance of rules and procedures of that insurance company

Module-3

PRINICPLES AND PRACTISE OF INSURANCE

Insurance may be defined as a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premium to pay the other party called insured a fixed amount of money after happening of a certain event. Insurance policy is a legal contract and its formation is subject to the fulfillment of the requisites of a contract defined under Indian Contract Act 1872. According to the Act “A Contract may be defined as an agreement between two or more parties to do or to abstain from doing an act, with an intention to create a legally binding relationship. Since Insurance is a contract, certain sections of Indian Contract Act are applicable. Insurance, like every other contract, is formed when there is an offer made, that offer is accepted, and consideration (payment or a promise to pay premium) is given.

The insurance contract involves—(A) the elements of the general contract, and (B) the element of special contract relating to insurance.

The special contract of insurance involves principles:

• Insurable Interest.
• Utmost Good Faith.
• Indemnity.
• Subrogation.
• Warranties.
• Proximate Cause.
• Assignment and Nomination.
• Return of Premium

The valid contract, according to Section 10 of Indian Contract Act 1872, must have the following essentialities

• Agreement (offer and acceptance),
• Legal consideration,
• Competent to make a contract,
• Free consent,
• Legal object.
• Writing and Registration
• Possibility of Performance
• Certainty and
• Agreement not declared void

Offer (Proposal) and Acceptance

The offer for entering into the contract may come from the insured. The insurer may also propose to make the contract. Whether the offer is from the side of an insurer or from the side of insured, the main fact is acceptance. Any act that precedes it is the offer or a counter-offer. All that preceded the offerer counter-offer is an invitation to offer. In insurance, the publication of the prospectus, the canvassing of the agents are invitations to offer. Generally, the acceptance of the offer must be communicated to the offerer, unless the offerer waives this requirement. It may be possible to infer acceptance from conduct, such as where the insured pays, or the insurers accept, the premium. If the offer is made by the insurer, the communication of an acceptance to a third party, such as a broker, is insufficient unless the broker is the agent of the insurer, which is not usually the case.

The acceptance must match the offer and be unconditional, otherwise it may be regarded as a counter offer, which will be a rejection of the original offer and will begin the whole process over again. When the prospect (the potential policy-holder) proposes to enter the contract, it is an offer and if there is any alteration in the offer that would be a counter-offer. If this alteration or change (counter-offer) ill-accepted by the proposer, it would be acceptable. In the absence of counter-offer, the acceptance of the offer will be an acceptance by the insurer. At the moment, the notice of acceptance is given to another party; it would be a valid acceptance. For example, where in response to a proposal by the prospective insured the insurer sends out a policy that includes a term of which the prospective insured was previously unaware, this might constitute a counter-offer. On the other hand, where the insurer responds with a policy in standard form, then as long as it is not inconsistent with the proposal, it may be held to be a valid acceptance even though it includes terms not expressly communicated, if the insured could reasonably be expected to know that there would be such terms.

It is a general principle of contract law that once an offer has been accepted and an agreement formed neither party may unilaterally withdraw. The contract may, of course, give the parties the right to cancel the contract. Where a policy contains a term allowing cancellation by the insurer, it will usually also provide for a portion of the premium to be repaid to the insured. It is common for an agreement on insurance to specify that either the contract is not binding or, alternatively, that the contract is binding but the risk does not commence, until a specified requirement is met, such as the payment of the premium or the completion of a satisfactory medical examination

For example, in life insurance an offer can be made either by the insurance company or the applicant (proposer) and the acceptance will follow.

For instance,

1. An offer made by the Insurance company to proposer that the premium amount will be INR.500/- per annum for the Insurance amount of INR.5000/-. It is for the proposer toaccept the offer or not
2. An advertisement in the newspaper about the availability of different life Insurance policies is an invitation for an offer. If a proposer makes an application, then it will be offer from the applicant and the insurance company may or may not accept it.
3. An offer may be considered accepted either when the insurance company issues the policy or the first premium is paid by the applicant.

As stated above in example (a) if the applicant pays the first premium of INR 500/- to the insurance company then the contract is completed as both the parties have accepted the offer. Similarly, if the company issues the policy in above stated example (b) then the offer is accepted by the insurance company and the contract is completed.

The offer or proposal and its acceptance may be verbal or in writing but in insurance contracts these are in writing. In general insurance the insured offers to purchase an insurance from the insurer and this offer is in the form of a proposal form and the insurer after studying the proposal can either reject the proposal or accept it. In case he accepts he issues a cover note or a letter of acceptance. In the latter event the acceptance letter becomes a counter offer or proposal, which is accepted on payment of premium by the insured.

Consideration (Premium)

A consideration is an exchange of money for the guarantee of an act preformed or another benefit provided. For a contract to be binding each party to the contract must give what is known as consideration or the exchange of values on which a contract is based. In an insurance contract, the insured person makes a premium payment (consideration now) and promises to comply with the provisions of the policy (consideration future). In return, the insurance company promises to pay in accordance with the terms of the contract. The premium will be set by the insurers at a level that attracts business, but that also both reflects the risk of a claim by this insured and, across the business as a whole, is likely to result in a profit. The premium will be payable either in a single sum or, more typically in consumer cases, by installments on credit terms. Even where the premium is payable by installments, it is still a single premium for the entire period, so that if the risk is terminated the outstanding installments will still have to be paid on the principle that the risk is not divisible unless the parties have agreed to the contrary. The premium is an important aspect of the agreement, and if one has not been agreed by the parties this may indicate that they have not concluded a contract

Competent to make a Contract

Another essential element for a contract is that the parties to the contract must be competent parties, or of undiminished mental capacity. Most people are competent to contract, but there are exceptions. A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests. A person who is usually of unsound mind, but, occasionally of sound mind may make a contract when he is of sound mind. A contract made by incompetent party/parties will be void. If a contract is made with a minor the application may be held unenforceable if the minor decides to repudiate it at a later date. In insurance contract the insurer is bound by the contract as long as the underage wishes to continue it. If the minor repudiates his contract, the law will allow him a refund of all premium paid. Insanity or mental incompetence precludes the making of a valid insurance contract.

Free Consent

Parties entering into the contract should enter into it by their free consent. The consent will be free when it is not caused by, coercion, mistake, undue influence, fraud, or misrepresentation. Both parties to the contract should be of the same mind and there must be consent arising out of common intention. Both parties should be clear about what the other is saying. The Insurer should know what the insured wants, and the insured should know what the insurer is offering, and both should be agreed on this. The proposal for free consent must sign a declaration to this effect, the person explaining the subject matter of the proposal to the proposer must also accordingly make a written declaration or the proposal. When there is no free consent except fraud, the contract becomes voidable at the option of the party whose consent was so caused. In case of fraud, the contract would be void.

Factors which invalidate free consent

Coercion: Coercion’ is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

Undue Influence: When the parties to the contract are in relationships in such a way that one party can dominate the will of the other and uses the unfair advantage so gained to obtain the consent of the other party, then the consent is said to have been obtained by undue influence. Now, the Contract Act 1872 also provides instances where a person can dominate the will of another

Fraud: Consent is not said to be free when it has been obtained by means of fraud. In such cases, the contract becomes voidable at the option of the party whose consent was obtained by means of fraud. Moreover, fraud is also a tort where action for damages can lie. The Indian Contract Act, 1872 gives the definition of the term ‘Fraud’. The law provides five acts which when committed either by the party or with his assistance or by his agent, with the intention to deceive the other party, amounts to fraud.

Misrepresentation: Misrepresentation under the Indian Contract Act, 1872 has an exhaustive definition and can be divided into 3 types.

• The first type is when a statement is made by a person, about a fact which is not true, though he believes it to be true.
• Second is the type when there is a breach of duty by a person who is making the false statement and he gains some kind of advantage even though it wasn’t his intention to deceive the other party.
• The third is the type where if one party acting innocently, causes the other party to make any mistake with regards to the subject matter of the agreement.

Mistake: When one of the parties has given its consent to the contract under some kind of misunderstanding then the consent is said to be have been given by mistake. If it wasn’t for the misunderstanding the party would not have entered into the agreement.

Legal Purpose

A contract must have a legal purpose-that is, it must not be for the performance of an activity prohibited by law, immoral, opposed to public policy, and which defeat the provisions of any law. If it does not, enforcing the contract would be contrary to public policy. In the proposal from the object of insurance is asked which should be legal and the object should not be concealed. If the object of insurance, like the consideration, is found to be unlawful, the policy is void. Contracts may be either oral or written; they must, however, follow a specific legal form, or appropriate language.

Principles of Insurance

The main objective of every insurance contract is to give financial security and protection to the insured from any future uncertainties. The principles of insurance are the rule of action or conduct adopted by the participants involved in the insurance business. The specific principles of a valid insurance contract consist of the following.

Utmost Good Faith (Uberrimae Fidei)

Under this principle, both parties involved in an insurance contract—the insured (policy holder) and the insurer (the company)—should act in good faith towards each other. The insurer and the insured must provide clear and concise information regarding the terms and conditions of the contract. This is a very basic and primary principle of insurance contracts because the nature of the service is for the insurance company to provide a certain level of security and solidarity to the insured person’s life. However, the insurance company must also watch out for anyone looking for a way to scam them into free money. So each party is expected to act in good faith towards each other. If the insurance company provides the insured/policy holder with falsified or misrepresented information, then they are liable in situations where this misrepresentation or falsification has caused the insured/policyholder loss. If the insured/policy holder have misrepresented information regarding subject matter or your own personal history, then the insurance company’s liability becomes void (revoked).

Insurable Interest

The principle of insurable interest states that the person getting insured must have insurable interest in the object of insurance. A person has an insurable interest when the physical existence of the insured object gives him some gain, but its non-existence will give him a loss. In simple words, the insured person must suffer some financial loss by the damage of the insured object. It means that the subject matter of the contract must provide some financial gain by existing for the insured (or policyholder) and would lead to a financial loss if damaged, destroyed, stolen, or lost. The owner of the subject is said to have an insurable interest until he/she is no longer the owner.

Indemnity

The principle of indemnity asserts that on the happening of a loss the insured shall be put back into the same financial position as he used to occupy immediately before the loss. In other words, the insured shall get neither more nor less than the actual amount of loss sustained. This, of course, is always subject to the limit of the sum insured and also subject to certain terms and conditions of the policy. In general insurance contracts principle of indemnity is applicable which says that insured would be compensated only the actual loss suffered by him at the time of accident and not more. Hence to arrive at the actual loss firstly the market value of the property on the date of accident is ascertained and then the sum insured or market value whichever is less is paid subject to policy conditions and completion of the formalities required for settlement of claim. Life insurance and personal accident insurance policies are the exception where the principle of indemnity does not apply and sum insured as mentioned in the policy is paid at the time of an admissible claim. For example, A house is insured against fire for Rs. 50000. It is burnt down and found that the expenditure of Rs. 30000 will restore it to its original condition. The insurer is liable to pay only Rs. 30000. In life insurance, principle of indemnity does not apply as there is no question of actual loss. The insurer is required to pay a fixed amount upon in advance in the event of accident, death or at the expiry of the fixed term of the policy. Thus, a contract of a life insurance is a contingent contract and not a contract of indemnity.

Proximate Cause (Causa Proxima)

Principle of Causa Proxima or Proximate (i.e. nearest) Cause, means when a loss is caused by more than one causes, the proximate or the nearest or the closest cause should be taken into consideration to decide the liability of the insurer. The principle states that to find out whether the insurer is liable for the loss or not, the proximate and not the remote must be looked into. That is the loss of insured property can be caused by more than one incident even in succession to each other. Property may be insured against some but not all causes of loss, and when a property is not insured against all causes, the nearest cause is to be found out. If the proximate cause is one in which the property is insured against, then the insurer must pay compensation. If it is not a cause the property is insured against, then the insurer does not have to pay. For example In a marine insurance policy, the goods were insured against damage by sea water, some rats on the board made a hole in a bottom of the ship causing sea water to pour into the ship and damage the goods. Here, the proximate cause of loss is sea water which is covered by the policy and the hole made by the rats is a remote cause. Therefore, the insured can recover damage from the insurer

Contribution

Principle of contribution is a corollary of the principle of indemnity. It applies to all contracts of indemnity, if the insured has taken out more than one policy on the same subject matter. According to this principle, the insured can claim the compensation only to the extent of actual loss either from all insurers or from any one insurer. If one insurer pays full compensation then that insurer can claim proportionate claim from the other insurers. As per this principle applicable to the general insurance policies, if the insured has more than one policy for the same property of the same value and if the loss is suffered due to damage to such property then the loss is shared and contributed between all the insurers in equal proportions or as per the proportion of the sum insured or as mentioned in the policy. The principle of contribution further strengthens the principle of indemnity applicable in general insurance contracts. This principle is not applicable in life and personal accident insurance. For example, A gets his property insured against fire for Rs. 10000 with insurer P and for Rs. 20000 with insurer Q. a loss of Rs. 15000 occurs, P is liable to pay for Rs. 5000 and Q is labile to pay Rs 10000. If the whole amount of loss is paid by Q, then Q can recover Rs. 5000 from P. The liability of P and Q will be determined as under:

Sum insured with Individual insurer (i.e. P or Q) x Actual Loss  = Total sum insured

Liability of P = 10000   x 15000              = Rs.5000/30000

Liability of Q = 20000 x 15000 = Rs.10000/30000

The right of contribution arises when

1. There are different policies which related to the same subject matters;
2. The policies cover the same period which caused the loss;
3. All the policies are in force at the time of loss; and
4. One of the insurer has paid to the insured more than his share of loss.

Subrogation

Principle of subrogation is an extension and another corollary of the principle of indemnity. It also applies to all contracts of indemnity. According to the principle of subrogation, when the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer. This principle is applicable only when the damaged property has any value after the event causing the damage. The insurer can benefit out of subrogation rights only to the extent of the amount he has paid to the insured as compensation. For example in marine cargo policies, in the transit by railways, after having paid the claim for the loss suffered by the insured due to damage or loss of insured goods, due to the subrogation rights the insurer become entitled to receive the claim amount from the railway authorities. The application of principle of subrogation is required to follow the rule of indemnity in general insurance contracts only and not in life or personal accident insurance policies. For example: Furniture is insured for Rs. 1 LAC against fire, it is burnt down and the insurer pays the full value of Rs. 1 LAC to the insured, later on the damage Furniture is sold for Rs. 10,000. The insurer is entitled to receive the sum of Rs. 10,000.

Loss of Minimisation

According to the principle of loss minimisation, insured must always try his level best to minimize the loss of his insured property, in case of uncertain events like a fire outbreak or blast, and so on. The insured must take all possible measures and necessary steps to control and reduce the losses in such a scenario. The insured must not neglect and behave irresponsibly during such events just because the property is insured. It is the main responsibility of the insured to act diligently and take all steps to cut losses to the insured property. For example, If a house is insured against fire, and there is accidental fire, the owner must take all reasonable steps to keep the loss minimum. He is supposed to take all steps which a man of ordinary prudence will take under the circumstances to save the insured property.

Proposal Form

Proposal form is the most important and basic document required for an insurance contract between the insured and insurance company. It includes the insured's fundamental information such as address, age, name, education, occupation and so on. It also includes the person's medical history. An insurance company offers a policy on the basis of a proposal form. The form is the most basic requirement for the functioning of the insurance contract between the insured and the insurance company. It needs to be completed by the proposer who may seek the assistance of a life insurance advisor to fill it up.When purchasing insurance, it is necessary for the prospect to provide the insurer with information so that it can assess the risk. When purchasing insurance, it is necessary for the prospect to provide the insurer with information so that it can assess the risk. This is usually done by filling in a proposal form, often available from agents, brokers, or insurers. Proposal forms are questionnaires issued by the insurer to be completed by the proposer or his/her agent, which ask questions about the subject matter of cover. A proposal form seeks basic information of the proposer and the assured. The proposer has to mention his/her income in the proposal form to satisfy the insurer about his/her ability to pay for the insurance and the need for insurance, respectively. Proposal form helps the insurance company to calculate all the potential risks in relation to the insurance policy and hence deciding the premium amount. Since the insurer will use the information to assess a premium and set the terms and conditions of the policy, the prospective insured must disclose all the material circumstances, whether or not the proposal form asks for them.

• Proposal forms elicit information. They provide underwriters with the information they need to decide whether or not to accept the proposal and, if so, at what price and on what terms. Standardized forms are easier for the applicant and make underwriting more efficient and consistent.
• A proposal form often constitutes a legal offer by the proposer, although offers can also be made orally.
• Sometimes a proposal form is filled in as a request to the insurers for a quotation on price and terms. The insurer’s quotation is then the legal offer.
• Many proposal forms or prospectuses summarize the cover obtainable under the insurance contract.
• Proposal forms may also advertise other products available from the insurer.
• In some cases, the wording and declaration in a proposal form often warrants the truth of the answers thereon. It is to be noted, however, that this practice has now been ameliorated in view of consumer protection.

On the structure of a proposal form, a typical one has four main sections. The first asks the proposer general questions relating to his/her personal details, insurance history, and details of the subject matter.

Sales Literature

Payment of Premium

Premium paying term is the total number of years for the policy holder to pay the premium. Policy term is normally equal to the premium paying term. However, some insurance policies give the insured the autonomy to choose a premium paying term lower than the policy term. For instance, insurers allow the insured to get the insurance benefits even if they stop the premium payments after a stipulated period of time by converting the normal insurance policy into a paid up policy. One of the important factors to consider while buying aninsurance plan is the premium paying mode. Therefore, while opting to buy an insurance plan, one should be aware that these insurance policies come with different premium payment options. The insured should make the selection as per their requirement taking the help of an adviser. The mode of payment is the frequency in which a policy owner elects to pay premiums. Frequency options are typically annual, semi-annual, quarterly and monthly on auto insurance policies. The monthly option may be slightly higher than semi-annual premiums because additional expenses are incurred.

The premium to be paid by any person proposing to take an insurance policy or by the policyholder to an insurer may be made in any one or more of the following manner(s), namely:-

• Cash
• Any recognized banking negotiable instrument such as cheques, including demand drafts, pay orders, banker’s cheques drawn on any scheduled bank in India
• Postal money orders
• Credit or Debit Cards held in his name
• Bank Guarantee or Cash Deposit
• Internet
• E-transfer
• Direct credits via standing instructions of proposer or the policyholder or the life insured through bank transfers and
• Any other method of payment as may be approved by the Authority from time to time.

Regular premium payment is the most recommended mode and it involves paying premium monthly, quarterly, half-yearly or yearly. The regular premium mode is advised firstly because of the affordability factor. An annual payment would require the insured to pay his/her premium once a year. This would be the most affordable option for him/her, since the insurance company would not spend as much time and money processing payments. If the insured chose a semi-annual payment, then he/she would pay her premium every six months (twice a year). His/her premium payments would be a bit higher than if he/she chose an annual payment frequency, but it might be easier for him/her to budget for two smaller payments instead of one larger one. A quarterly payment would require the insured to make a payment every three months (four payments a year). The insured would find it easier to budget for four smaller payments, but his/her policy premium would be higher. A monthly payment would require the insured to pay a premium every month (twelve times a year), and it would likely have the highest policy premium, since the insurance company would need to process these twelve payments per year

Online Premium Payment

Premium can be paid by proposer or policy holder either by cash, cheque, bank draft, bank pay order, credit/debit card, Internet or e-transfer or direct credit through bank transfer or through bank guarantee or cash deposit. As an existing policyholder he/she can now make their renewal premium payment online. It is easy, convenient and takes very little time. All they have to do is click on the link given in the website, provide their policy number and date of birth for verification and pay their premium through a secure online gateway. Premium payment can be done any online payment mode such as NEFT, Net banking, mobile banking, internet banking and other modes.

An insurance premium is generally expressed as premium per thousand rupees of sum assured and is illustrated in the form of tables of premium rates by insurance companies. Premium varies across insurance plans, policy terms, sum assured and the age of the proposer. Periodicity or mode of premium payment depends on the type of policy chosen and also on the payment options that the policy offers

In Advance

Premium is required to be paid in advance and can be paid via cash up to Rs 50,000, (the limit set by IRDA for cash payments) cheque or DD. Further, most insurance companies have provided for payment of premium online.

Discounts Offered on Insurance Premiums

Often companies offer a discount on the premium rate payable on the basis of sum assured and the mode of payment of premium.

Rebate for Sum Assured

Typically most companies offer rebates for higher sum assured (higher than a certain amount). This is because the cost of servicing of all policies of the same type being almost the same, a higher sum assured means lower servicing cost per unit of sum assured. Consequently, this translates to higher profits/returns per unit of sum assured or per unit of premium paid for the company.

Rebate for Periodicity of Premium

In case of periodic premium payment policies one can normally choose to pay premium annually, half yearly, quarterly or monthly depending on one’s cash flow situation. However, higher the frequency of premium payment higher the cost of servicing (collection, processing and administrative costs) for the company. Also, if the premium is paid at one go for the whole year the funds are available (for investment) to the company for longer than in monthly mode of payment. Consequently, the company can earn more returns on the premium paid. In case of single or limited premium payment policies this rebate is often already worked into the premium rate as the mode of payment is structurally built into the policy.

Extra Premium

The normal premium tables are meant for people who do not carry any additional risk or ‘standard lives’ in insurance parlance. In case of standard lives the ordinary premium rates are applied. However, in case of people who carry extra risk because they suffer from health problems such as diabetes or heart disease or work in hazardous occupation the insurer may charge extra premium over and above the normal rate. Extra premium is also charged for any additional insurance covers (called ‘Add-ons’ or ‘riders’ in insurance jargon) are bought along with the base policy.

Level Premium

When the premium charged under a policy remains the same throughout the duration of the contract, it is called level premium. In this case premium level is guaranteed and cannot be changed by the company at a later date. This is advantageous for both the assured and the insurance company and therefore most insurance plans except some insurance plans involve level premium payment.

Single Premium

Single premium policies are normally targeted at people who are in the higher income bracket or those who have idle money with them. Single-premium policy charges the policyholder a single up-front premium payment to fully fund the policy. It was once a popular tax shelter.

Non-Payment and Late Payment of Premium

In case the premium is not paid on the due date, the policy is considered as lapsed and the policyholder loses its benefits. Most policy contracts, however, provide for a 'grace period', which gives the policy holder an additional period of time after the due date for the payment of the premium. During this period, he/she can pay the premium without any extra charge and the policy will still continue to be in force. For all insurance policies other than term insurance, for monthly mode of payment, the grace period is usually 15 days, while for other frequency of payments (quarterly, half-yearly or yearly) it is usually one month but not less than 30 days (This means that in case of February generally 30 days grace is still given). For term insurance policies, the grace period is normally 15 days. When a policy has lapsed, it can be revived and brought to its full force by payment of overdue premiums (with interest) and a declaration about state of health or fresh medical examination. However, a lapsed policy can be revived only if the insurer agrees to do so.

Tax Benefit Available for Premium Paid

Under Section 80C of the Income Tax Act, any amount paid by a policyholder towards insurance premium for self, spouse or his/her children can be claimed as deduction from taxable income. Premium paid for policies in the name of any other third party (other than spouse or children) such as parents (father/mother/both) or in-laws is not eligible for deduction under section 80C If a person is paying premium for more than one insurance policy, all the premiums can be included. The benefit is available for insurance policies sold by all insurance companies – both public and private sector.

Section 64 VB of Insurance Act

In all cases of risks covered by the policies issued by an insurer, the attachment of risk to an insurer will be in consonance with the terms of Section 64VB of the Act and except in the cases where the premium has been paid in cash, in all other cases the insurer shall be on risk only after the receipt of the premium by the insurer.

Accordingly, No risk to be assumed unless premium is received in advance.—

1. No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.
2. For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer. Explanation.—Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be.
3. Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent.
4. Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or dispatch by post to, the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding bank and postal holidays.
5. The Central Government may, by rules, relax the requirements of sub-section (1) in respect of particular categories in insurance policies.
6. The Authority may, from time to time, specify, by the regulations made by it, the manner of receipt of premium by the insurer.

Premium Receipt

Premium receipt is a receipt issued to the policyholder by the insurer or the insurer's agent which proves that payment has been received. Insurance policy receipt issued upon payment of the first premium by an applicant. It makes the policy in force before the policy documents are issued, provided the applicant meets all requirements. The insurer provides the proposal form and other related documents and the underwriter examines the form and other documents and then determines the terms on which to accept the risk or reject the same. The consent of the person assured is obtained in the form of payment of premium. After receiving the payment, the insurance company issues the first premium receipt, which acknowledges the proposal of the assured. It contains all particulars of the policy. It has the details of the next premium to be paid. The first premium receipt is an important and powerful document on the basis of which the assured can ask the insurer to issue the policy bond, which is treated as evidence of the contract of insurance.

First premium receipt is also called conditional binding receipt. A conditional binding receipt is involved in life, health and certain property insurance contracts; if the insured is deemed to be covered by the insurer, the coverage begins on the date the insured receives the conditional binding receipt. Typically, a premium payment must be received by the insurer along with a completed acceptable application in order for the insured to obtain the receipt. If a premium accompanies an application, a conditional binding receipt provides that coverage will be in force from the date of application or medical examination, as long the insurer would have issued the coverage on the basis of the facts revealed on the application, medical examination and other usual sources of underwriting information. A life and health insurance policy without a conditional binding receipt is not effective until itis delivered to the insured and the premium is paid. As long as the insured is going to receive the policy anyway, the insurer is obliged to cover a claim should one occur between the time the application is received and the time the policy is officially in place. If, however, the insured is denied coverage as the typical underwriting process progresses, the insurer could nullify the conditional binding receipt, even if a premium was collected.

Further the function of a conditional binding receipt can actually be divided into two separate receipts, a conditional receipt and a binding receipt. The conditional receipt is most common. Under a conditional receipt, the applicant and the insurance company form a conditional contract that is contingent upon the conditions that existed when an application or medication exam is completed. It provides that the applicant is covered immediately as long as they pass the insurer's underwriting requirements. It is the insurance agent's responsibility to tell the applicant they are covered on the condition they prove to be insurable and pass a medical exam, if one is required. A conditional receipt gives an insurance company a window of time in which they can ultimately issue or refuse to approve the policy. If, during this time, the applicant for a life insurance contract dies, the company will pay a death benefit if the policy would have been issued. A binding receipt states an insurance policy is effective upon receipt of an initial premium payment. However, should the insured die before the application is processed; benefits are fully payable, subject to limitations. The binding receipt binds an insurer to the agreement unconditionally when benefits are due up to the limits of the policy.

Renewal premiums are the subsequent premiums that are paid by the insured to the insurer in order to keep the policy in operation and avail the benefits of the policy accordingly. The renewal premium receipt shows the amount of premium that the insured has paid for the policy. It can be submitted as an investment proof to the taxation authority for receiving tax benefits.

Insurance Policy

Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. Insurance policy is a contract between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy. Insurance policy as a formal contract-document issued by an insurance company to an insured,

1. Puts an indemnity cover into effect,
2. Serves as a legal evidence of the insurance agreement,
3. Sets out the exact terms on which the indemnity cover has been provided, and
4. States associated information such as the

1. Specific risks and perils covered
2. Duration of coverage
3. Amount of premium
4. Mode of premium payment and
5. Deductibles, if any

The contract sets out the terms and conditions under which you agree to pay a premium to the insurance company, and the terms and conditions under which the insurance company agrees to compensate you for loss after an unforeseen event. All insurance policies include terms and conditions that describe the ways in which the policy will operate and specify what is included and what is not, what the insurance company promises to do and what the policyholder promises to do. All insurance policies have certain basic components, usually in the following order

• Recital Clause:
This is also known as the preamble. It gives a start for arriving at the operative clause (the scope of cover provided under the policy is mentioned, followed up by exceptions to indicate the precise range of cover) by saying that as the insured has made a proposal and declaration (which shall form the basis of the contract) for taking out a policy of insurance and as he has paid or agreed to pay the premium, therefore, the insurer agrees to provide him cover in respect of loss, damage or destruction etc. as per the Operative Clause
• Declarations:
Identifies who is an insured, the insured's address, the insuring company, what risks or property are covered, the policy limits (amount of insurance), any applicable deductibles, the policy period and premium amount. These are usually provided on a form that is filled out by the insurer based on the insured's application and attached on top of or inserted within the first few pages of the policy.
• Definitions:
Defines important terms used in the rest of the policy.
• Insuring Agreement:
Describes the covered perils, or risks assumed, or nature of coverage. This is where the insurance company makes one or more express promises to indemnify the insured.
• Exclusions:
The exclusions section tells what is not covered under the policy. Exclusions takes coverage away from the insuring agreement by describing property, perils, hazards or losses arising from specific causes which are not covered by the policy.
• Terms and Conditions:
These are fundamental components of the insurance contract. If you do not comply with the terms and conditions of the policy, you may be in breach of the contract with the insurer. This may mean that the insurer is not obliged to fulfill its promise and pay out some or all of your claim. These are specific provisions, rules of conduct, duties, and obligations which the insured must comply with in order for coverage to incept, or must remain in compliance with in order to keep coverage in effect. Terms and conditions may be found throughout the policy and are important areas to highlight for reference in the case of a loss, because they often outline exactly what requirements must be met in order to ensure coverage.
• Endorsements:
Additional forms attached to the policy that modify it in some way, either unconditionally or upon the existence of some condition.
• Riders:
A rider is used to convey the terms of a policy amendment and the amendment thereby becomes part of the policy.

Endorsements

An insurance endorsement is an amendment or addition to an existing insurance contract which changes the terms or scope of the original policy. Endorsements may also be referred to as riders. The purpose of an endorsement is a policy change. An insurance endorsement may be used to add, delete, exclude or otherwise alter coverage. An insurance endorsement may be issued mid-term, at the time of purchase, or at renewal. The insurance endorsement is a legally binding amendment to the insurance contract. Insurance companies create endorsements to offer options to the insured to add coverage or increase coverage limits, but insurers may also issue special endorsements to limit or restrict coverage. Insurance policy endorsements may serve any number of functions, including broadening the scope of coverage, limiting or restricting the scope of coverage, clarifying the application of coverage to some unique loss exposure, adding other parties as insured, or adding locations to the policy. An endorsement alters the policy and becomes part of your legal insurance contract. It remains in force until the expiry of the policy and may renew under the same terms and conditions as the rest of your policy. The exception to this is if the endorsement specifies a specific term which the endorsement is valid. Endorsements can be divided into categories based on their purpose. Most fall into one of the following groups,

• Exclusions:
Many endorsements are intended to exclude coverage for certain types of claims.
• Added Coverage:
Endorsements are used to add a type of coverage that is not provided by the basic policy.
• Modification of Coverage:
Some endorsements expand the existing coverage.. Other endorsements reduce the scope of coverage. For instance, an insurer attaches an endorsement to a general liability policy that replaces the standard contractual liability exclusion with one that is more restrictive.
• Editorial Changes:
Some endorsements are added to clarify the intent of the policy without altering the coverage. The insurer uses an endorsement to replace one word or phrase with another.
• Administrative Changes:
Endorsements may be added for administrative purposes, such as changing the insurer's mailing address or correcting the name of the policyholder.

Section 41 of the Insurance Act, 1938 (Rebating)

Rebating is returning a portion of the premium or the agent's/broker's commission on the premium to the insured or other inducements to place business with a specific insurer. In the insurance business, rebating is a practice whereby something of value is given to sell the policy that is not provided for in the policy itself. An example of rebating is when the prospective insurance buyer receives a refund of all or part of the commission for the insurance sale. Rebates can be made in the form of cash, gifts, services, payment of premiums, employment, or almost any other thing of value. Rebating is illegal and no intermediary is allowed to induce anyone to take a policy. Section 41 of the Insurance Act, 1938 is hence an important section for an insurance agent. As per Section 41 of the Insurance Act, 1938, Prohibition of rebates means

1. No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer: Provided that acceptance by an insurance agent of commission in connection with a policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub section if at the time of such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer.
2. Any person making default in complying with the provisions of this section shall be punishable with fine which may extend to five hundred rupees.

Insurance Claim

An insurance claim is a formal request to an insurance company for coverage or compensation for a covered loss or policy event. An insurance claim is when you have a loss or sustain damage that is caused by a peril insured by your insurance policy. The insurance policy provides coverage and compensation to the insured for covered losses or the damages that he/she sustains by way of he/she making a claim. The insurance company validates the claim and, once approved, issues payment to the insured or an approved interested party on behalf of the insured. Insurance claims cover everything from death benefits on life insurance policies to routine and comprehensive medical exams. In many cases, third-parties file claims on behalf of the insured person, but usually only the person(s) listed on the policy is entitled to claim payments.

Intimation of Claim

Claim intimation is the first step of any notification of the claim to the insurer. This is often called as First Notification of Loss (FNOL). Notification of the claim does not necessarily mean the insurance company is paying for the loss. Claim accepted means the insurer has agreed to consider the claim for payout. The insurance company has to go through the formalities of investigating into the validity of the claim made, before accepting the responsibility of paying the amount. This is when we term it as claims intimated but not accepted. In due course, claims intimated may be accepted by the company. However, the amount is not yet paid and is still due to the insured. This is termed as claims intimated, accepted but not paid.

A policyholder is supposed to inform an insurance company as soon as a claim occurs. So, if you, for instance, damage your car in an accident, you need to inform the insurer quickly. Or, if you are hospitalized and pay for the bills, you need to inform the insurer quickly to process the reimbursement if you have a health insurance policy. Insurers like to know as soon as the claim is made so that they can get into the thick of things and investigate all documents and assess the losses. Also, if there is no deadline, then the insurers would not know their liabilities and won’t be able to provision for it. So while some insurers may not specify the time within which you are supposed to intimate a claim, some insurers may put it down clearly. When you sign up for the policy, this is a question you need to ask and get an answer to. For instance, in the case of reimbursement, a health insurance policy document states that notice of claim should be made within 72 hours before admission in case of planned hospitalisation and not later than 48 hours or before discharge in case of emergency hospitalisation. Subsequently the claim documents need to be submitted within 30 days from the date of discharge. If an insurer spells out a timeline and the insured does not inform the insurer about the claim within that, the claim is considered delayed.

If you delay, then on technical grounds the insurer can reject a claim. However, IRDAI, while recognizing the importance of having a deadline to intimate a claim with all the relevant documents, held the view that this should not prevent insurers from settling genuine claims where there was a delay in intimating a claim due to unavoidable circumstances. Accordingly, the regulator directed the insurer to not reject paying out delayed claims until the reasons for delay are ascertained and the insurer is sure that the delayed claim would have been rejected even if it was reported on time. Accordingly, insurers were instructed to incorporate additional wordings in the policy document, stating that a delayed claim will be paid where the delay is proven to be for reasons beyond the control of the policyholder. Irdai recently reiterated its stance regarding handling of delayed claims. While regulations protect the insured against a delay due to unavoidable circumstances, it is always advisable to intimate a claim as soon as possible.

Appointment of a Surveyor

Surveyors are professionals who assess the loss or damage and serve as a link between the insurer and the insured. They usually function only in non-life business. Their job is to assess the actual loss and avoid false claims. Surveyors like agents, are not employees but are independent professionals hired by the insurance company. A person intending to act as a surveyor and loss assessor (S& LA) in respect of general insurance has to apply to the IRDAI for the grant of license to act as such. IRDAI shall satisfy itself that the applicant, in addition to submitting the application complete in all respects:- satisfies all the applicable requirements of section 64UM read with section 42D of the Act and rule 56A of the Insurance Rules, 1939;possesses such additional technical qualifications as may be specified by IRDAI from time to time; has furnished evidence of payment of fees for grant of license, depending upon the categorization; has undergone a period of practical training, not exceeding 12 months, as contained in Chapter VII of these regulations; and furnishes such additional information as may be required by IRDAI from time to time.

The insurance regulator has rolled out new guidelines on appointment of surveyors and assessors for assessing a loss in a general insurance policy. Recently a rule was passed by the Insurance Regulatory and Development Authority of India (IRDAI) vide circular dated July 14th, 2015, stating that claim amount should not exceed an amount specified by the regulator, unless the claim settlement report is obtained from a person who holds license to act as surveyor and loss assessor. The guidelines of appointment of surveyor’s state

• Surveyors and Loss Assessors shall be appointed either by insurers or insured to assess loss for policies having premium above Rs. 20,000
• Insured or claimant needs to notify claim to the insurer in the stipulated time allowed by insurer. Upon claim notification, the insurer should immediately respond to the insured or claimant, about any further requirements. In case, if surveyor is required to be appointed to assess the claim, the insurers needs to appoint the person within 72 hours of the receipt of intimation from the insured or claimant.
• Appointment of Surveyors and Loss Assessors should not be outsourced by the insurers.

Duties and Responsibilities of a Surveyor

• He should investigate, quantify, validate and deal with losses and report thereon; carry out the work with competence, objectivity and professional integrity by strictly adhering to the Code of Conduct.
• He should maintain confidentiality and neutrality without jeopardizing the liability of the Insurer and the claim of the Insured.
• He should examine, inquire, investigate, and verify the cause and circumstances of the loss including extent of loss, nature of ownership and insurable interest.
• He should estimate, measure and determine the quantum and description of the loss.
• He should comment on the admissibility of the loss and also whether conditions and warranties have been observed under the policy.
• He should assess the liability under the contract of insurance and also point out discrepancies, if any, in the policy wordings.
• He should give reasons for repudiation of a claim in case the claim is not covered under the policy terms and conditions.

Survey Report

A surveyor and loss assessor, whether appointed by insurer or insured, is expected to submit the report to the insurer within 30 days of being appointed—and a copy of the report to the insured as well, with comments on the assessment of loss. If required, the surveyor can seek an extension while keeping the insured informed about the same. However, regardless of any extensions, a surveyor has to submit the report within 6 months from the date of appointment. If the insurance company finds a survey report to be incomplete, it can ask the surveyor for an additional report, which needs to be submitted within 3 weeks. Such an additional report can be sought only one time during a single claim cycle.

A surveyor’s job is first to assess the quantum of loss and then comment on the admissibility of the claim i.e. Whether, in his opinion, the losses are due to the peril covered by the policy and are payable under the terms of the policy. His report is recommendatory. He assesses the liability on the basis of physical inspection and going through the books of account and other relevant documents and explanations given by the client to substantiate the loss. His job is to strictly go by the wordings of the policy, though he may make additional comments and observations relevant to the loss. Any genuine losses the client may have suffered, which could not be substantiated at the time of the survey, can still be taken up with the insurance company. If the quantum of loss is in dispute and/or the insurer is not convinced by the client or vice versa, legal recourse is available under the arbitration clause. The surveyor only assesses the loss and recommends an amount. It is for the insurer to accept it or otherwise. After all, it is the insurance company which ultimately picks up the tab and not the surveyor.

The insurance company cannot ignore the report in toto if it is based on facts and figures. However, it can always call for additional information from the surveyor or the insured if it is not satisfied with the loss assessment or even go for second opinion or assessment. It can also obtain a specialist’s opinion. In an extreme situation, where it has strong reasons to do so (eg; mala fide on the part of the surveyor), it can ignore the report and order a fresh survey to be conducted.

While the surveyor’s report definitely is privileged and confidential (except in case of marine losses) and the insurance company may not divulge all the details of the report; it is definitely bound to furnish to the insured the working of the claim amount i.e. How the surveyor has arrived at a particular figure of the final claim amount. Contrary to popular belief, the insured can demand a resurvey if they feel that the surveyor has grossly erred in assessing the loss. The insured will have to convince the insurer that there was a gross mistake in assessing the loss. Some of the large broking houses have a panel of surveyors whose help can be taken by the corporate in event of a claim. In the event of a loss, the surveyors can work with the corporate in properly presenting the claim to the surveyor deployed by the insurance company. If the papers are presented in sync with the requirements of the surveyor, it helps him in getting more focused and the turnaround time for submission of the report and the settlement of the claim is drastically reduced.

Claim Forms

A claim form which has to be filled in when making an insurance claim. The content of the claim form vary with each class of insurance. In general the claim form is designed to get full information regarding the circumstances of the loss, such as date of loss, time, cause of loss, extent of loss and so on. The other questions vary from one class of insurance to another. In addition to claim forms certain documents are required to be submitted or secured by the insurer to substantiate the claim. For example, for fire claims, a report from the fire brigade would be necessary; for cyclone damage, a report from the meteorological office may be called for; in burglary claims, a report from the police may be necessary; for motor claims the insurer may like to examine driving licence, police report, RC, and son on; in marine cargo claims the number of documents varies according to the type of loss i.e. total loss, particular average, inland or overseas transit claims and so on.

For example, details and documents for filing a motor claim

Details you will need to provide when you a file an insurance claim

• Policy number
• Your contact numbers
• Name of insured person
• Date & time of accident
• Vehicle number
• Make and model of the vehicle
• Location of loss
• Extent of loss
• Brief description of how the accident took place
• Garage name (with contact details)
• Contact details and name of the insured person (if the person intimating the claim is not insured)

List of documents you should keep ready while making a claim.

Accident Damages,

• Proof of Insurance - Policy / Cover Note copy
• Copy of Registration Book, Tax Receipt (Original required for verification)
• Copy of Motor Driving License (with original) of the person driving the vehicle at the material time
• Police Panchanama / FIR (In case of third-party property damage/ death / body injury)
• Estimate for repairer, where the vehicle is to be repaired
• Repair bills and payment receipts after the job is completed

In the case that the car insuranceclaim is to be paid to repairer submit the following along with the documents mentioned above

• Claims Discharge Cum Satisfaction Voucher signed across a Revenue stamp in this format.

Important aspects in an insurance claim

• The first aspect to be decided is whether loss is within the scope of the policy. The legal doctrine of proximate cause provides guidelines to decide whether the loss is caused by an insured peril or an excluded peril. The burden of proof that the loss is within the scope of the policy is upon the insured. However, if the loss is caused by an excluded peril the onus of proof is on the insurer.
• The second aspect to be decided is whether the insured has complied with policy conditions especially conditions which are precedent to liability.
• The third aspect is in respect is in respect of compliance with warranties. The survey report would indicate whether or not warranties have been complied with.
• The fourth aspect relates to the observance of utmost good faith by the proposer, during the currency of the policy.
• On the occurrence of a loss, the insured is expected to act as if is uninsured. In other words, he has a duty to take measure to minimise the loss.
• The last aspect concerns the determination of the amount payable. The amount of loss payable is subject to the sum insured. However the amount payable will also depend upon the following. The extent of the insured’s insurable interest in the property affected; the value of salvage; application of underinsurance and application of contribution and subrogation conditions.

Investigation is different from the assessment of loss. Investigation is done to ensure that a valid claim has been made verify the important details and doubts such as absence of insurable interest, suppression or misrepresentation of material facts, deliberately creating the loss and so on are ruled out.

Motor third party claims involving death and personal injuries are assessed on the basis of doctor’s report. These claims are dealt by Motor Accident Claims Tribunal and the amount to be paid is decided by factors like the age and income of the claimant. Claims involving third party property damage are assessed on the basis of a survey report. Motor own damage claim is assessed on the basis of surveyors report. It may require police report if third party damage is involved. Health insurance claims are assessed either in house or by Third Party Administrators (TPAs) on behalf of the non-life insurance companies. The assessment is based on the medical reports and expert opinion.

Section 64 UM of the Insurance Act, 1938

Where, incase of a claim of less than INR 20,000/- in value on any policy of insurance it is not practicable for an insurer to employ an approved surveyor or loss assessor without incurring expenses disproportionate to the amount of claim, the insurer may employ any other person (not being a person disqualified for the time being for being employed as surveyor or loss assessor) for surveying such loss and may pay such reasonable fee or remuneration to the person so employed as he may think fit.

Categories of Claims

The claims which are dealt with in insurance policies fall into the following categories.

Standard Clams: These are claims which are clearly within the terms and conditions of the policy. The assessment of claim is done keeping in view the scope and the sum insured opted for and other methods indemnity laid down for various classes of insurance. The claim payable by the insurer takes in to account various factors like valuation at time of the loss, insurable interest, salvage prospects, loss of earnings, loss of use, depreciation, replacement value depending on the policy taken

Non-Standard Claims: These are claims where the insured must have committed breach of condition or warranty. The settlement of these claims is considered subject to rules and regulations framed by non-life insurance companies

Condition of Average or Average Clause: This is a condition in some policies which penalises the insured for insuring property at sum insured less than its actual value known as underinsurance. In the event of a claim the insured gets an amount that is proportionately reduced from his actual loss in accordance to the amount underinsured.

Acts of God Perils – Catastrophic Losses: Natural perils such as storm, cyclone, flood inundation and earthquake are termed as ‘acts of God’ perils. These perils may result in losses to many policies of insurer in the affected region. In such major catastrophic losses, the surveyor is asked to proceed to the loss site immediately for an early assessment and loss minimisation efforts. Simultaneously, insurers’ officials also visit the scene of loss particularly when the amount involved is large. The purpose of the visit is to obtain an immediate, on the spot idea of the nature and extent of loss.

Discharge Vouchers

Settlement of claim is made only after obtaining a discharge under the policy. A discharge voucher represents culmination of insurance claim, which is evidence of payment. Wherever there are no disputes by the insured/s or claimant/s to the amount offered by the insurer towards settlement of a claim, the present system of obtaining the discharge voucher may be continued, IRDAI said. The insurers must ensure that the vouchers collected are dated and complete in all respects while obtaining the signature/s of the insured persons or claimant(s). In case the amount offered is disputed by the insured or claimant, insurers should take steps to pay the amount assessed without waiting for the voucher discharged. However, under no circumstances the discharge vouchers shall be collected under duress, by coercion, by force or compulsion, from the insured.

Payment of Claim

A claim and its payment are the end result of the insurance process. With respect to life insurance, this means that the insured has died and the beneficiary is in line to collect from the insurer what is due. Unlike property or casualty insurance, claims made on a life insurance policy are rarely negotiated. They are either paid or denied. When proof of the death of the insured arrives at the insurer's claims department, the records are checked to validate that the policy was in force at the time of death and ensure that the person to whom the policy proceeds are to be paid is the rightful beneficiary.

When an insured dies, the life insurance company should be notified as soon as is possible and practical. Once the company has received the proper forms, there's usually little or no delay in payment of the claim, especially when it's obvious that the claim is valid – the policy is in force, the beneficiary is available, there's no evidence of suicide within the limitations of the contract's suicide clause, and so on. Valid life insurance claims are generally paid in relatively short order, usually within a few days. This policy also helps to foster goodwill with the public, which is one of the life insurance industry's most valuable selling tools.

In the fields of property or casualty insurance, the amount of individual claims paid is often less than the face amount of the policy. In contrast, life insurance is generally paid at the full face value of the policy. There are, however, a few exceptions to this rule: the first is when there's an outstanding loan against the cash value of the policy. The amount of the loan, along with any unpaid interest, is deducted from the policy's face amount before payment is made to the beneficiary. The second exception is if there's a premium payment due. Insurance contracts often extend a grace period of up to a month after passing of the premium due date before the policy lapses. If the insured dies within this grace period, the amount of the premium due would be deducted from the policy's face amount before payment is made to the beneficiary.

The third exception that would prevent a life insurance policy's full-face value from being paid is when an error was made in determining the age or gender of the insured at the time the policy was issued. If such an error is discovered upon the insured's death, the insurance company will compute the face amount that the premium would have purchased if the accurate information was originally used and pay that amount to the beneficiary. Such occurrences are actually not that unusual. Some may be intentional, but most are simply mistakes. In either case, the discrepancy is not deemed material enough to completely void the policy.

In indemnity policies, the upper limit of a claim is the sum assured and this usually applies for the period of the policy. Certain policies, however, allow for reinstatement of the Sum Insured by payment of proportionate premium for the remaining period of the policy. The actual claim will be the actual extent of financial loss as validated by documents like bills. If the property is underinsured, the insured shall bear a rate able proportion of the loss. There can be more than one claim in the policy period but the sum assured is usually the limit for the policy period unless reinstated. Nowadays health insurance policies - which cover hospitalisation costs - have also a cashless settlement of claims. That is, you don't have to pay for the treatment at the hospital and then make a claim for reimbursement of the expenses. The insurance company has a service provider called the third party administrator (TPA) health services, who liaises with the hospitals and directly makes the payment for your treatment as per the terms of your policy and coverage.

Life Insurance Claim Process

A Life Insurance Policy can be claimed if your claim falls in one of the below categories

1. On maturity of the policy you bought. On completion of term you can renew or withdraw your invested amount.
2. On death of the person on whom policy was issued, if it occurred before maturity of the policy, then his nominees can avail the policy amount on the basis of terms & condition mentioned.

1. Claim Benefit
• On maturity the policyholder gets the lump sum amount.
• But in case the policyholder dies then his nominees gets the amount so they can stabilize their life and don’t fall into any financial in securities.
2. Maturity Claims Process
• After completion of policy period. The insurance company sends out a letter informing that on which date the policy money will be paid to the policyholder.
• However in case you do not receive any letter from your company, then follow up with your insurance company or agent through whom you bought the policy.
• The policyholder must submit discharge form duly filled with policy document.
• After receiving these two documents post-dated cheque is sent by post to policyholder before due date.
• Few policies like money back policy is paid in intervals to the policyholders. But provided that he/she should do the remaining payment for the premium.
• In cases where amount payable is less than a fixed amount (in LIC the limit is up to rs.60,000), cheques are released without receiving discharge receipt or policy document. However, in case of higher amounts these two requirements are insisted upon.
3. Death Claims Process

The death claim amount is paid if premiums were paid on time or if insured person dies. Process to claim insurance is as follows,

Inform the insurer and submit documents required for process as suggested by insurance company the insured chooses. Documents required to submit are,

1. Correctly filled claims form with below documents.
2. Medical attendant’s certificate.
3. Policy documents.
4. No objection certificate for all case except for murder.
5. Discharge vouchers provided by insurance company with bank passbook to be submitted for crediting the amount into applicant’s account.

Other Documents Required for Different Case Types

Natural Death

1. Death Certificate(from RBD)
2. Legal Lawyers Certificate (from Revenue Dept.)

Accidental Death & Murder

1. Death Certificate(from RBD)
2. FIR & Inquest Report
3. Post mortem Report
4. Legal Lawyers Certificate (from Revenue Dept.)

Suicidal Death

1. Should complete 1 year of Policy.
2. Death Certificate(from RBD)
3. FIR & Inquest Report
4. Post mortem Report
5. Legal Lawyers Certificate (from Revenue Dept.)

Process after submitting the document

• Insurance company may appoint an investigator to invigilate whether the claim and policy is valid.
• If it is found to be valid, the amount is paid, otherwise a repudiation letter is sent to the claimant, with reason for rejection.
• If the claim is valid, they must process it without delay. Any query about additional documents shall be raised at once and not in a piecemeal manner, within 15 days from the day of claiming.
• A claim under a life insurance policy should be paid or be disputed giving all the relevant reasons within 30 days from the date of receiving all relevant papers and other details required.

General Insurance Claim Process

An insurance claim is a formal request to an insurance company asking for a payment based on the terms of the insurance policy. The insurance company reviews the claim for its validity and then pays out to the insured or requesting party (on behalf of the insured) once approved. Normal claim process followed by general insurers

• An insured or the claimant shall give notice to the insurer of any loss arising under contract of insurance at the earliest or within such extended time as may be allowed by the insurer.
• On receipt of such a communication, a general insurer shall respond immediately and give clear indication to the insured on the procedures that he should follow. In cases where a surveyor has to be appointed for assessing a loss/ claim, it shall be so done within 72 hours of the receipt of intimation.
• Where the insured is unable to furnish all the particulars required by the surveyor or where the surveyor does not receive the full cooperation of the insured, the insurer or the surveyor as the case may be, shall inform in writing the insured about the delay that may result in the assessment of the claim.
• The surveyor shall be subjected to the code of conduct laid down by the authority while assessing the loss, and shall communicate his findings to the insurer within 30 days of his appointment with a copy of the report being furnished to the insured, if he so desires. Where, in special circumstances of the case, either due to its special and complicated nature, the surveyor shall under intimation to the insured, seek an extension from the insurer for submission of his report. In no case shall a surveyor take more than six months from the date of his appointment to furnish a copy of the report to the insured.
• On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 30 days offer a settlement of the claim to the insured. If the insurer, for any reasons to be recorded in writing and communicated to the insured, decides to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the survey report or the additional survey report, as the case may be.
• Upon acceptance of an offer of settlement by the insured, the payment of the amount due shall be made within 7 days from the date of acceptance of the offer by the insured. In the cases of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it.

Module -4

POINT OF SALE- GENERAL INSURANCE PRODUCTS INCLUDING HEALTH INSURANCE

General Insurance

Insurance can be widely segregated in three categories–life, health and general. General insurance is insurance for valuables other than our life and health. General insurance covers the insurer against damage, loss and theft of your valuables. The premium and cover of general insurance depends upon the type and extent of insurance. A general insurance policy typically has a period of a few years. General insurance or non-life insurance helps you to safeguard yourself and the things around, which you value a lot. General insurance covers insurance of property against fire, burglary, theft; personal insurance covering health, travel and accidents; and liability insurance covering legal liabilities. This category of insurance virtually covers all forms of insurance except life. These valuables carry a lot of financial risks. Therefore, general insurance plans provide financial protection from the impact of fire, storm, flood, earthquake, car accidents, theft and other travel accidents. It also covers us from the expenses spent on the legal actions. In short, you have the option to choose the right type of cover and the right type of insurance policy as per your requirements. The tenure for a general insurance is not like the tenure we have in life insurance. Mostly these types of insurance are yearly contracts.

Types of General Insurance

Health (Medical) Insurance: Medical insurance or simply mediclaim, It is basically a type of insurance coverage that covers the cost of an individual's medical and surgical expenses. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly. It is often included in employer benefit packages as a means of enticing quality employees. The cost of health insurance premiums is deductible to the payer, and benefits received are tax-free.

Motor Insurance: Motor insurance is the insurance policy for vehicles. It could include car insurance and two-wheeler insurance. Vehicles that are used for commercial purposes, like buses and trucks, are covered by commercial vehicle insurance. Motor insurance is mandatory in India. It is compulsory to buy auto insurance when you purchase a vehicle.

Travel Insurance: Travel insurance is insurance that is intended to cover medical expenses, trip cancellation, lost luggage, flight accident and other losses incurred while travelling. Travel insurance would help you tackle all the travel and medical contingencies while you travel abroad. It is utmost important to add travel insurance to your checklist while you plan your vacation, be it for leisure or business.

Home Insurance: Home insurance is a form of property insurance that covers losses and damages to an individual's house and to assets in the home. Homeowners insurance also provides liability coverage against accidents in the home or on the property.

Personal Accident Insurance: Personal Accident insurance or PA insurance is an annual policy which provides compensation in the event of injuries, disability or death caused solely by violent, accidental, external and visible events. It is different from life insurance and medical and health insurance.

Rural Insurance: Rural insurance helps to fulfil the requirements of rural and agricultural businesses which is the base of rural insurance. The motive of this type of general insurance is to ensure that working capital as well as assistance is offered to the rural families. This can be done in the form of income generating assets.

Rural Insurance includes

• Livestock such as goat, sheep, cattle, etc.
• Agricultural pump sets
• Plantation like grapes, rubber trees
• Sub-Animals including silkworm, honeybee, etc.

Commercial Insurance: Commercial insurance is a type of business insurance that offers solutions for industrial sectors including but not limited to construction, manufacturing, telecom, textiles, logistics, and so on. It offers insurance cover to different business related requirements. Common commercial insurance types include property, workers’ and liability compensation. The types of policies depend on the business and most insurers will have special packages for businesses that fall under their solutions purview.

Some of the major commercial insurance policies are

• Fire Insurance
• Marine insurance
• Liability insurance
• Employee benefits insurance
• Engineering insurance
• Property insurance
• Shopkeeper Insurance

Marine Insurance: Marine insurance is also known as cargo insurance. It covers any loss or damage due to cargo, terminals, ships and other transport or cargo through which any property is acquired, transferred or is held between two points that can be the origin and the destination point.

Fire Insurance: Fire insurance policies are the contracts which insure the loss by fire or the risks incidental to fire. Fire policies are the policies which are effected on the buildings, furniture, fixtures, plant and machinery, stocks and so on.

Engineering Insurance: Engineering insurance refers to the insurance that provides economic safeguard to the risks faced by the ongoing construction project, installation project, and machines and equipment in project operation. Depending on the project, it can be divided into construction project all risks insurance and installation project all risks insurance; depending on the attribute of the object, it can be divided into project all risks insurance, and machinery breakdown insurance.

Liability Insurance: Liability insurance is a policy that offers protection to businesses and individuals from risk that they may be held legally or sued for negligence, malpractice or injury. This insurance policy protects the insured from legal payouts and costs for which the policyholder is deemed to be responsible. However, contractual liabilities and intentional damage are usually not covered as part of this policy.

Commercial Property Insurance: Commercial property insurance is used to cover any type of commercial property. Commercial property insurance protects commercial property from such perils as fire, theft and natural disaster. This type of insurance is carried by a variety of businesses, including manufacturers, retailers, service-oriented businesses and not-for-profit organizations.

Shopkeeper Insurance: This type of policy covers damage to shop buildings and contents, housebreaking, burglary, cash insurance, bicycles, signboards, baggage, personal accident, liability etc. as per policy wordings.

Employee Benefit Insurance:An employee benefit insurance plan refers to insurance offered by employers to their current employees in the form of a group insurance program. It also serves as a way to attract and retain workers in a company.

Stand-Alone Health Insurance

A health insurance policy is a contract between the insurance company and the policyholder, wherein the insurer pays for the medical expenses incurred by the life insured. The insurer will either provide a reimbursement for your medical expenses or ensure you are eligible for cashless treatment for injuries or illnesses covered under the policy at one of the network hospitals. You can also get tax deductions on the premiums paid towards health insurance under Section 80D of the Income Tax Act, 1961.

Features of a Health Insurance Plan

• Policies are there for both individuals with family cover or family cover such as family floater plans.
• The insurance provider covers specific medical expenses of the insured based on the premium paid by the insured. Policy covers physician’s fee, surgery costs, room rent, and laboratory tests. Also provides coverage for critical illness (certain conditions are attached).
• Cashless hospitalisation is another feature through which the policyholders don’t have to pay the bills of a treatment through their own pocket. In this feature, the bills are paid directly by an insurer or through a middleman to the hospital. The policy covers hospitalisation charges. Pre and post hospitalisation expenses are covered under this plan.
• The insured also pays a predetermined amount for specific health care services. This is called co-payment.
• Free health check-up of insured person is provided after 4 claim free years of policy with the same insurer up to certain prescribed limits in the policy.
• Some policies also provide for hospitalisation where less than 24 hours hospitalisation is required.
• A lot of policies also offer claims for domiciliary hospitalisation, which means cover for treatment and care of a patient at home if recommended by the doctor. The insurers usually offer this facility if the treatment exceeds a certain number of days for an injury or illness.
• No claim bonus is a very popular feature of health policies under which the policyholders receive a bonus if they don’t make a claim during a specific year.
• Lifetime renewal.
• The individuals also enjoy tax deductions as per the Section 80D of Income Tax Act. The maximum limit of deductions can range from Rs. 25000 to Rs. 60000 on the basis of age of insurer or his/her family member

Types of Health Insurance Plans

Individual Health Insurance Plan: Under an individual health insurance plan, only one person is covered for the chosen sum insured. Family members can be enrolled under this plan but a different sum insured has to be chosen for each member.

Family Floater Insurance Plan: This type of plan is customized for families, wherein a fixed sum insured is available for all insured members for one or more claims during the policy tenure. Spouse, dependent children, and parents can be included under this plan.

Fixed Benefit Hospitalisation Plan: This type of plan offers fixed coverage and benefit payouts if the insured member is diagnosed with a specified illness or is hospitalized. It partially covers hospitalisation costs and provides a substitute income.

Some health insurance add-ons or riders that can be attached to your base policy are:

Critical Illness Plan: The insurer will pay a fixed benefit payout if the insured person is diagnosed with any of the critical illnesses specified under the policy. The lump sum benefit can cover hospitalisation cost and act as an income supplement.

Hospital Cash and Surgical Benefit Plans: This plan covers defined hospitalisation and surgery costs. Medical bills will have to be submitted to the insurer to receive the benefits.

Unit Linked Health Plans: Mediclaim plans through ULIP route is yet another form of health insurance. Many health insurance companies have introduced Unit Linked Health Plans. In such plans, you get health insurance along with investment.

Maternity Plan: The plan is specific just to pregnancy. It includes both pre-natal as well as post-natal care and all the medical costs that are incurred during pregnancy duration.

Categories of POS Products and Salient Features of POS Products

Vehicle Insurance

(a) Motor Insurance

Motor vehicle insurance,also called automotive insurance, is a contract by which the insurer assumes the risk of any loss the owner or operator of a motor may incur through damage to property or persons as the result of an accident. There are many specific forms of motor vehicle insurance, varying not only in the kinds of risk that they cover but also in the legal principles underlying them.

Key Features of Motor Insurance Policy

Some of the key features of motor insurance can be listed as follows.

• Most motor insurance policies protects you and your vehicle from all kinds of manmade and natural disasters
• There are multiple add-on covers available to provide extra protection for your vehicle. Some of these rider policies can be extremely beneficial when it comes to vehicle maintenance.
• The premium charges for motor insurance is calculated based on the IDV of the vehicle. During the time of renewal, the IDV is calculated again based on the depreciation of the vehicle.
• Premium discounts can be enjoyed by vehicle owners by choosing a higher deductible. Deductible refers to the amount of money you are willing to pay from your own hand during a claim. Many insurers allow flexible options when it comes to choosing a deductible for your motor insurance policy.
• No claim bonus is available with most motor insurance policies. If no claims have been made during a particular policy period, policyholders can enjoy no claim bonus in the form of premium discounts.
• Cashless car insurance benefit is available in the select network of garages affiliated to the insurance company. When the vehicle is serviced in these garages, vehicle owners have to pay only for the deductible amount opted by them.
• Almost all major motor insurance service providers provide online services when it comes to paying premiums and filing for claims. With this benefit, getting an insurance cover is no longer a cumbersome activity

Types of Motor Insurance

Third Party Insurance:This insurance is mandatory by law. It protects a policy holder against losses which arise due to bodily injury/death to a third party or any damage to property. Here third party includes people travelling with you or whom the insured person injures and claims damages at the time of accident. But this insurance does not protect you, your vehicle and co-passengers against losses which arise due to bodily injury/death.

Comprehensive Insurance:This type of insurance will cover third party liabilities as well as damages caused to you and your car. You will receive financial protection against liabilities arising from natural disasters, theft, and accidents. Comprehensive insurance plans include third-party premium and own-damage premium. Own-damage premium is determined based on the age of the car, make and model of the car, geographical location, and engine capacity. The comprehensive car insurance policy offers personal accident cover for the owner-driver. In case you require personal accident cover for the passengers, you will have to take that coverage separately after paying extra premium

Two Wheeler InsuranceTwo wheeler insurance is essentially a method of protecting your two wheeler from accidents, theft, natural disasters, and other such perils. The owner of the two wheeler will buy an insurance policy from an insurance company. As per this contract, the insurance company offers financial protection to the policyholder in the event of several incidents involving the insured vehicle. This includes accidents, natural disasters, theft, man-made calamities, in-transit damages, and third-party liability claims for loss of life, injuries, and property damage. In return, the policyholder pays a premium to the insurance company. As per the Motor Vehicles Act, 1988, all vehicles in India are mandated to have at least third-party liability insurance cover. Riding a bike without insurance can attract heavy penalties. Apart from being the law, two wheeler insurance is an essential investment as it provides the rider complete peace of mind when he/she is on the road. The protection that the insurance offers against third-party liability claims is noteworthy.

Feature of Two-Wheeler Insurance

Liabilities Only Cover:Bike owners can purchase from liability only two wheeler plans being offered by top insurers.

Comprehensive Cover:Bike owners can also opt for personal accident cover and bike cover along with third party liability cover under a single two wheeler plan.

Additional Covers: Bike owners can also include the optional covers as per their requirement and make their insurance plan more comprehensive.

Nominal Premium: It takes very little to get an adequate bike insurance. Top insurance companies are offering two wheeler starting from Rs. 2 premium per day.

Short Tenure:Most two wheeler policies are for one or two years though some insurance companies are also offering two wheeler policies for three years.

Individual Cover:Two wheeler plans can be for a single bike belonging to an individual.

Group Cover:Group two wheeler cover can be availed for a set of bikes by family, company, corporate or any legal entity. Insurance companies may offer attractive discounts on group bike insurance, and per head, premium can cost lesser.

Quick Purchase and Renewal:Two wheeler policies can be purchased online or offline with very little documentation. You can get your bike insured in no more than half an hour.

No Claim Bonus:No claim bonuses are applicable for subsequent renewals. No claim bonus is a percentage of the amount deducted from the premium amount for policy renewal and no claims being raised during past policy tenures.

No Claim Bonus Transfer:If two wheeler policy needs to be transferred to another insurer then the applicable no claims bonuses can also be transferred easily.

Discounts:Insurance companies are offering discounts on two wheeler policies. Discounts on premium can be given for long-term policy of over two years and one-time premium payment. Discounts may also be given for companies for installed security features on the bike and for a group two wheeler plan.

Customer Support:Top two wheeler companies are offering all-time customer support and assistance to customers. Policyholders who have suffered injury or damage can call up the insurer or PolicyX.com and get the needed support instantly

Auto Renewal:Two wheeler plans can have auto-renewal options under which the policy gets automatically renewed at the end of the policy tenure. This feature is beneficial for those who tend to forget renewal dates.

Types of Two Wheeler Insurance

Liability-Only Insurance:Also referred to as third party liability insurance, this standalone plan offers protection to the insured vehicle from legal liabilities to a third party that arise from accidents. This plan covers third-party injuries, death, and property damage. Insurance protection is not inclusive of coverage to the insured vehicle itself. Third party insurance is compulsory under Indian law and all two wheelers are required to have this form of insurance. Liability only insurance covers the legal cost arising out of damage resulting in personal injury, property damage or death to a third party due to the insured vehicle. Along with covering the cost of damage due to an accident or incident, most insurance companies also offer accidental death cover to the owner of the insured vehicle. This is an additional benefit that is offered to two-wheeler owners. This serves as an additional cover in the event the owner is injured, with the insurance company covering the cost up to a certain limit.

Comprehensive Insurance:This insurance plan includes two types of coverage. The protection offered by one part of this insurance is similar to that offered by the standalone liability-only plan explained above. It protects the bike owner from liabilities to a third party due to accidental injuries, death, or property damage. The other part of the insurance plan protects the insured vehicle from a host of events, including accidents, theft, in-transit damages, natural disasters, man-made calamities, etc. The vehicle owner is also offered Personal Accident cover under this scheme. Comprehensive two-wheeler insurance covers damage to the vehicle arising out of natural and man-made calamities as well as coverage for the owner and rider. Comprehensive bike insurance provides complete protection in the event of an accident resulting in partial or total damage to the insured vehicle. It also covers the owner and the co-rider (included as an add-on) through personal accident cover. With a two-wheeler comprehensive insurance policy, you can enjoy good protection for your vehicle when it is stolen, damaged, or lost. It also provides personal accident cover to the owner or rider of the vehicle. Apart from this, it will also cover third-party liability.

(c) Commercial Vehicle Insurance Commercial Vehicles are part and parcel of many businesses. Whether you own a company with a single van or an entire fleet of commercial vehicles, commercial vehicle insurance is very useful. Commercial vehicle insurance is necessary to keep your business running smoothly. Whether you own a small company with a single van or a company running an entire fleet of commercial vehicles, commercial vehicle insurance is both mandatory and useful. Getting the right level of commercial vehicle insurance, such as bus insurance, taxi insurance or truck Insurance at a price that suits you is important, especially when you are using your vehicle regularly for business.

Key Features of Commercial Insurance Policy

• Bodily injury or death caused by the use of the vehicle is covered.
• Any damage to the property caused by the use of the vehicle is covered.
• Claims can be made quickly and simply.
• Various classes of commercial vehicles can be insured including trailers, goods carrying vehicles (both private and public

Types of Commercial Vehicle Insurance

Comprehensive Plans: A comprehensive truck insurance plan covers for the insured the following:

• Covers for loss and damage to the insured
• Third-party bodily injury
• Third-party vehicle and property damage

Third Party Only: The third party only policy covers for third-party injuries and property damage to their vehicle. It doesn’t cover the insured for any loss.

Some of the Optional Covers Provided by Commercial Vehicle Insurance Companies in India

Named Driver Policy:The benefit of investing in named driver motor insurance policy is that the policy is in the name of the person driving the vehicle the most. To make this plan more flexible, other names can be added to the policy as well at a nominal fee. It must be noted that the benefit extended to additional drivers will differ from that of the main listed driver. Also, adding another driver helps reduce the premium that the business has to pay. Another aspect that businesses need to keep in mind is that the main and additional drivers must be informed about the insurance cover.

Any Driver Policy:Another form of commercial insurance is any driver policy. This is an ideal choice for businesses that have multiple vehicles and several drivers that keep rotating routes or vehicles. Since a specific name is not mentioned in the policy, each driver is entitled to the same benefits and protections as the other. Additionally, businesses need not worry about taking a new insurance policy for new drivers or cancel ones for those who have left the organisation.

Fleet Motor Insurance:Fleet motor insurance is a product designed specifically for corporate customers. When companies operate more than 15 vehicles for their business purposes, the entire fleet can be protected with a single motor insurance policy. This cover helps companies take care of various legal obligations and lower the risks associated with running a fleet of vehicles.

Travel InsuranceA travel insurance plan will assist you in taking care of unforeseen situations during a journey. Travel insurance is insurance that is intended to cover medical expenses, trip cancellation, lost luggage, flight accident and other losses incurred while travelling. People usually acquire it at the time of booking of a trip. This type of insurance assists you in covering the financial losses during the duration of the trip. A multi-trip travel insurance covers the expenses of unlimited trips in the definite frame of time

Features of Travel Insurance

Trip Delay:If the trip is delayed for more than 5 hours due to covered hazard you can avail the benefit according to the maximum limit shown in the Policy scheme.

Missed Departure:If you miss the departure of your booked journey, the cost will be reimbursed in case it was caused due to public transport services fail or the vehicle in which you are travelling is involved in an accident

Loss or Tickets and Baggage:The insurer will reimburse the amount stated in the scheme/plan if it is lost by you and it leads to not continuing the intended travel. Travel insurance provides cover for you in the case of loss or theft of your baggage during the transition. The cover depends on the plan chosen and varies from one insurance provider to another.

Medical expenses:Offers coverage for any surgical or emergency medical treatment when you are away from home

Medical Evacuation:In the event of a medical emergency, arrangements for evacuation and transportation of the insured are covered

Curtailment:Offers coverage for any trip that is shortened or cancelled due to a valid reason. This feature helps you to save a lot of money on cancellation of flights or hotel accommodation

Personal Liability Cover:Offers coverage if you damage some one's property or are liable for bodily injuries due to an accident

Loss of Passport:Offers coverage towards expenses for replacing the original passport if robbed during your travel

Terrorism:Offers coverage for your medical and insured losses during an act of terrorism while your visit overseas

Repatriation of Remains:Offers coverage for expenses to take the insured's mortals or human remains back to the home country

Types of Travel Insurance Plans

Domestic Travel Insurance:Domestic travel insurance covers travel within India. Individuals are covered for loss of baggage, medical expenses, 24/7 customer support, medical evacuation, emergency cash assistance, personal accident cover, loss of baggage etc. It offers coverage to the individual policyholder. Any person above 18 years and below 65 years can opt for this travel insurance plan.

International Travel Insurance:In a foreign country, amidst new culture and people, in case you fall sick or meet with an accident, it may get difficult to bear unexpected medical expenses. The medical facilities and expenses at international destinations are very high as compared to India, meeting such contingency expenses may jeopardize your travel plan and impact the financial stability. To avoid such financial setbacks and take precaution beforehand, it is essential to opt for a travel insurance policy to safeguard yourself and your family from any such unforeseen expense

Students Travel Insurance:A student travel insurance plan offers medical as well as financial support to the students travelling abroad for higher studies. A student might face sudden medical emergencies or financial problems while studying in the foreign land. This might interrupt his studies as well. Student travel insurance plan would cover any such emergencies throughout the duration of studies without any hindrances.

Senior Citizen Travel Insurance:Different insurance companies offer comprehensive travel insurance to the senior citizens for stress-free travel around the world. Benefits like medical cancellation of the trip, burglary back home when you are busy enjoying your vacation, loss of baggage, pre-existing illnesses cover, emergency medical expenses, personal liability, emergency financial assistance, dental treatment, flight cancellation, etc. are covered under this travel insurance

Schengen Travel Insurance:Anyone travelling to Schengen countries for a maximum 90 days like Austria, Belgium, Czech Republic, Denmark, Poland, Finland, Estonia, France, Greece, Iceland, Germany, Latvia, Lithuania, Italy, Hungary, Malta, Norway, Luxembourg, Liechtenstein, Portugal, Poland, Spain, Slovakia, Slovenia, Sweden and Switzerland, need to mandatorily have a Schengen travel insurance or a health insurance in addition to the Schengen Visa

Asia Travel Insurance:If you are travelling to any of the Asian countries or Southeast Asian countries, then Asia travel insurance comes into the picture. Here benefits offered include distress allowance, loss of passport, emergency cash assistance, emergency medical cover, third-party liability etc. Asia travel insurance offers a comprehensive coverage that would take care of any uncertainties.

Single-Trip Travel Insurance:For people who do not travel frequently, a single trip travel insurance policy could prove to be very useful. Offered by all major insurance companies in India, a single trip travel insurance policy will offer cover against all major risks and will also help you cut down the premium costs. A single trip insurance policy essentially covers a single overseas trip. An international single trip insurance policy will last until you return home from your trip. All insurers have a limit on the number of days that count as a single trip. Single trip insurance policies are apt if you are making not more than one trip an year

Multi-Trip Travel Insurance:With the rise of affordable vacations thanks to home stays and home swapping, there has been a rise in the number of vacations and trips individuals make over the course of a year. No longer is a trip just about the annual family vacation anymore. Short getaways and breaks are also gaining in popularity, with everyone from students to pensioners jet setting off on a whirlwind trip every once in a while. The number of people travelling for business has also seen a rise, contributing to a significant chunk of revenue for the travel industry. For frequent traveller’s, annual multi-trip travel insurance would be the ideal solution. Every trip taken in the year would be covered under the plan, a convenient alternative to taking out a travel insurance policy each time you travel.

Corporate Travel Insurance:A corporate travel insurance plan can be procured by corporate employers who intend to provide insurance protection to their employees while they are abroad. Corporate travel insurance plan is a comprehensive package which provides complete medical and health cover to the international business traveller. Corporate travel insurance plan covers your business trips abroad. Corporate plans can be customized according to the requirements of the organization. All plans offer adequate medical and travel-related cover for policyholders and are available as multi-trip and single round trip policies.

Group Travel Insurance:A group travel insurance plan should be considered if you are a group of five or more people traveling outside your home country. Group travel insurance is taken as a comprehensive cover for people belonging to a group travelling to same/similar destination, the type of cover may differ as per the policy terms. Group travel insurance will cover you for everything you would usually get as an individual but means you can often save time and money including everybody on the same policy

Family Travel Insurance: When travelling overseas with family, it’s important to prepare against medical emergencies and travel-related challenges beforehand. Family Travel Insurance is your safety net which makes sure that problems in your travels do not ruin your much-deserved break. It is a single policy which takes care of any problem that may be faced by you and your family members while travelling. Unlike other individual travel insurance schemes, the coverage amount provided by international holiday insurance is divided equally by all the family members. Also the process of claim disbursement is simple and involves minimal paperwork.

Personal Accident Insurance

Personal Accident insurance or PA insurance is an annual policy which provides compensation in the event of injuries, disability or death caused solely by violent, accidental, external and visible events. The personal accident insurance policy provides that, if at any time during the currency of this policy, the insured (person who has taken the policy) shall sustain any bodily injury resulting solely and directly accident caused by external violent and visible means, then the insurance company shall pay to the insured or his legal personal representative(s), as the case may be, the sum or sums set, forth, in the policy, if resulting in specified contingencies such as death, permanent disablement etc.

Key Features of Personal Accident Insurance

Death:If a person dies due to an accident the risk is covered under the personal accident policy. His legal heirs are entitled to get the sum insured. e.g. If the sum insured is Rs 1.00 lakhs and in case of death his legal heirs will get Rs 1.00 lakhs as compensation.

Disability:Disability can be classified further as follows:

• Permanent Total Disability (PTD)
• Permanent Partial Disability (PPD)
• Temporary Total Disability (TTD)

Permanent Total Disability: As the name indicates the disablement is of permanent and irrecoverable nature and is absolutely total and the insured is unable to engage in the gainful employment. Under this disability the compensation is equal to the sum insured. Example of PTD, loss of sight of both eyes, loss by physical separation of two entire hands or entire feet, loss of one hand and one foot, person in comma for longer period will also be treated as PTD, Paralysis.

Permanent Partial Disability:The disability is not total but partial. For example, loss of toe or a finger. The compensation will be based on the percentage of the disability and it will defined in the policy and if it not defined then as per doctor certificate the compensation is paid.

Temporary total disablement:As the name implies this is a disablement which is total but for a temporary period only. The temporary may be days, weeks, months or even years. The payment is on weekly basis.

Ambulance Expenses:The charges paid to an ambulance to ferry the injured person to the nearest hospital are waived off under the policy

Broken Bones:There is a provision of a fixed amount payment for broken bones resulted because of an accidental mishap.

Burns:If the policyholder sustains burns because of a mishap, the policy offers a percentage of benefit as entitled under the plan.

Education Advantage:In the case of the demise of the policyholder in an accident, the education expenses of the dependent child are covered under the policy up to a certain limit.

Hospital Daily Cash:In the case of hospitalisation as a result of an accident, the injured person is offered a fixed amount of medication. The number of days for such payments are however mentioned in the policy plan.

Repatriation or Transportation of the Mortal remains:In case a person passes away in an unfortunate accident, the cost of transportation of his/her mortal remains from the demise site to the hospital or cremation ground or home is covered

Family Transportation Allowance:This applies when an accident results in the confinement of the principal insured to a hospital quite far from his/her residence. In such instances, the actual transportation cost incurred by the immediate family member to reach the insured person is compensated. The amount reimbursed is subject to the maximum amount specified in the policy.

Type of Personal Accident Insurance

Individual Accident Insurance:In the occurrence of any intentional or unintentional mishap, Individual Accident Insurance defends an individual. The result of any such incident may include impairment, permanent or temporary disability or/and demise

Group Accident Insurance:This insurance is usually availed by employers willing to provide their employees with insurance cover against any road/rail/air accident. Insurance usually offers a discount on the premium amount of such insurance policies depending upon the size of the group. Thus, such policies can be easily availed at a lower price which makes them affordable for small organisations and businesses. However, unlike individual plans, group insurances offer basic coverage. An IRDA approved group insurance widely covers impairment, permanent or temporary disability or/and demise.

Term Insurance

Term Insurance is a life insurance plan that provides financial coverage to the beneficiary of the insured person for a defined period of time. In the event of death of term insurance policyholder during policy term, the beneficiary can claim death benefits from the insurance company. Term insurance is a pure life insurance product, which provides financial protection in case of death of the life insured during the term of the policy. A term insurance plan is the most affordable form of life insurance cover. It is designed to financially protect ones family in case of death of the bread-earner

Features of Term Insurance Plan

Flexible Payment Options:Term insurance policies offer flexible premium payment options, allowing policyholders to choose a payment plan based on their convenience. Premiums can be either limited pay, single pay or regular pay plans. Policyholders who choose limited or regular pay plans can pay their premiums either monthly, quarterly, half-yearly or annually.

High Sum Assured for Low Premiums:Term insurance premiums are some of the lowest in the insurance sector, allowing for a prudent and relatively inexpensive way to safeguard the policyholder’s dependents in case of untimely demise. The Sum Assured associated with term insurance plans are also relatively high when compared to the premium amounts. Regular plans as well as TROP plans offer as much as 105% return on premiums paid as a benefit upon maturity.

Choice of Plan:A number of insurers offer policyholders a choice when it comes to the type of plan they wish to opt for. Policyholders can choose between single or joint life plans, depending on their need. They can thus choose to extend coverage for dependent spouses or choose a plan exclusively for the breadwinner of the family.

Death Benefit:On the death of the policyholder during the policy term, his/her dependents stand to receive the amount chosen at the time of choosing the policy. The amount would depend on the term plan, with the amount increasing, decreasing or remaining the same irrespective of at what juncture of the policy tenure the policyholder’s death occurs.

Tax Benefits:Policyholders can claim tax exemptions under various sections by virtue of opting for a term insurance policy. Tax exemptions can be got under section 80C of the Income Tax Act on premium amounts. Policyholders can also claim exemptions under Section 10 (10D) of the Income Tax Act for benefits received through insurance policies.

Survival Benefits:While a regular term insurance plan does not have any survival benefits, a number of insurers have designed plans that also offer survival benefits in the form of premium refunds on maturity. On maturity of the policy, surviving policyholders stand to receive benefits under a TROP policy only. In the case of a TROP policy, the policyholder will receive the premium amount paid over the policy tenure as one lump sum.

Add-on Benefits: A number of individuals have begun to opt for add-on features to their regular term insurance policies. These add-on plans will push up the price of the premium being paid but provide additional benefits in case of accidental death, critical illness, total and permanent disability benefit etc.

Types of Term Insurance PlansInsurance companies offer a wide range of term insurance plans with exciting features and benefits to stand out amongst competitors in the insurance space. Term insurance can be classified into the following types:

Regular Term Insurance Plans:A regular term insurance plan is a no-frills insurance plan that provides coverage against a specific set of risks on payment of a pre-decided premium amount. These plans offer no benefits upon maturity. Premium payments can be made periodically or they can be paid at once (single pay). The options for insurance cover can go as high as the insurer is willing to underwrite and the policy tenures can be as high as 20 years. When the policy matures, the insurance cover ceases, as does the need to pay premiums for such a cover. This is the most basic form of life insurance protection. Regular term insurance also comes with low premiums and high sum assured. This ensures that the policyholder can receive maximum benefits from the plan in a cost-effective manner.

Group Term Insurance Plans:Group Term Insurance policies are offered to a group of individuals by an employing organisation, association, or trusts and societies. It provides coverage to each and every member insured under the plan. It is also less expensive compared to an individual term insurance plan. Group term plans offer more or less the same benefits as individual plans, however, the only disadvantage is that the coverage expires once the employment or membership ends. As is made obvious by the name, a group term insurance plan is meant to be an insurance instrument that can be used by a group to secure its members against untoward occurrences. These plans can be taken by any group of people or companies for their employees but can come with one essential clause or mandate set by the insurer where the policy will require a minimum number of people participating in it. For example, if a policy says that it will cover groups of at least 20 people then a small company that has less than 20 employees won’t be able to purchase the policy.

Convertible Term Insurance Plans:A convertible term plan allows the policyholder to convert his/her policy into a permanent one during the policy tenure. Some insurers provide this as an additional benefit rider while others offer the same as a standalone plan. As far as the terms and conditions have been met, converting a term life policy into a permanent policy should not be a difficult process.

Term Return of Premium (TROP):TROP plans are standard term life insurance plans with a slight variation in the method of providing survival benefits. On survival, policyholders are returned the total amount of premiums paid by them during the policy tenure, excluding tax. Such a method ensures that the money spent on the policy is returned to you after a specific interval.

Decreasing and Increasing Term Plans:The insurance market is flooded with various types of policies that it often becomes difficult for the buyer to choose the best suited plan. Decreasing and increasing insurance policies are two of the commonly used terms in the insurance realm. Let’s take a look at the features and benefits of the aforementioned policies:

Decreasing Term Insurance:In this type of policy, the sum assured on death as well as the premium decreases at a certain rate throughout the policy term. Such plans are generally offered by financial institutions to insure the property held as collateral against the loan offered. It is an additional safety component which ensures that the bank will get back the amount released as loan, in case of the worst scenario. The duration of the policy term can vary between 1 and 30 years. The essence of decreasing term insurance is that a person’s requirement for high insurance coverage decreases with age, as certain liabilities do not exist beyond a point. Decreasing term insurance plans are not suitable for individuals who have no other form of life coverage. If you buy only one life insurance package, it should be a pure term insurance policy, as it would offer you a level death benefit throughout the tenure. While the main advantage of choosing decreasing term insurance is that it can be used for personal asset protection, small businesses also use these plans to insure indebtedness for startup expenses or operational costs.

Increasing Term Insurance:Under increasing term insurance plans, the insurance coverage increases at specified durations when the policy is in full force. It evaluates risks on par with the rising costs at any given time in the future and compensates accordingly. The cover usually keeps increasing till the time it attains a value which is 1.5 times higher than the original cover. Increasing term life insurance policies are configured to offer respite from inflation. It also ensures that the death benefit is substantial when it is finally paid out to the nominee. One of the main disadvantages of the increasing term insurance plan is that the premium increases according to the benefit. Hence, these policies get more expensive over time. Increasing term insurance is less common than other forms of term insurance. These plans are particularly suitable for couples who plan to have a child in the near future, and would like to save up for the same.

Joint Term Insurance Plans:As the name suggests, joint term insurance plans are those schemes which allow the person insured to cover his/her spouse under the same policy. It is a comprehensive financial protection solution with multiple benefits for couples. It basically ensures that the family equilibrium remains intact during hardships, or in the worst case, during the absence of one of the two or both. These policies are well suited for married couples with dependent children.

Module -5

MISECELLANEOUS

Grievances Redressal Mechanism

Grievance Redress Mechanism is part and parcel of the administrative machinery of every business entity. No such entity can claim to be accountable, responsive and user friendly unless it has established an efficient and effective grievance redress mechanism. The insurance industry essentially being a service industry can exist and survive only if there is a customer. In this people-centric business where the customer expectations are ever rising grievances are bound to arise. And if customer has a grievance and that grievance is not satisfied it may lead to fall in the reputation of the insurance company and resultant loss of customer. Therefore, handling customer grievance is very important in insurance. To redress these grievances and to lubricate the insurance machinery grievance redressal mechanism has been provided for insurance disputes. The grievance redressal mechanism for insurance related dispute has been gathered hereafter.

(a) Grievance Redressal Cell of Insurers

It is incumbent upon the insurers on continuous basis to have in place an independent and transparent grievance redress machinery to resolve grievances in conformity with Redress of Public Grievances Rules, 1998. Apart from this, Regulation 5 of the IRDAI (Protection of Policyholders Interests) Regulations, 2006, stipulate that every insurer shall have in place, proper procedures and effective mechanism to address complaints and grievances of policyholders efficiently and with speed. So, every insurer must establish a ‘grievance cell’ at their office in order to address the grievances and problems of their policyholders. These in house grievance redress units are fully aligned with the IRDAI guidelines on grievance redressal and have excellent setup to handle customer grievances. The annual reports of the IRDAI contain information about the number of grievances received by the public and private insurers, grievances settled and disposed and those pending with them. In order to improve grievance settlement mechanism in the industry, the IRDAI appointed a Committee to Look into Grievance Redressal System of insurers and suggest modifications of the regulations for the protection of policyholders.

Insurance Companies are committed to resolve grievance in a cost effective and impartial manner. As a matter of fact, even before any difference of opinion between the insurer and insured graduates to a grievance to be resolved by ‘In-house Grievance Redressal Machinery’ the organization is required to provide credible arrangement for expeditious hearing of such difference of opinion and address the issues through negotiations, promptly and impartially. Insurance companies look into and resolve the grievances of their prospective and existing customers who have any issue regarding their products and services before, during and afterwards. They track and monitor the complaints and coordinate to resolve the complaints within the time frame mentioned in the policy. An in-depth analysis of the complaint is done to identify the root cause of complaint and identify issues pertaining to products, process and system. They also conduct a trend analysis of the complaints received and give suitable directions to the various departments to heal the trouble. However, if the in-house grievance redressal mechanism fails to resolve the grievance amicably or fails to respond to the insured within 30 days, the aggrieved insured has a right to make complaint for amicable resolution at industry level through ‘insurance ombudsman’ so as to get rid of the conflict of interest between insured and insurer. Apart from this, the IRDAI has also established its own grievance cell at its headquarters for discontented insurance customers.

Procedure

Every company has instituted an in-house grievance settlement procedure. And the policyholders who have a complaint against the insurer are required to first approach the Grievance/Customer Complaint Cell of the concerned insurer.

1. Every insurer shall have a board approved grievance redressal policy which shall be filed with IRDAI. The system and procedure for receiving, registering and disposing of grievances and other relevant details along with details of turnaround times shall be clearly mentioned in the policy.
2. Every insurer shall have a designated Grievance Officer of a senior management level to hear the grievances of policyholders. Senior Management would mean either the CEO or the compliance Officer.
3. An insurer shall send a written acknowledgement to a complainant within 3 working days of receipt of the grievance. The acknowledgement shall contain the name and designation of the officers who will deal with the grievance. It shall also contain details of the insurer’s grievance redressal procedure and the time taken for resolution of disputes.
4. Where the insurer resolves the dispute within 3 working days, it may communicate the resolution along with acknowledgement. Where the grievance is not resolved within 3 working days, an insurer shall resolve the grievance within 2 weeks of its receipt or reject the complaint and gives reasons for doing so.
5. The insurer shall inform the complainant about how he/she may pursue the complainant, if dissatisfied. The insurer shall inform that it will regard the complaint as closed if it does not receive a reply within 8 weeks from date of receipt of response by the insured/policyholder.
6. Any failure on the part of insurers to follow the above-mentioned procedures and time frames would attract penalties by the Insurance Regulatory and Development Authority.
7. All insurers should publicize its grievance redressal procedure and ensure that it is specifically made available on website. It is also necessary for the insurers to have in place the automated system that will enable online registration, tracking of status of grievances by complainants and periodical reports prescribed by IRDAI.
8. Insurers shall also have in place a system to receive and deal with all kinds of calls including voicemail, e-mail, relating to grievances from prospects and policyholders. The system should enable and facilitate the required interfacing with IRDAI’s system of handling calls and e-mails.
9. However, if the policyholder do not receive a response from insurer within a reasonable time or are dissatisfied with the response of the company they may approach the grievance cell of IRDAI.

(b) Grievance Redressal Cell of IRDAI

The interest of policyholder is on top of the agenda of Insurance Regulatory and Development Authority. IRDAI has established its own grievance cell at its headquarter for discontented insurance customers. A recent introduction by IRDAI for the facilitation of policyholder is IRDAI Grievance Call Centre (IGCC). IGCC acts as an additional and easily accessible channel for policy holders to lodge their grievances and also seek their status over phone/email. If need arises then investigations and inquiries are carried out by IRDAI as well

(c) Integrated Grievance Management System (IGMS)

Today, all major regulatory bodies are concerned about customer rights and fair trade. Almost all major regulators across industries have set up robust grievance management and redressal mechanisms to service and protect interests of end customers. The interest of policyholders is on top of the IRDAI’s agenda. These days IRDAI is investing in to execute Integrated Grievance Management System (IGMS) through automation of the Grievance Cell for on-line registration of complaints. IGMS will act as a gateway for policyholders to register their complaints with the insurance companies first and if required these complaints can then be escalated directly to the IGCC. With IGMS, you can also route your complaint. A complaint registered through IGMS will flow simultaneously to the insurers system as well as to IRDAI repository In fact, a media campaign has been launched in order to educate policyholders and publicise the regulating body’s grievance redressal mechanisms. Another initiative in this direction is the launch of the Integrated Grievance Management System (IGMS), a platform to help customers lodge and track their complaints online. Additionally, the regulator also has a grievance cell, besides several Insurance Ombudsman offices. The IGMS put in place by IRDAI is the repository of the insurance industry complaints providing not only a platform to raise customer grievances with insurers but also to generate various, analytical reports on Customer grievances registered against the Insurers. If policyholders are not able to access the insurance company directly for any reason, IGMS provides a gateway to register complaints with insurance companies.

(d) Government Department of Administration Reforms and Public Grievances (DAPRG)

Insurance industry is essentially a service industry where, in the present context, customer expectations are constantly rising and dissatisfaction with the standard of services rendered is ever present. Despite there being continuous product innovation and significant improvement in the level of customer service aided by use of modern technology, the industry suffers badly in terms of customer dissatisfaction and poor image. Alive to this situation the government and the regulator have taken a number of initiatives.  Apart from the complaints registered in the IGMS Portal of IRDAI, Complaints registered in DARPG Portal against insurers are also referred to IRDAI. The Insurance regulatory body regularly accesses the portal of the DARPG and ensures that complaints relating to the insurance sector are downloaded and necessary action to get them examined by the insurers is taken.

(e) Consumer Forums

The Consumer Protection Act, 1986, was enacted with an objective to provide simple, speedy and inexpensive redressal to the grievances of consumers. It covers goods and services, unless specifically exempted by the Central Government. The Act establishes quasi-judicial authorities at the district, state and national levels to deal with consumer grievances. Insurance is one of the services enumerated in the Consumer Protection Act, 1986 and falls within the purview of the definition of ‘services’ under Sec. 2(1) (0). Insurance being a prime component of financial services, any beneficiary under such contract is considered to be an insurance consumer. The consumer law provides protection to all affected consumer whose insurance services suffer from the deficiencies and defects. The act however restricts the ambit and scope of the power of the consumer court to award compensation to the aggrieved policyholder. And, it is only when there is deficiency in the service rendered to him and he has suffered any loss or injury due to the negligence of the insurer that relief by way of compensation can be granted to him/her. In other words, the consumer is entitled to relief under the act if and only if he establishes that he hired the service complaint of and that the service provided to him has a deficiency. Consumer courts are the last resort for a policyholder. One need not approach the ombudsman before knocking on the consumer courts’ doors, one can do so directly. Approaching the consumer forum would be the simplest, fastest and most economical remedy. The forum is better accessible, and awards compensation and costs.  The insured can also approach consumer forums or civil courts for relief if the insurer fails to comply with the Ombudsman’s order or they are not satisfied with it.

(f) Arbitration on Quantum

Arbitration, a form of Alternative Dispute Resolution (ADR), is a technique for the resolution of disputes outside the Courts, where the parties to a dispute refer it to one or more persons (the arbitrators or arbitral tribunal) by whose decision (the award) they agree to be bound. It is a resolution technique in which a third party reviews the evidence in the case and imposes a decision that is legally binding for both sides and is enforceable. These days, the use of Arbitration clause in consumer contracts is on the rise – it is commonly found in consumer contracts for insurance policies, gift redemption offers, or home or car loans from finance companies. The speedy resolution mechanism offered via arbitration as compared to resolution of disputes by Civil Courts makes it a popular choice for Indian Insurance Industry. In sectors such as insurance the use of arbitration clause has a history. Insurance offerings were once covered by tariffs and required that disputes (largely relating to quantum) be resolved via arbitration. Even as insurance offerings have been de-tariffed since 2007, it is customary to continue with the arbitration clause.

(g) Lok Adalat

Lok Adalat literally means “People’s Court”. It is a court for the people, by the people and of the people themselves. It is a special kind of people’s court in which disputes are solved by direct talks between the litigants. In Lok Adalat, the procedural and perfunctory requirements of the proper court are done away with, and the cadaverous remains are fleshed out with flexibility and amenity in settlement, and this lends the Lok Adalat the characteristics of people friendliness. It is a mode of redressing grievances and delivering justice but it has nothing in common with the adjudicating machinery. In fact, Lok Adalats originated from the failure of the Indian Legal System to provide fast, effective and affordable justice. The evolution of this movement was a part of strategy to relieve the heavy burden on the courts with cases pending disposal. The Supreme Court has been promoting this forum as a part of an alternative disputes redressal mechanism to reduce the high pendency of cases in the subordinate courts. The pendency of the cases poses great difficulties to the judiciary and to the people who queue up in the hope of getting justice. Lok Adalat is a boon to litigant public where they can get their disputes settled fast and free of cost.

(h) Insurance Ombudsman

The first point of contact for a policyholder should always be the insurer. The traditional role of civil service which was of administrator, service provider and controller of development activities has to make way for the new roles of facilitator and regulator so as to create best environment and conditions in the country for building a nation of excellence. While consumer groups remain apprehensive about the steps being taken by the regulator to protect policyholders’ interests, these moves are definitely a step in the right direction. If a policyholder is unhappy with the company’s response, he can approach the insurance ombudsman in his city 30 days after you first lodged the complaint with the insurer. It is a quasi-judicial body which deals with cases up to a value of Rs 20 lakh and has the power to award compensation to aggrieved policyholders. The ombudsman primarily comes into the picture for complaints that involve monetary compensation; IGMS is the way to go for simpler complaints. The ombudsman framework has turned out to be as helpful as it was expected to be. Unlike the grievance cell, the Ombudsman does have the power to pass orders. Cases of up to Rs 20 lakh fall under the ambit of the Ombudsman’s powers. The Ombudsman addresses issues related to rejection or delay in the settlement of claims, disputes on premiums and non-issuance of a document after collecting the premium. Complaints have to be filed with the Ombudsman office under whose jurisdiction your complaint falls. Recommendations can be made within a month of the receipt of the complaint, while a verdict has to be given within three months. If the need arises, the Ombudsman can also award compensation to the policyholder. The Ombudsman is appointed by the Insurance Council and is supposed to be independent. The order passed by the Ombudsman is binding on the insurance company. It is up to the insured whether to accept the award or to file a consumer complaint if he/she is dissatisfied with such an award. If the verdict is acceptable to the insured, he/she is required to intimate the Ombudsman of this within 15 days.  This requires a paradigm shift in governance to a system where the citizen is in the centre and he is consulted at various stages of formulation and implementation of public policy. To achieve this objective, India needs a public service which is capable, innovative and forward looking.

Protection of Policyholders Interest Regulations, 2017

In a major move to protect consumer interests and curb malpractices in India, the Insurance Regulatory and Development Authority (‘IRDAI’), on 30 June 2017, notified the IRDAI (Protection of Policyholders’ Interests) Regulations, 2017, which supersedes the existing IRDAI (Protection of Policyholders’ Interests) Regulations, 2002. Among other reforms, the 2017 regulations define more stringent timelines for investigation and settlement of claims. Further, the 2017 regulations impose a Board-approved policy on insurers, with minimum disclosure requirements to counter mis-selling to policyholders. Separate regulations have been laid out for health policies in the new regulations. These Regulations are complementary to any other regulations made by the Authority, which, inter alia, provide for protection of the interests of policyholders. These Regulations apply to all insurers, distribution channels, intermediaries, insurance intermediaries, other regulated entities and policyholders.

In exercise of the powers conferred by clause (zc) of sub-section (2) of section 114A of the Insurance Act, 1938 (4 of1938) read with clause (b) of sub section (2) of section 14 and section 26 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), the Authority, in consultation with the Insurance Advisory Committee, hereby makes the following regulations, namely:

1. Short Title and Commencement

1. These regulations may be called The Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interests) Regulations, 2017.
2. These regulations shall come into force from the date of their publication in the official Gazette of the Government of India and supersede Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002 and any clarification circulars/guidelines issued in this regard.

2. Applicability

1. These Regulations are complementary to any other regulations made by the Authority, which, inter alia, provide for protection of the interests of policyholders.
2. These Regulations apply to all insurers, distribution channels, intermediaries, insurance intermediaries, other regulated entities and policyholders.

3. Objective

1. To ensure that interests of insurance policy holders are protected.
2. To ensure that insurers, distribution channels and other regulated entities fulfill their obligations towards policyholders and have in place standard procedures and best practices in sale and service of insurance policies.
3. To ensure policy holder-centric governance by insurers with emphasis on grievance redressal.

4. Definitions

In these regulations, unless the context otherwise requires:

1. “Act” means the Insurance Act, 1938 (4 of 1938);
2. “Authority” means the Insurance Regulatory and Development Authority of India established under the provisions of section 3 of the Insurance Regulatory and development Authority Act, 1999 (41 of 1999);
3. “Bank Rate” means “Bank rate fixed by the Reserve Bank of India (RBI) at the beginning of the financial year in which claim has fallen due”;
4. “Complaint” or “Grievance” means written expression (includes communication in the form of electronic mail or other electronic scripts), of dissatisfaction by a complainant with insurer, distribution channels, intermediaries, insurance intermediaries or other regulated entities about an action or lack of action about the standard of service or deficiency of service of such insurer, distribution channels, intermediaries, insurance intermediaries or other regulated entities;

   Explanation: An inquiry or request would not fall within the definition of the “complaint” or “grievance”.

5. “Complainant” means a policyholder or prospect or any beneficiary of an insurance policy who has filed a complaint or grievance against an insurer or a distribution channel
6. “Cover” means an insurance contract whether in the form of a policy or a cover note or a Certificate of Insurance or any other form as approved by the Authority to evidence the existence of an insurance contract;
7. “Distribution Channels” means persons and entities authorized by the Authority to involve in sale and service of insurance products;
8. “Proposal form” means a form to be filled in by the prospect in written or electronic or any other format as approved by the Authority, for furnishing all material information as required by the insurer in respect of a risk, in order to enable the insurer to take informed decision in the context of underwriting the risk, and in the event of acceptance of the risk, to determine the rates, advantages, terms and conditions of the cover to be granted;

   Explanation: “Material Information” for the purpose of these regulations shall mean all important, essential and relevant information sought by insurer in the proposal form and other connected documents to enable him to take informed decision in the context of underwriting the risk;

9. “Prospect” means any person who is a potential customer of an insurer and likely to enter into an insurance contract either directly with the insurer or through a distribution channel;
10. “Prospectus”: means a document either in physical or electronic or any other format issued by the insurer to sell or promote the insurance products;

    Explanation: Insurance products referred herein shall also include the riders offered, if any. Where a rider is tied to a base policy all the terms and conditions of the rider referred in the definition shall be mentioned in the prospectus. Where a standalone rider is offered to a base product, a reference to the rider shall be made in the prospectus of the base policy indicating the nature of benefits flowing thereupon.

11. Words and expressions used and not defined in these regulations, but defined in the Act, or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or the Insurance Rules, 1939 or any other regulations issued by the Authority shall have the meanings respectively assigned to them in those Acts or Rules or Regulations;

5. Board Approved Policy for Protection of Interests of Policyholders

1. Every insurer shall have in place a board approved policy for protection of policyholders’ interests which shall at the minimum, include

1. Steps to be taken for enhancing insurance awareness so as to educate prospects and policyholders about insurance products, benefits and their rights and responsibilities.
2. Service parameters including turnaround times for various services rendered.
3. Procedure for expeditious resolution of complaints
4. Steps to be taken to prevent mis-selling and unfair business practices at point of sale and service.
5. Steps to be taken to ensure that during policy solicitation and sale stages, the prospects are fully informed and made aware of the benefits of the product being sold vis-a-vis the product features attached thereto and the terms and conditions of the product so that the benefits / returns of the product are not mis-stated / mis-represented.

2.Every insurer shall display the service parameters and turnaround times as approved by the Board in its website and keep the same updated as and when the service parameters are revised by the Board.

6. Point of Sale

1. A prospectus of any insurance product shall clearly state

   (i) (a) The Unique Identification Number (UIN) allotted by the Authority for the concerned insurance product

   (b) The scope of benefits;

   (c) The extent of insurance cover;

   (d) Warranties, exclusions/exceptions and conditions of the insurance cover along with explanations.

   (ii) (a) A description of the contingency or contingencies to be covered by insurance;

   (b) The class or classes of lives or property eligible for insurance under the terms of such prospectus;

   (c) A full statement of the circumstances, if any, in which rebates of the premiums quoted in the prospectus or table shall be allowed on the effecting or renewal of a policy, together with the rates of rebate applicable to each case; and

   (d) A copy of Sec. 41 of the Act but not including the proviso to sub-section (1) thereof.

   (iii) The allowable riders or add-on covers on the insurance products shall be clearly spelt out with regard to their scope of benefits,

   (iv) The premium pertaining to health related or critical illness riders shall not exceed 100% of premium under the basic product, the premiums under all other life insurance riders put together shall not exceed 30% of premiums under the basic product and any benefit arising under each of the above mentioned riders shall not exceed the sum assured under the basic product.

   (v) In case of life insurance, whether the product is participating (with-profits) or nonparticipating (without-profits).

   Provided that the benefit amount under riders in a life insurance policy shall be subject to section 2(11) of the Insurance Act, 1938.

   Explanation: The rider or riders attached to a life insurance policy shall bear the nature and character of the main policy, viz. participating or non-participating and accordingly the life insurer shall make provisions, etc., in its books.

2. An insurer or its agent or other intermediary shall provide all material information in respect of a proposed cover to the prospect to enable the prospect to decide on the best cover that would be in his or her interest.
3. Where the prospect depends upon the advice of the insurer or his agent or an insurance intermediary, such a person must advise the prospect dispassionately.
4. Where for any reason, the proposal and other connected papers are not filled in by the prospect, the insurer or the distribution channel shall explain the contents of the form, and a certificate shall be incorporated at the end of the proposal form from the prospect that the contents of the proposal form and connected documents have been fully explained to him and he has fully understood the significance of the proposed contract.
5. The Insurers shall ensure, that a sale executed over distance-marketing modes such as Internet, SMS, Tele Marketing, interactive electronic medium etc., shall be undertaken by authorized and qualified sales persons who are specified in this behalf by the Authority. It is mandatory that the consent of the prospect be obtained before canvassing. Care should be exercised to ensure that the prospect contacted has clarity as to the identity of the insurer, the distribution channel, the product, benefits and conditions of offer etc. The canvassing so made shall not involve compulsion, inconvenience or nuisance of any kind to the prospect.

7. Products on Offer/ Products Withdrawn

1. Every insurer shall place in its website the terms and conditions of every insurance product that is offered for sale by the insurer as it was approved by the Authority under File and Use procedure or filed with the Authority under Use and File procedure, including products modified or products withdrawn. The UIN allotted by the Authority to every insurance product shall also be mentioned against each product.
2. The insurer shall keep the list updated at all times.

8. Proposal for Insurance

1. Except in case of a marine insurance cover, or such other covers approved by the Authority exempting usage of proposal form, a proposal for grant of insurance cover, either for life insurance business or for general insurance business or for health insurance business, must be evidenced by a document in written or electronic or any other format as approved by the Authority. It is the duty of the insurer to furnish to the insured, free of charge, within 30 days of the acceptance of a proposal, a copy of the proposal submitted by the Insured.
2. In case of marine insurance cover or other insurance covers where a proposal form is not used, the insurer shall record the information obtained orally or in writing or electronically, and confirm it within a period of 15 days thereof with the prospect and incorporate the information in its cover note or policy. Where the insurer claims that the prospect suppressed any material information or provided misleading or false information on any matter material to the grant of a cover, then the onus of proof rests with the insurer only in respect of any information not so recorded.
3. Any proposal form seeking information for grant of life cover shall prominently state therein the requirements of Section 45 of the Act.
4. While answering the questions in the proposal form for obtaining life insurance cover, the prospect is to be guided by the provisions of Section 45 of the Act.
5. Wherever the benefit of nomination is available to the proposer, in terms of the Act or the conditions of policy, the insurer or the distribution channel shall draw the attention of the proposer to it and encourage the proposer to avail the facility and inform him of the provisions of section 39 of the Act.
6. Insurer shall process the proposals with speed and efficiency and the decision on the proposal thereof, shall be communicated in writing to the proposer within a reasonable period but not exceeding 15 days from the date of receipt of proposals or any requirements called for by the insurer.
7. Where a proposal deposit is refundable to a prospect under any circumstances, the same shall be refunded within 15 days from the date of underwriting decision on the proposal.

9. Matters to be Stated in Life Insurance Policy

1. A life insurance policy shall clearly state:

1. the name and UIN allotted by the Authority for the product governing the policy, its terms and conditions; name, code number, contact details of the person involved in sales process;
2. Whether it is participating in profits or not, whether it is linked or non-linked;
3. The manner of vesting or payment of profits such as cash bonus, deferred bonus, simple or compound reversionary bonus;
4. The benefits payable and the contingencies upon which these are payable and the other terms and conditions of the insurance contract;
5. The name of Nominee (s), age of nominee(s) and their relationship and name of guardian in case of minor nominees.
6. The details of the riders being attached to the main policy;
7. The date of commencement of risk, the date of maturity and the date(s) on which survival benefits, if any, are payable;
8. The premiums payable, periodicity of payment, grace period allowed for payment of the premium, the date of last installment of premium, the implication of discontinuing the payment of an installment(s) of premium and also the provisions of guaranteed surrender value;
9. The details of revival schemes provided for reviving a lapsed policy and requirements to be submitted for revival there under. The insurers shall use term “revival” which is in vogue for renewing a lapsed insurance policy.
10. Name, Address, Date of birth and age of the insured as at the date of commencement of the policy.
11. The policy conditions for

    a. Conversion of the policy into paid up policy,

    b. Surrender

    c. Foreclosure

    d. Non-forfeiture

    e. Discontinuance provisions in case of Linked Policies

12. Contingencies excluded from the scope of the cover, both in respect of the main policy and the riders;
13. The provisions for nomination, assignment, loans on security of the policy and a statement that the rate of interest payable on such loan shall be as prescribed by the insurer at the time of taking the loan;
14. Any special clauses, exclusions or conditions imposed on the policy;
15. The address, email id of the insurer to which all communications in respect of the policy shall be sent;
16. The notes to policyholder highlighting the significance of notifying timely the change of his/her address;
17. Details of insurer’s Internal Grievance Redressal Mechanism along with address and contact details of Insurance Ombudsman within whose territorial jurisdiction the branch or office of the insurer or the residential address or place of residence of the policyholder is located;
18. The list of documents that are normally required to be submitted by a claimant in case of a claim under the policy.

10. Free Look Cancellation of Life Insurance Policies

1. The insurer shall inform clearly by the letter forwarding the policy to the policyholder that he has a free look period of 15 days from the date of receipt of the policy document and period of 30 days in case of electronic policies and policies obtained through distance mode, to review the terms and conditions of the policy and where the policyholder disagrees to any of those terms or conditions, he has the option to return the policy to the insurer for cancellation, stating the reasons for his objection, then he shall be entitled to a refund of the premium paid subject only to a deduction of a proportionate risk premium for the period of cover and the expenses incurred by the insurer on medical examination of the proposer and stamp duty charges.
2. In respect of a linked insurance product, in addition to the deductions under sub-regulation (i) above, the insurer shall also be entitled to repurchase the units at the price of the units on the date of cancellation.
3. A request received by insurer for free look cancellation of the policy shall be processed and premium refunded within 15 days of receipt of the request, as stated at sub clause (i), (ii) above.

11. Matters to be Stated in General Insurance Policy

1. A general insurance policy shall clearly state:

• The name(s) and address(s) of the insured and of any bank(s) or any other person having financial interest in the subject matter of insurance, UIN of the product, name, code number, contact details of the person involved in sales process;
• Full description of the property or interest insured;
• The location or locations of the property or interest insured under the policy and, where appropriate, with respective insured values;
• Period of Insurance;
• Sums insured;
• Perils covered and not covered;
• Any franchise or deductible applicable;
• Premium payable and where the premium is provisional subject to adjustment, the basis of adjustment of premium be stated;
• Policy terms, conditions and warranties, Exclusions, if any.
• Action to be taken by the insured upon occurrence of a contingency likely to give rise to a claim under the policy;
• The obligations of the insured in relation to the subject matter of insurance upon occurrence of an event giving rise to a claim and the rights of the insurer in the circumstances;
• Any special conditions attaching to the policy;
• The grounds for cancellation of the policy which in the case of a retail policy, for the insurer, can be only on the grounds of mis – representation, non-disclosure of material facts, fraud or non-cooperation of the insured

Explanation: Products approved as retail policies under File and Use guidelines notified by the Authority from time to time fall within the purview of retail policy referred above.

• Provided that in the case of Commercial policies alone, other circumstances under which the policy may be cancelled be given, along with the manner of calculation of refund and notice period for cancellation.
• The address of the insurer to which all communications in respect of the insurance contract should be sent;
• The details of the endorsements, add-on covers attaching to the main policy;
• That, on renewal, the benefits provided under the policy and/or terms and conditions of the policy including premium rate may be subject to change; and
• details of insurer’s internal grievance redressal mechanism along with address and contact details of Insurance Ombudsman within whose territorial jurisdiction the branch or office of the insurer or the residential address or place of residence of the policyholder is located.

12. Matters to be Stated in a Health Insurance Policy

1. A health insurance policy shall clearly state:

1. The name of the policyholder and the names of each beneficiary covered, UIN of the product, name, code number, contact details of the person involved in sales process;
2. Date of birth of the insured and corresponding age in completed years;
3. The address of the insured;
4. The period of insurance and the date from which the policyholder has been continuously obtaining health insurance cover in India from any of the insurers without break;
5. The sums Insured;
6. The sub-limits, Proportionate Deductions and the existence of Package rates if any, with cross reference to the concerned policy section;
7. Co-pay limits if any;
8. The pre-existing disease (PED) waiting period, if applicable;
9. Specific waiting periods as applicable;
10. Deductible as applicable – general and specific, if any;
11. Cumulative Bonus, if any;
12. Periodicity of payment of premium installment;
13. Policy period;
14. Policy terms, conditions, exclusions, warranties;
15. Action to be taken on the occurrence of a claim for cashless and reimbursement options separately;
16. Details of TPA, if any engaged, their address, toll free number, website details;
17. Details of Grievance Redressal mechanism of insurer;
18. Free look period facility and portability conditions;
19. Policy migration facility and conditions where applicable;
20. That, on renewal, the policy could be subject to certain changes in terms and conditions including change in premium rate;
21. Provision for cancellation of the policy; and
22. Address and other contact details of Ombudsman within whose territorial jurisdiction the branch or office of the insurer or the residential address or place of residence of the policyholder is located.

13. General Principles Governing Issuance of General and Health Insurance Policies

1. In stipulating the exclusions of the policy, insurers shall endeavour to classify the exclusions, wherever possible as under:

1. Standard exclusions applicable in all policies;
2. Exclusions specific to the policy which cannot be waived;
3. Exclusions specific to the policy, which can be waived on payment of additional premium.

2. The insurers may also endeavor to broadly categorize policy conditions into following, so as to give clarity and understanding of the conditions to the policyholder:

1. Conditions precedent to the contract;
2. Conditions applicable during the contract;
3. Conditions when a claim arises;
4. Conditions for renewal of the contract.

3. Every insurer shall keep the insured informed on the requirements to be fulfilled regarding lodging of a claim arising in terms of the policy and the procedures to be followed by him so as to settle claim early.

14. Claims Procedure in Respect of a Life Insurance Policy

1. A life insurer, upon receiving a death claim, shall process the claim without delay. Any queries or requirement of additional documents, shall be raised all together and not in a piece-meal manner, within a period of 15 days of the receipt of the claim.

2.

1. A death claim under a life insurance policy shall be paid or be rejected or repudiated giving all the relevant reasons, within 30 days from the date of receipt of all relevant papers and required clarifications. However, where the circumstances of a claim warrant an investigation in the opinion of the insurer, it shall initiate the same at the earliest and complete such investigation expeditiously, in any case not later than 90 days from the date of receipt of claim intimation and the claim shall be settled within 30 days thereafter.
2. If there is delay on the part of Insurer beyond the timelines mentioned in sub regulation (i) above, the insurer shall pay interest at a rate, which is 2% above bank rate from the date of receipt of last necessary document
3. Except in the case of claims where an application is made under section 47 of the Act to the court, if a claim is ready for payment but the payment cannot be made due to any reasons of proper identification of the payee, the life insurer shall pay interest on the claim amount at the bank rate from the date on which claim is ready for payment.
4. In respect of maturity, survival benefit claims and annuities, the life insurer shall initiate the claim process by sending intimation sufficiently in advance or send post-dated cheque or give direct credit to the bank account of claimant through any electronic mode approved by RBI, so as to pay the claim on or before the due date. In case of any delay on the part of the Insurer in settling the claim on due date, the life insurer shall pay interest at a rate, which is 2% above bank rate from the due date of payment or date of receipt of last necessary document from the insured/claimant, whichever is later.
5. In respect of free look cancellation, surrender, withdrawal, request for refund of proposal deposit, refund of outstanding proposal deposit if any, shall be processed and paid within 15 days of receipt of request or last necessary document, failing which the insurer shall pay penal interest at a rate, which is 2% above bank rate from the date of request or receipt of last necessary document if any whichever is later, from the insured/claimant.

Explanation: Administration of Health Insurance Policies issued by Life Insurers shall also be governed by Chapter IV of IRDAI (Health Insurance) Regulations, 2016.

6. The interest payments referred above in sub regulations (ii), (iii), (iv), (v) shall be paid by the Life Insurer suo moto without waiting for specific demand from the insured/claimant.

15.Claim Procedure in Respect of a General Insurance Policy

1. An insured or the claimant shall give notice to the insurer of any loss arising under contract of insurance at the earliest or within such extended time as may be allowed by the insurer. On receipt of such a communication, a general insurer shall respond immediately and give clear information to the insured on the procedures that he should follow. In cases where a surveyor has to be appointed for assessing a loss/claim, it shall do so immediately, in any case within 72 hours of the receipt of intimation from the insured. Insurer shall communicate the details of the appointment of surveyor, including the role, duties and responsibilities of the surveyor to the insured by letter, email or any other electronic form immediately after the appointment of the surveyor.
2. The insurer / surveyor shall within 7 days of the claim intimation, inform the insured / claimant of the essential documents and other requirements that the claimant should submit in support of the claim. Where documents are available in public domain or with a public authority, the surveyor/insurer shall obtain them.
3. The surveyor shall start the survey immediately unless there is a contingency that delays immediate survey, in any case within 48 hours of his appointment. Interim report of the physical details of the loss shall be recorded and uploaded/forwarded to the insurer within the shortest time but not later than 15 days from the date of first visit of the surveyor. A copy of the interim report shall be furnished by the insurer to the insured/claimant, if he so desires.
4. Where the insured is unable to furnish all the particulars required by the surveyor or where the surveyor does not receive the full cooperation of the insured, the insurer or the surveyor, as the case may be, shall inform in writing to the insured under information to the insurer about the consequent delay that may result in the assessment of the claim. It shall be the duty equally of the insurer and the surveyor to follow up with the insured for pending information / documents guiding the insured with regard to submissions to be made. The insurer and/or surveyor shall not call for any information/document that is not relevant for the claim.

5. (i) The surveyor shall, subject to sub-regulation 4 above, submit his final report to the insurer within 30 days of his appointment. A copy of the surveyor’s report shall be furnished by the insurer to the insured/claimant, if he so desires. Notwithstanding anything mentioned herein, in case of claims made in respect of commercial and large risks the surveyor shall submit the final report to the insurer within 90 days of his appointment. However, such claims shall be settled by the insurer within 30 days of receipt of final survey report and/or the last relevant and necessary document as the case may be.

   (ii) Where special circumstances exist in respect of a claim either due to its special / complicated nature, or due to difficulties associated with replacement/reinstatement, the surveyor shall, seek an extension from insurer for submission of his report. In such an event, the insurer  shall give the status to the insured/claimant fortnightly wherever warranted. The insurer may make provisional/ on account payment based on the admitted claim liability.

6. If an insurer, on the receipt of a survey report, finds that it is incomplete in any respect, he shall require the surveyor, under intimation to the insured/claimant; to furnish an additional report on certain specific issues as may be required by the insurer. Such a request may be made by the insurer within 15 days of the receipt of the final survey report.

Provided that the facility of calling for an additional report by the insurer shall not be resorted to more than once in the case of a claim.

7. The surveyor, on receipt of this communication, shall furnish an additional report within three weeks from the date of receipt of communication from the insurer.
8. On receipt of the final survey report or the additional survey report, as the case may be, and on receipt of all required information/documents that are relevant and necessary for the claim, an insurer shall, with in a period of 30 days offer a settlement of the claim to the insured/claimant. If the insurer, for any reasons to be recorded in writing and communicated to the insured/claimant, decides to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the final survey report and/or additional information/documents or the additional survey report, as the case may be.
9. In case, the amount admitted is less than the amount claimed, then the insurer shall inform the insured/claimant in writing about the basis of settlement in particular, where the claim is rejected, the insurer shall give the reasons for the same in writing drawing reference to the specific terms and conditions of the policy document.
10. In the event the claim is not settled within 30 days as stipulated above, the insurer shall be liable to pay interest at a rate, which is 2% above the bank rate from the date of receipt of last relevant and necessary document from the insured/claimant by insurer till the date of actual payment.

16. Claim Procedure in Respect of a Health Insurance Policy

1. Every insurer shall adhere to the procedure laid down under Insurance Regulatory and Development Authority of India (Health Insurance) Regulations, 2016 for settlement of health insurance claims.

1. An Insurer shall settle the claim within 30 days from the date of receipt of last necessary document in accordance with the provisions of Regulation 27 of IRDAI (Health Insurance) Regulations, 2016.
2. In the case of delay in the payment of a claim, the insurer shall be liable to pay interest from the date of receipt of last necessary document to the date of payment of claim at a rate 2% above the bank rate.

2. However, where the circumstances of a claim warrant an investigation in the opinion of the insurer, it shall initiate and complete such investigation at the earliest, in any case not later than 30 days from the date of receipt of last necessary document. In such cases, Insurer shall settle the claim within 45 days from the date of receipt of last necessary document.

1. In case of delay beyond stipulated 45 days the Insurer shall be liable to pay interest at a rate 2% above the bank rate from the date of receipt of last necessary document to the date of payment of claim.

17. Grievance Redressal Procedure

1. Every insurer shall have in place proper procedures and effective mechanism to resolve complaints and grievances of policyholders, claimants efficiently and with speed.
2. The Grievance Redressal Procedure as outlined in Annexure – I shall be followed scrupulously by all Insurers.

18. Power to Issue Clarifications

In order to remove any difficulties in respect of the application or interpretation of any of the provisions of these regulations, the Chairperson of the Authority may issue appropriate clarifications or guidelines, as and when required.

19. General Principles

1. Every life insurer shall inform policyholders whose participating policies are in force, at least once in a year, the bonus accrued to their policies or the value of their ULIP policies as the case may be, through a letter/email/any other electronic mode.
2. The requirements of “disclosure of material information” regarding a proposal or policy apply, under these regulations, both to the insurer and the insured. As far as the insured is concerned, wherever required, he shall co-operate with the distribution channels to ensure this.
3. The policyholder shall assist the insurer, if the insurer so requires, in any prosecution, proceeding or in the matter of recovery of claims by the insurer against third parties.
4. The policyholder shall furnish all information that is sought from him by the insurer, either directly or through the distribution channels, which the insurer considers as having a bearing on the risk to enable the insurer to assess properly the risk covered under a proposal for insurance.
5. Insurers shall at all times maintain total confidentiality of policyholder information, unless it becomes necessary to disclose the information to statutory authorities due to operation of any law.
6. Any breach of the obligations cast on an insurer or distribution channels or surveyors in terms of these regulations may enable the Authority to initiate action against each or all of them, jointly or severally, under the Act and/or the Insurance Regulatory and Development Authority Act, 1999.

20. Transitory Provisions

The insurers shall revise all the policy document formats which are not in compliance with provisions laid down at Regulation 9,11,12 of these Regulations and submit a compliance certificate to the Authority signed by CEO on or before 31.12.2017.

Annexure – I to Protection of Policyholders Interest Regulations, 2017

Grievance Redressal Procedure

1. A complainant who wishes to make a complaint against insurer, intermediary, insurance intermediary, distribution channel or other regulated entities involved in insurance sales and services shall approach the respective grievance redressal officer of insurer. In case either grievance redressal officer of insurer does not respond or the resolution provided by him is not to the satisfaction of the complainant he may register a complaint in grievance redressal management system of the Authority. The Authority facilitates re-examination of the complaint so as to provide final resolution by insurer.

2. Every insurer shall have in place an effective grievance redressal procedure to address complaints of policyholders efficiently and with speed and communicate the action taken by the insurer on the complaint to the complainant along with the information in respect of Insurance Ombudsman as may be necessary.

3. Grievance Redressal Officer

1. Every insurer shall have a designated Grievance Redressal Officer (GRO) of a senior level at the corporate office. The GRO at the corporate office will be the contact person for the Authority.
2. Every other office of the insurer shall also have a designated Grievance Officer who shall be head of that office. The details of the GRO/designated Grievance Officer along with the contact details in full shall be published in the website of the insurer and the name and contact details of designated Grievance Officer of respective office and the other Grievance Officers in hierarchy up to GRO at corporate office shall also be displayed in the notice board of respective offices.
3. Every office of the insurer shall also display in prominent place, the name, address and other contact details of the insurance ombudsman within whose jurisdiction the office falls.

4. Grievance Redressal System/Procedure

1. Every insurer shall have a system including IT systems and a procedure for receiving, registering and disposing of grievances in each of its offices. Every insurer shall publicize its grievance redressal procedure and ensure that it is specifically made available on its website.
2. All insurers shall necessarily form part of the Integrated Grievance Management System (IGMS) put in place by the Authority to facilitate the registering/ tracking of complaint on-line by the policyholders. The Insurer’s system, shall involve, mirroring of the Grievance database, of Insurers with IGMS and shall also facilitate analysis of complaints, mitigation, improvement of processes and system, through constant review.
3. Insurers shall also have in place system to receive and deal with all kinds of calls including voice/e-mail, relating to grievances, from prospects and policyholders. The system shall enable and facilitate the required interfacing with the Authority’s system of handling calls/e-mails

5. Closure of Complaint/Grievance

i. A complaint shall be considered as disposed of and closed when

1. The insurer has acceded to the request of the complainant fully (or)
2. Where the complainant has indicated in writing, acceptance of the response of the insurer (or)
3. Where the complainant has not responded to the insurer within 8 weeks of the insurer’s written response.

ii. Where the grievance is not resolved in favor of the policyholder or partially resolved in favor of the policyholder, the insurer shall inform the complainant of the option to take up the matter before insurance ombudsman giving details of the name and address of the Ombudsman of competent jurisdiction.

AML/KYC Norms

(A) Anti-Money Laundering (AML) Compliance for Insurance Companies

The Prevention of Money Laundering Act, 2002 brought into force with effect from 1st July2005 (amended from time to time). The act is applicable to all the financial institutions which include insurance companies: Life and Non-Life, Public Sector and private Sector. Insurance companies that issue or underwrite covered products that may pose a higher risk of money laundering must comply with Bank Secrecy Act/anti-money laundering (BSA/AML) program requirements. A covered product includes:

• An annuity contract other than a group annuity contract
• A permanent life insurance policy other than a group life insurance policy
• Any other insurance product with cash value or investment features

Insurance regulations only apply to insurance companies, excluding agents and brokers from the requirements. However, insurance companies are held responsible for compliance with their program, which includes the activities of any agents and brokers. Insurance companies should therefore integrate their agents and brokers into their AML program.

Features of a BSA/AML Program

Insurance companies must develop a written, risk-based BSA/AML program addressing the covered insurance products. At a minimum, the program must consist of the following features,

• A designated compliance officer responsible for effectively implementing the program
• Ongoing training of appropriate persons, including insurance agents and brokers
• Policies, procedures and internal controls tailored to the AML risks of the institution
• Independent testing to monitor ongoing compliance, including testing for compliance of insurance agents and brokers

Suspicious Activity Reporting (SAR)

Along with implementing an adequate BSA/AML program, insurance companies are subject to Suspicious Activity Reporting (SAR) requirements. Companies are required to submit a SAR to the Department of Treasury’s Financial Crimes Enforcement Network. Insurance companies must obtain relevant customer information from agents, brokers and any other sources to report such transactions. The following are the list of suspicious activity that must be reported

• Customer insisting on anonymity, reluctance to provide identifying information, or providing minimal, seemingly fictitious information
• Cash based suspicious transactions for payment / multiple DDs each denominated for less than Rs. 50,000/-
• Overpayment of premiums with a request for a refund of the amount overpaid
• Request for a purchase of policy in amount considered beyond his apparent need;
• Unusual terminating of policies and refunds;
• Inflated or totally fraudulent claims e.g. by arson or other means causing a fraudulent claim made to recover part of the invested illegitimate funds.
• Policy from a place where he does not reside or is employed.
• Borrowing the maximum amount against a policy soon after buying it
• Frequent free look surrenders by customers
• Frequent request for change in addresses
• Assignments to unrelated parties without valid consideration.

Special attention is paid to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose and transactions. Background including all documents /office records /memorandums pertaining to such transactions, as far as possible, be examined by the Principal Compliance officer for recording his/her findings. Operating offices through Nodal Officer of Regional Office should report the suspicious transactions to FIU-IND within 7 working days of identification in the prescribed formats under advice to Principal Compliance Officer at Head Office. Directors, officers and employees (permanent and temporary) shall be prohibited from disclosing the fact that a SAR or related information of a policyholder/prospect is being reported or provided to the FIU-IND.

Areas of Concern to Review

Insurance companies face the challenge of developing an AML program that incorporates insurance agents and brokers, and effectively covers the risks proportionate to its specific products offered. Any areas of concern can be addressed by conducting the following reviews

Policies and Procedures: Evaluate policies and procedures to determine adequacy given the institutions’ risks and current industry regulatory requirements

AML Risk Assessments:Assess the inherent and residual AML risks related to products, services, customers and geographic exposure

Model Validations and AML Automated System Data Validation: Determine if the appropriate AML models and systems are effectively implemented

Independent Audits: Conduct independent reviews and detailed AML transactional testing to ensure the program’s ongoing compliance

Training: Review staff training programs to ensure adequate coverage of relevant responsibilities under the program

Risk-Based Review: Determine and assess the total effectiveness of AML-related processes and internal controls in relation to the specific products, services, customers and geographies of the company, including staffing levels and expertise, customer due diligence processes, effectiveness of the monitoring processes in place to identify and report suspicious activities, and the integration of insurance agents and brokers into the program

Independent/Outsourced Due Diligence and Sanctions Screening: Identify beneficial ownership structures, negative news and sanctions screening for customers, vendors and transaction parties

Products Exempted from AML Purview

The following categories of products/business lines may be exempted from the purview of AML requirements,

• Standalone medical/health insurance products.
• Reinsurance and retrocession contracts
• Group insurance businesses issued to a company, financial institution, or association.

(B) Know Your Customer (KYC) Norms

Insurance regulator IRDAI has issued Anti Money Laundering (AML) guidelines that include strict adherence of KYC norms by insurance companies. The AML makes it mandatory for insurers to comply with 'Know Your Customer' (KYC) norms by obtaining documents to clearly establish the customer identity in case of all new insurance contracts. Where premium is Rs 1 lakh per annum in case of individual policies, a detailed due diligence should be exercised to establish KYC

Three Criteria

1. Identification of name
2. Identification of residence
3. Identification of source of funds / net worth.

Exercising KYC Norms

A list of documents to be verified at the time of accepting the risk / payout or refund more than INR one lac for compliance with KYC requirement for individuals and others is prescribed as per the guidelines. Further, the insurer would not enter into a contract with a customer whose identity matches with any person with known criminal background or with banned entities and those reported to have links with terrorists or terrorist organizations

Documents that may be obtained from customers

FEATURES	DOCUMENTS
Insurance contracts with individuals whether using their legal name and any other names uses	Passport PAN Card Voter’s Identity Card Driving License Letter from a recognized Public Authority (as defined under Section 2 (h) of the Right to Information Act, 2005) or Public Servant (as defined in Section 2(c) of the ‘The Prevention of Corruption Act, 1988’) verifying the identity and residence of the customer Personal identification and certification of the employees of the insurer for identity of the prospective policyholder.
Residence Proof (individuals)	Telephone bill pertaining to any kind of telephone connection like, mobile, landline, wireless, etc. provided it is not older than six months from the date of insurance contract Bank account statement wherein his permanent /present residence address is available, provided it is not older than six months as on the date of acceptance Letter from any recognized public authority Electricity bill Ration card Valid lease agreement along with rent receipt, which is not more than three months old as a residence proof. Employer’s certificate as a proof of residence (Certificates of employers who have in place systematic procedures for recruitment along with maintenance of mandatory records of its employees are generally reliable)
Proof of both identity and residence (individuals)	Written confirmation from the banks where the prospect is a customer, regarding identification and proof of residence.
Insurance contracts with companies Name of the company Principal place of business Mailing address of the company Telephone/Fax Number	Certificate of incorporation and Memorandum and Articles of Association Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account Power of Attorney granted to its managers, officers or employees to transact business on its behalf Copy of PAN allotment letter
Insurance contracts with partnership firms Legal name Address Names of all partners and their addresses Telephone numbers of the firm and partners	Registration certificate, if registered Partnership deed Power of Attorney granted to a partner oran employee of the firm to transact business on its behalf Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses
Insurance contracts with trusts and foundations Names of trustees, settlers beneficiaries and signatories Names and addresses of the founder, the managers/directors and the beneficiaries Telephone/fax numbers	Certificate of registration, if registered Power of Attorney granted to transact business on its behalf Any officially valid document to identify the trustees, settlers, beneficiaries and those holding Power of Attorney, founders/managers/directors and their addresses Resolution of the managing body of the foundation/association

Mandatory KYC Verification

KYC verification is mandatory for,

• Premium payment of INR one lakh per annum for individual policies.
• Insurance premium paid by other than the insured.
• At the claim pay out stage or refund more than INR one lakh.
• Any change in the customers’ recorded profile that comes to the notice of the insurer and which is inconsistent with the normal and expected activity of the customer should attract the attention of the insurer for further ongoing KYC processes and action as considered necessary.
• For the high risk profiles, such as for customers who are non-residents, high net worth individuals, trusts, charities, NGO’s and organizations receiving donations, companies having close family shareholding or beneficial ownership, firms with sleeping partners, politically exposed persons (PEPs).
• Proposals for contracts with high risk customers are to be concluded after approval of senior management officials. It is however, emphasized that proposals of Politically Exposed Persons (PEPs) in particular requires approval of senior management, not below Head (underwriting) /Chief Risk Officer level.

Point of Sale (POS) Persons

To increase insurance penetration in the country, the industry needs more distributors to travel the last mile. To achieve that goal, what’s needed is a simple certification process for these distributors. So, to get such distributors on board quickly, the IRDAI, in 2015, allowed for a new type of distributor, called the point of sale (POS) person. Given that these individuals have a lower qualification and training threshold, compared to other insurance distributors such as agents, brokers and corporate agents, IRDAI has allowed these individuals to sell only basic insurance products, which do not require a lot of underwriting.

Mandate of a POS Person

As per the regulator, products such as motor insurance, travel insurance and personal accident insurance require very little underwriting as they are based on information provided by the prospect. Also, such insurance policies are automatically generated by the system. Therefore, the intervention required for such products is minimal and the training and exams for such persons could be of a lesser degree than those for a full-fledged distributor. In fact, in November 2017, IRDAI had allowed the life insurance industry to use point of sale persons to sell life insurance products. For this, it identified products that are simple to understand, and in which the benefits are stated upfront and they are fixed and predefined. Accordingly, IRDAI identified pure-term insurance plans with and without return of premium, non-linked (non-participating) endowment plans that state the investment benefits upfront and immediate annuity as products that can be sold by the POS persons. And this year, in order to ensure faster certification of POS persons, the regulator has relaxed the certification programme by allowing the insurers or intermediaries hiring them to train and examine these individuals in-house. 

A New Training Programme

POS persons can be engaged either directly by insurers or by intermediaries such as corporate agents and insurance brokers. The new POS guidelines allow intermediary players in the insurance sector such as brokers giving comparative insurance rates to appoint agents to work on their behalf. Under previous guidelines, only insurers could appoint dedicated agents for their business and one agent could sell policies only for one company. On the other hand, POS certified agents of brokers are allowed to solicit and sell retail insurance products for various insurance companies on the condition that they should already be pre-underwritten. This for example includes motor insurance, simple health insurance and travel insurance. As per the latest guidelines, brokers with online comparison portals can now have agents working for them. What this primarily means is that apart from their primary platform that is – online sales, these intermediaries can now also have offline sales agents to push sales in under penetrated markets. All the benefits of the online platform such as lower rates, hassle free policy issuance, on the spot policy issuance etc can now be made available through a robust combination of physical agents and digital technology. This will lead to easier availability of auto insurance, say for example, in a petrol pump or a neighborhood store. Easier availability and sufficient push from insurers/intermediaries will also improve insurance renewal and policy issuance, especially in the two-wheeler segment. In the latest move to promote further insurance penetration, IRDAI has also allowed insurance intermediaries such as brokers to sponsor the training and certification of POS agents. Allowing intermediaries to appoint POS persons to sell retail insurance will ensure greater adherence to insurance requirements as well as improve insurance density by making policy purchase extremely convenient and easily available.

The minimum educational qualification of such persons is Class 10 and they should be 18 years of age at least. Earlier, as per the rules, IRDAI had appointed the National Institute of Electronics and Information Technology (NIELIT) to conduct the examination of certificate for point of sale persons. But in a notification dated 7 February, IRDAI removed this condition for the life insurance industry. Training and certification from NIELIT is no longer mandatory. As per an insurance official, this was done after representations were made to the regulator that this could hamper quick on-boarding of point of sales persons. Accordingly, IRDAI has allowed in-house training by the insurer or intermediary engaging the POS persons. They will have to conduct an in-house training of 15 hours and an examination thereafter. The insurer or the intermediary will then issue a certificate and maintain the records for at least 5 years. IRDAI has, however, prescribed a model syllabus for training purposes. As per the insurers we spoke to, the syllabus has been drafted by the Life Insurance Council and IRDAI, and will be used by all the insurers.

Products Solicited and Marketed by POS Person

The POS person can sell only the following pre-underwritten product.

• Motor comprehensive insurance package policy for two-wheeler, private car and commercial vehicles.
• Third party liability (act only) policy for two-wheeler, private car and commercial vehicles.
• Personal accident policy
• Travel insurance policy
• Home insurance policy
• Any other policy specifically approved by the authority

The POS person can sell Life Insurance Products filed with and approved by the authority as POS-Life Products, which may be

• Pure Term Insurance product with or without return of premium
• Non-linked (Non-Participating) Endowment product   Immediate Annuity Product
• Any other product / product category, if permitted by the Authority.

Every policy sold through the POS person shall be separately identified and pre-fixed by the name POS – (name of product). The insurance company shall file the product with the Authority under the file use guidelines for information.

IRDAI has received requests from many insurers to allow indemnity based health insurance products to be sold through POS. On examination of the request made, the authority under the powers vested with it under clause V(1)(f), of the said guidelines, has decided to allow individual indemnity based health insurance products to be solicited through PoS channel with the following conditions,

• The indemnity based health insurance products may be offered to only individual policyholders excluding groups and government scheme.
• INR 5 lacs per life/individual will be the maximum sum insured
• Number of such products that can be filed as POS product is capped at 3 (three) per insurance company
• Since health indemnity products follow a different process than health benefit products, which were hitherto included in the POS’P channel, the POS’P may be educated about the process involved in preferring claims, particularly the cashless claims who in turn shall educate the holder of indemnity based health insurance product.

Tagging of Proposal Form and Insurance Policy to POS Person

• Every proposal form, in paper or in paperless form, insurance policy and other related documents shall carry provision to record the Aadhaar card number or the PAN card number in order to tag the policy to the POS person who is selling the said policy.
• The insurance company shall be responsible to record the Aadhaar card number or the PAN card number of the POS person in the proposal form and insurance policy. The insurancecompany shall be responsible for the conduct of the POS person representing him and any misconduct on part of the POS person shall make it liable to a penalty as per provisions of Section 102 of the Act.
• For sales effected through the insurance intermediary, the insurance intermediary shall record the Aadhaar card number or the PAN card number of the POS person in the proposal form and require insurance company to do the same in the insurance policy. The insurance intermediary shall be responsible for the conduct of the POS person engaged by it and any misconduct on part of the POS person shall make it liable to a penalty as per provisions of Section 102 of the Act.
• One of the factors that shall be considered while renewing the certificate of registration of the insurance intermediary, shall be the conduct of the POS person on the rolls of insurance intermediary.

Dos and Don’ts for POS Person

1. Every POS person should identify himself and the Insurer/Intermediary of whom he is POS.
2. Show the POS certificate to the prospect on demand.
3. Disseminate the required information in respect of insurance products offered for sale by the insurer and take into account the needs of the prospect while recommending a specific insurance company/plan.
4. Advice the availability of scales of commission/brokerage in respect of the insurance product offered for sale on IRDA website, if asked by the prospect.
5. Indicate the premium to be charged by the insurer for the insurance product offered for sale.
6. Explain to the prospect the nature of information required in the proposal form by the Insurer, and also the importance of disclosure of material information in the purchase of an insurance contract.
7. Bring to the notice of the insurer every fact about the prospect relevant to the insurance underwriting, including any adverse habits and material fact that may adversely affect the UW decision.
8. Obtain the requisite documents at the time of filling the proposal form with the insurer, and other documents subsequently asked for by the insurer for completion of the proposal.
9. Advise every prospect to effect nomination under the policy.
10. Inform promptly the prospect about the acceptance or rejection of the proposal by the insurer.
11. Render required to service to the clients such as assignment, change of address etc.
12. Support for claim settlement by complying with the requirements for claim settlement.

Don’ts for POS Person

1. Solicit or procure insurance business without being appointed to act as such by the insurer/intermediary.
2. Induce the prospect to omit any material information in the proposal form.
3. Induce the prospect to submit wrong information in the proposal form or documents submitted to the insurer for acceptance of the proposal
4. Behave in a discourteous manner with the prospect
5. Demand or receive a share of proceeds from the beneficiary under an insurance contract.

Steps to become a POS Person

A POS agent is someone who will be appointed by the insurer to sell insurance policies online anywhere, anytime. This will include selling of basic insurance products like life insurance, health insurance, motor insurance, travel insurance and so on. Anyone who wants to earn an extra income or make a career in the insurance industry can become a POS agent. If you think you have a neck for selling and can make people aware of the importance of insurance then you are the one. You may be a housewife, a student, a working professional, a retired person, a business man, you can be anyone.

• Registration: Fill in the simple details for registering yourself by clicking on the link. Takes only about 5 mins.
• Submit Documents: You have to submit some mandatory documents to proceed ahead (refer below for the documents)
• Prepare for the Test: This is a mandatory 15-hour training which you will get after opening your account.
• Appear for the Test: After training, you will be eligible to apply for a test for 90 minutes consisting of simple objective questions. You can take unlimited attempts to clear this exam. 18 out of 50 marks are required to pass i.e. you only need 36 percent to clear the examination.
• Get POS Certificate:After successfully completing the test you will get a POS certificate provided you are not associated with other insurance company.
• Start Booking Policy: Once you are certified POS agent you will be able to book policies and start your own business.

Eligibility

• 18 years and above
• 10th pass

Documents to be Submitted

• Aadhar Card number with soft copy to be uploaded
• PAN Card number with soft copy to be uploaded
• Education Certificate (10th or 12th mark sheet)
• Cancelled cheque copy or front page of passbook
• 1 Passport size photo

No, you cannot. As per the guidelines of IRDAI, a person can become a POS agent for only one insurance company or insurance aggregator. If you are already registered with a company as a POS agent then you will have to give up that license to become a Policy X POS agent.

Certificate

You will receive your certificate after one month of completion of your exam but you can start selling the policy once you have cleared the exam.

Module -6

SYNOPSIS

Introduction to Insurance

This material explains the meaning of risk, different types of risks and the risk management techniques that can be used to reduce losses.

Peril:An event or incident that may cause a loss is caused a peril. Insurance cannot avoid or stop an event from happening. It can only help compensate the losses. Insurance can compensate only financial losses. Examples of Peril, Fire, Flood, Earthquakes, Landslide, lightening.

Classification of Risks

• Catastrophic – Single event leads to higher than usual number/amount of claims on the insurer
• Financial risks- Loss from risk can be quantified in monetary terms
• Non financial risks- loss from risk cannot be measured in monetary terms
• Dynamic risk- Risks resulting from changes in the economy
• Static risks- Loss from risk due to perils of nature and dishonesty of other individuals
• Pure risks- These risks are not under the control of the person
• Speculative risk- In these risks there is a chance of gain or loss
• Fundamental risks- These risks affect a lot of people together
• Particular risks- These risks affect only specific persons

Hazard: Hazard is a condition that increases the chance of risk.

1. Physical Hazard refers to characteristics and qualities of subject matter to be insured.
2. Moral Hazard refers to the character of the person approaching for insurance

Risk Management

1. Prevent/avoid the risk
2. Reduce the risk
3. Retain the risk
4. Transfer the risk

Risk management formally evolved a function of business enterprise but applies to individual risk. An individual can transfer risk on his life to an insurance company by purchasing life insurance policy.

Concept of Insurance

An insurance company (referred to usually as the insurer) promises to pay to the owner (insured) or beneficiary of the asset, a certain sum of money (sum assured),if a loss occurs to ensure continuance of the financial benefits. The insured pays a certain amount (consideration) to the insurance company for bearing the risk, which is known as a premium. The business of insurance is related to the protection of the economic value of the assets. An asset is valuable for the owners because they get benefit s from it in the form of a comfort and convenience.

Evolution of Insurance

Insurance evolved in India in 18th Century. In 1818, the Oriental Life Insurance company was the first life Insurance company to start insurance operations in Calcutta.

How Insurance Works and Concept of Pooling

1. People exposed to similar risk are brought together
2. Insurance company acts as an intermediary
3. Mutual consent among group members to share the loss and compensate the person who suffered the loss
4. Compensation is expected to put the person in the same place, financially, as before suffering the loss.

Insurance Contract

Insurance is a contract between two parties the insurance company and the policyholder. The insurance policy would specify the following

1. The risk which is the subject matter of the contract
2. The event upon which the liability of the insurer would arise
3. The nature of liability of the insurer , the amount and the manner of payment
4. The amount and the manner of payment of premium by the policyholder
5. Other obligations if any of the policyholder
6. Consequences of any obligations by the policyholder

Principle of Insurable interest

A person is said to have an insurable interest when they stand to gain or benefit from the continued existence (safety) and well being of the person or property insured and would suffer a financial loss if there is damage to the person or property.

Principle of Indemnity

Insurance is meant to indemnify/compensate the losses. Accordingly to the principle of indemnity, insurance should place the insured in the same financial position after the loss, as they enjoyed before it, not better. The principle of indemnity makes sure that the insurance company compensates the insured only to the extent of the loss so that the insured does not profit from insurance.

Principle of Subrogation

The substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he or she who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies or securities. Subrogation ensues having paid the claim, the insurance company gets the right to make good the damages from the party who caused the loss. Having been indemnified by the insurer, the insured does not retain the right to get compensated by the party who caused the loss and thus makes profit from insurance. Subrogation ensures insurance company is entitled to recover money from the third party but only to the extent it has paid as compensation to the insured person.

Principle of Contribution

The principle of contribution ensures that if there is more than one insurance policy drawn up on the same subject matter, the insured cannot recover their loss from all the insurers , in which case they will recover more than their loss, or even make a profit.

Contribution

• The insured does not profit by making separate claims rom multiple companies for the same event.
• Each insurer pays only their proportionate share of the loss.
• The principles of subrogation and contribution apply only to contracts of indemnity. So the two principles do not apply for Life Insurance.

Principle of Utmost Good faith

As per the principle of utmost good faith, the proposer is obliged to declare all relevant facts that are material to the assessment of the risk, at the time of making the proposal. This information is important for the insurer in deciding whether to accept the proposal and the appropriate premium to be charged.

Material Facts

A fact is said to be material, if it affects the decision of the underwriter to accept or reject the risk or to determine rates, terms, and conditions if the risk is accepted. That is, if that “fact” is relevant to the assessment of the risk and determination of the premium.

Principle of Utmost good faith will be breached, by giving wrong information and by not disclosing material facts. The Insurance Company should declare all the relevant information and benefits of the product to the customer.

Proximate Cause

Proximate cause is defined as the active and efficient cause that sets in motion a chain of events which brings about a result, without the intervention of any force started and working actively from a new and independent source. . The dominant, effective or operative cause of an event is known as the proximate cause.

Term that Apply to Life and Non-Life insurance

Insurance: A contractual process wherein a person protects his physical assets (such as a car or home), as well as life from certain events or perils by transferring the risk to an insurer.

Insurer: A company that provides protection by entering into a contract with the person seeking protection for his assets.

Insured: The person who applies for insurance protection is called the Insured.

Proposal: The insurance process starts with an application in writing called proposal, made by the person, who wants to take insurance and includes the details of what they want to insure and the type of cover they require.

Underwriter: The person representing the insurance company whose job is to assess the proposal for insurance.

Premium:It is the amount of money or consideration that has to be paid in exchange for the insurance.

Various Constituents of Insurance Market

Companies

1. Life Insurance Companies
2. Non-Life Insurance Companies
3. Standalone Health Insurance Companies
4. Reinsurance

Intermediaries

1. Individual Agents
2. Corporate Agents
3. Brokers
4. Banks
5. Point of Sales Person (POS)
6. Specialists
7. Surveyors
8. Medical Examiners
9. TPAs

Regulatory Bodies

1. IRDA
2. Insurance Council
3. Ombudsman

Role of Intermediaries

• Agents need to obtain license from IRDA which will be valid for 3 years. After which that needs to be renewed
• Should meet eligibility criteria. Individuals as well as corporate bodies like banks, firms, companies and so on are allowed to become agents.
• Remuneration is by way of commission which is regulated by IRDA.
• It is the duty of the agent to keep the interests of the customer before everything else, analyse the customers’ requirements and accordingly recommend only those products that fulfils customer requirement.

Brokers

• An insurance broker is an individual, a company, a society or a firm wholly engaged in sourcing insurance business for various companies.
• Brokers are independent professionals and need to obtain license from IRDA.
• License may authorize broker to place direct business with any insurer/insurers or arrange reinsurance or both
• Should meet minimum capital requirement ranging from 50 lakhs for direct broker to 250 lakhs for reinsurance broker or composite broker.
• Remuneration is by way of brokerage by the insurers or reinsurers and is regulated by IRDA.

Regulators

(a) IRDA

• Constituted as Regulator of insurance sector in 1999 by an act of Parliament.
• IRDA was formed to regulate promote and ensure orderly growth of the insurance industry. IRDA administers insurance act.
• IRDA has the authority to issue licenses to the insurers and intermediaries.
• IRDA has the authority to issue regulations, relevant and proper functioning of the industry. It can issue guidelines and directions to insurance companies.

(b) Insurance Council

The life insurance council and general insurance council are constituted under insurance act. All insurers are members of the councils. Both these councils are envisaged as self-regulatory mechanisms for the insurance industry.

(c) Insurance Ombudsman

• Created by the Govt of India on 11th Nov 1998. The function of the ombudsman is to resolve complaints in respect of disputes between policyholders and insurers in a cost effective and impartial manner.
• Govt has appointed 12 ombudsmen across the country and allotted them different geographical areas as their areas of jurisdiction.
• A person can lodge a complaint with ombudsman if the complaint has been rejected or not addressed satisfactorily or not replied to by the insurer.

Nature of complaint to ombudsman

1. Any partial or total repudiation of claims by insurance customers.
2. Any dispute with regard to premium paid or payable in terms of the policy.
3. Delay in settlement of claim
4. Any dispute on the legal construction of the policy wordings in case such dispute relates to claims.
5. Non issuance of any insurance document to customers after receipt of premium.

Types of Life Insurance Plans

1. Term insurance plan provides only death cover.
2. Pure Endowment plan which provides only survival benefit
3. Endowment assurance plan provides sum assured on survival of a specified period or on death, if it happens earlier
4. Whole life plan is a term insurance plan with an unspecified period.
5. Money back plan is a combination of term insurance and multiple pure endowment plans.
6. ULIP plans is a combination of Insurance protection and Investment
7. Annuity Plans.

Term Insurance in Detail

Under pure term insurance plan, if death of the life assured does not take place within the selected term, the assurance comes to an end on completion of the term. Premium already collected are not refunded. But a variation of this plan can be devised by refunding all the premium collected, if life assured survives the term. Now term insurance comes with riders like accident benefit, disability benefit, waiver of premium, critical illness etc. Term insurance plans are useful to give shield for liability (long term loans, keyman insurance, mortgage liability etc.

Personal Accident Cover

Personal accident policy provides that, if the insured shall sustain any bodily injury resulting solely and directly from accident caused by external violent and visible means, then the company shall pay to the insured or his legal personal representatives, a the case may be, the sum, or sums set forth, in the policy. Following are some of the disablements covered in this plan.

1. Permanent total Disablement
2. Permanent Partial disablement
3. Temporary total disablement.

Exclusions

No compensation is payable in respect of death, injury or disablement of the insured.

1. From intentional self injury, suicide or attempted suicide
2. Whilst under the influence of drugs, liquor
3. While engaging in aviation or mountaineering
4. Directly or indirectly caused by insanity or venereal diseases
5. Arising from insured committing a criminal act
6. From service in the armed forces
7. Resulting directly or indirectly from child birth or pregnancy

Health Insurance

Hospitalisation indemnity plans offered for Individuals, as a family floater and also as a group. Typically theses plans reimburse the following expenses.

1. Hospital costs. Accommodation costs, nursing care, operation theatre expenses, specialist s consultation and physiotherapy received as in patient.
2. Specialists’ fees. Surgeon’s and anaesthetist’s fee for in patient and day care procedures
3. Physicians fees for in-patient treatment
4. Cost of medicines, diagnostic test etc.

Pre-existing conditions ( conditions the insured had before taking out the insurance)are usually excluded from coverage for a defined period (in 2008, the General Insurance Council decided to cap the waiting period for pr existing conditions to 4 yeas). These products generally exclude the following.

1. Drug abuse
2. Self inflicted injuries
3. Out-patient treatment
4. HIV/AIDS of sexually transmitted diseases
5. Cosmetic surgery (unlinked to burns or cancer)
6. Preventive treatment/ immunisations etc.
7. Maternity and termination of pregnancy

Usually the condition for eligibility for this benefit payment is that the insured has to be hospitalised for atleast 24 hours This is however, waived for certain defined day care surgical procedures where due to technological advancement, the patient can undergo surgery and be discharged on the same day. In these policies, pre hospitalisation and post hospitalisation also covered with capping on no of days. For example pre hospitalisation expenses for 30 days and post hospitalisation expenses for 60 days covered and policy conditions spell these benefits with clarity. Recently these products have seen the introduction of many cost sharing provisions like,

1. Sub limits on specific surgeries, ailments, components of the hospital costs.
2. Co payments (also called co insurance) where a defined share of the costs are borne by the insured and
3. Deductible ( also called excess) where the initial defined amount , of hospital costs are borne by the policyholder after which the coverage starts.

These help to reduce the moral hazard , and contribute to lower the overall costs for the insurer, which also means that the reduced insurers liability can fow to the customer in the form of reduced premium.

Critical Illness Policy

Thanks to the medical advances, more and more people are surviving major diseases in cancer, strokes, heart attacks etc. Medical care has increased life expectancy resulting in people surviving critical illnesses that would have previously resulted in death. This however, continues to require high amount of medical costs, reduced ability to work and a major change in lifestyle. This critical illness policy eases the financial pressure by providing a lumpsum payment on diagnosis of a covered condition.

Overseas Mediclaim

• This policy covers for payment of medical expenses in respect of illness suffered or accident sustained by Indian residents during their overseas trips for specific purpose.
• Insured person is that person named in the overseas policy schedule to whom the appropriate premium has been paid.
• The insurance is valid from the first day of insurance or date and time of departure from India whichever is later and expires on the last day of the no o days specified in the policy. Schedule or on return to India.
• Name and address of an overseas independent entity which provides emergency assistance and claims administration services abroad are specified in the policy.

Benefits in this Policy

1. Medical expenses and repatriation.
2. Expenses for physician services, hospital and medical services and local emergency medical transportation
3. Dental care resulting out of an accident covered
4. Expenses for physician ordered emergency medical evacuation
5. Expenses for medical evacuation , including transportation and medical care en route to a Hospital
6. Expenses to carry the mortal remains to India, if the insured dies in the overseas destination where he travelled
7. Personal accident
8. Loss of checked baggage
9. Delay of checked baggage
10. Loss of Passport.

Motor Insurance

For purpose of insurance, motor vehicles are classified into three broad categories.

1. Private Cars
2. Motor cycles and motor scooters
3. Commercial vehicles further classified into goods carrying vehicles, passenger carrying vehicles, miscellaneous vehicles.

Motor Vehicles Act, 1988

The insurance of motor vehicles against damage is not made compulsory, but the insurance of third party liability arising out of the motor vehicles in public places is made compulsory. No motor vehicle in a public place without such insurance. The liabilities which require compulsory insurance are as follows.

1. Death or bodily injury of any person including owner of the goods or his authorised representative carried in the carriage.
2. Damage to any property of a third party.
3. Death or bodily injury of any passenger of a public service vehicle.
4. Liability arising under workmen’s compensation Act 1923 in respect of death or bodily injury of paid driver of the vehicle, conductor or ticket examiner (Public service vehicle0 workers carried in a goods vehicle.

Policy Coverage

Liability only Policy

Cover is provided in the policy as follows.

Subject to the limit of liability as laid down in the schedule hereto, the company will indemnify the insured in the event of accident caused by or arising out of the use of the Motor vehicle anywhere in India against all sums including claimant’s costs and expenses which the insured shall become legally liable to pay in respect of

1. Death or bodily injury to any person so far as it is necessary to meet the requirements of the Motor vehicles Act.
2. Damage to property other than property belonging to the insured or held in trust or in the custody or control of the insured upto the limit specified in the schedule.

The company will also pay all costs and expenses incurred with its written consent.

Personal Accident Cover for Owner-Driver

The company undertakes to pay specified compensation for bodily injury/death sustained by the owner-driver of the vehicle in direct connection with the vehicle insured on whilst mounting into/dismounting from a travelling in the insured vehicle as a co driver, caused by violent, accidental, external and vehicle means. This cover is subject to

1. The owner driver is the registered owner of the vehicle insured herein
2. The owner –driver is the insured named in the policy
3. The owner driver holds an effective driving license
4. Capital sum insured Rs 1 lakh ( two wheelers). Capital sum insured Rs 2 lakhs (pvt cars and commercial vehicles)

Conditions

These relate to notice of loss, cancellation of policy, arbitration etc. A new concept, which reads as follows, must be noted. In the event of death of the insured, the policy will not immediately lapse but will remain valid for a period of three months from the date of death of insured or until the expiry of this policy (whichever is earlier). During the said period, legal heir(s) of the insured to whom the custody and use of the Motor vehicle passes may apply to have this Policy transferred to the name(s) of the heirs(s) or to obtain a new insurance policy for the Motor vehicle.

Private Car Package Policy

This policy provides the so called “Comprehensive cover” and the structure of the policy form is the same for all vehicles.

• Section I deals with the Own damage.
• Section II deals with the Liability to third parties
• Section III deals with the Personal Accident cover for owner driver.

For Private cars premium rating is based on the following factors

1. Insured’s declared value of the vehicle
2. Cubic capacity
3. Geographical zones
4. Age of the vehicle.

Point of Sales (POS) Person

POS is approved by IRDA to improve the reach and penetration of insurance. These are special categories of individual intermediaries, who are involved in solicitation and marketing of routine insurance products which require minimal underwriting. For example, motor, travel, personal accident etc policies are largely pre-under written products , wherein policies are usually system generated, based on details furnished by the proposer, with minimal technical intervention required.

POS can be appointed by an Insurance Company or a Corporate Insurance Intermediary. Each policy sold through these intermediaries has to be separately identified and prefixed by POS- Product name. The POS can sell comprehensive motor insurance, third party liability, personal accident cover, travel insurance policy, home insurance policy and any other policy specifically approved by IRDA.

Dos and Don’ts for POS Person

Dos

• Every POS person should identify himself and the Insurer/Intermediary of whom he is POS.
• Show the POS certificate to the prospect on demand.
• Disseminate the required information in respect of insurance products offered for sale by the insurer and take into account the needs of the prospect while recommending a specific insurance company/plan.
• Advice the availability of scales of commission/brokerage in respect of the insurance product offered for sale on IRDA website, if asked by the prospect.
• Indicate the premium to be charged by the insurer for the insurance product offered for sale.
• Explain to the prospect the nature of information required in the proposal form by the Insurer, and also the importance of disclosure of material information in the purchase of an insurance contract.
• Bring to the notice of the insurer every fact about the prospect relevant to the insurance underwriting, including any adverse habits and material fact that may adversely affect the UW decision.
• Obtain the requisite documents at the time of filling the proposal form with the insurer, and other documents subsequently asked for by the insurer for completion of the proposal.
• Advise every prospect to effect nomination under the policy.
• Inform promptly the prospect about the acceptance or rejection of the proposal by the insurer.
• Render required to service to the clients such as assignment, change of address etc.
• Support for claim settlement by complying with the requirements for claim settlement.

Don’ts for POS Person

1. Solicit or procure insurance business without being appointed to act as such by the insurer/intermediary.
2. Induce the prospect to omit any material information in the proposal form.
3. Induce the prospect to submit wrong information in the proposal form or documents submitted to the insurer for acceptance of the proposal
4. Behave in a discourteous manner with the prospect
5. Demand or receive a share of proceeds from the beneficiary under an insurance contract.

Module-1

EXERCISE –MCQs

1. 1. Which is not a type of fire insurance policy?
1. a. Floating policy.
2. b. Credit insurance policy
3. c. Consequential loss policy
4. d. Comprehensive policy
2. 2. What is the purpose and need of insurance?
1. a. It provides an ideal risk mitigation mechanism against events that can potentially cause financial distress to individuals and businesses.
2. b. An insured person pays the amount of premium in time as stated in the agreement which encourages for developing a saving habit of persons.
3. c. An insured can get the facility of a loan from an insurance company or can take loan from other financial institutions through the security of insurance policy.
4. d. All of the above
3. 3. Insurance hazard is defined as
1. a. The likelihood that an insured event will occur, requiring the insurer to pay a claim.
2. b. An event or circumstance that causes or may potentially cause a loss
3. c. The probability of happening of the undesired event may become more certain or prominent if the subject-matter of insurance presents some peculiar characteristics facilitating the causation of the event.
4. d. A condition that poses unacceptable risk of loss or a situation in which the insurance would be against the law.
4. 4. Which of the following is no a type of marine insurance policy
1. a. Cargo policy
2. b. Fleet policy.
3. c. Hull policy.
4. d. Average policy
5. 5. Which of the following is correct?
1. a. Physical hazards are concerned with the attitude and conduct of people, and indicate those dangers which relate to character, integrity and mental attitude of the insured.
2. b. Peril is a specific risk or cause of loss covered by an insurance policy i.e.an event or circumstance that causes or may potentially cause a loss
3. c. Both a and b
4. d. Only a
6. 6. Surrender value is defined as
1. a. A discount, given by an insurer to a policyholder for making no claims during the policy term
2. b. The sum of money an insurance company pays to a policyholder in the event that his or her policy is voluntarily terminated before its maturity or an insured event occurs.
3. c. An amount paid periodically to the insurer by the insured for covering his risk.
4. d. It is the amount the policyholder will get from the life insurance company if he decides to exit the policy before maturity.
7. 7. A temporary a numbered document issued by an insurance/duly authorised representative pending issue of policy document to the insured in non-life insurance is known as?
1. a. Certificate of Insurance
2. b. Cover Note
3. c. Policy Document
4. d. Endorsement Certificate
8. 8. A beneficiary is defined as
1. a. A person or a firm who proposes for insurance cover to the insurance company.
2. b. An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual
3. c. The one whom the insured has nominated for the insured amount in case of your death.
4. d. All of the above
9. 9. Uninsurable risk is
1. a. A condition that poses unacceptable risk of loss or a situation in which the insurance would be against the law
2. b. A condition that poses unacceptable risk of loss or a situation in which the insurance would be against the law
3. c. A physical condition that increase the possibility of a loss and indicate the danger(s) of the subject of insurance which can be identified by inspection of the risk
4. d. The probability of happening of the undesired event may become more certain or prominent if the subject-matter of insurance presents some peculiar characteristics facilitating the causation of the event.
10. 10. Which of the following is true with regard to an insurance claim
1. a. A formal request to an insurance company for coverage or compensation for a covered loss or policy event.
2. b. In the event of claim under the policy, immediate intimation in writing by a letter is required to be given by insured to office of insurance company informing the policy number, name of insured, date of accident, place of accident, nature of loss, cause of loss/damage.
3. c. Insured should submit the duly completed and signed claim form, documents with a covering letter to insurance company and should always obtain acknowledgement from insurance company on photo copy of covering letter, for receipt of documents.
4. d. All of the above
11. 11. A certificate of insurance is defined as
1. a. It is a receipt of premium issued by the office of the insurer to the proposer/insured in token of having received the premium.
2. b. A prescribed form required to be submitted duly signed and duly filled up along with the premium by the proposer proposing insurance to the office of the insurer.
3. c. Provides verification of the insurance and usually contains information on types and limits of coverage, insurance company, policy number, named insured, and the policies’ effective periods.
4. d. None of the above
12. 12. Inorder that a risk be insurable which of the following requirements must be met?
1. a. The loss to be insured against must be important enough to warrant the existence of an insurance contract
2. b. The loss is catastrophic and the loss must be uncertain as to cause, time, place and amount
3. c. Risk must permit a reasonable statistical estimate of the chance of loss in order to determine the amount of premium to be paid
4. d. Both a & c
13. 13. The amount of money that an insurance company is obligated to cover in the event of a covered loss is known as
1. a. Sum insured
2. b. Paid Up value
3. c. No claim bonus
4. d. Premium
14. 14. Which of the following is true?
1. a. A risk is simply the possibility of a loss, but a peril is a cause of loss. A hazard is a condition that increases the possibility of loss.
2. b. A policy is a temporary a numbered document issued by an insurance or a duly authorised representative pending issue of policy document to the insured in non-life insurance.
3. c. It is the main responsibility of the insurer/insurance company to act diligently and take all steps to cut losses to the insured property
4. d. Premium receipt is the document issued by the insurer after the issue of the policy to correct, add, delete, make amendments in the policy at the instance of the insurer or the insured.
15. 15. In revocable beneficiary?
1. a. The policy holder has to take consent of the beneficiary before the name is changed.
2. b. The policy holder is given the right to change the beneficiary name without the consent of the named beneficiary.
3. c. Both a & b
4. d. Only a

Module-2

EXERCISE –MCQs

1. 1. The __________ is an autonomous, statutory body tasked with regulating and promoting the insurance and re-insurance industries in India
1. a. LIC of India
2. b. IFCI
3. c. IRDAI
4. d. National Insurance Corporation
2. 2. Which of the following is not true about PoS?
1. a. In products offered through POS, there is a high chance for miss-selling insurance products.
2. b. The PoS person can sell only simple and easy to understand products wherein each and every benefit under the product is predefined and disclosed upfront clearly to the customer.
3. c. Every policy sold through POS will be separately identified and pre-fixed by the name PoS.
4. d. The PoS will be made liable to a penalty as per the provisions of Section 102 of the Act.
3. 3. An insurance intermediary is defined as
1. a. As a person who can solicit and market only certain pre-underwritten products approved by the authority.
2. b. As a person who serve as a bridge between consumers and insurance companies, and includes individual agents, corporate agents including banks and brokers, insurance marketing firm.
3. c. As a person who brings about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation.
4. d. A person who promotes financial stability in economy by insuring the risks and losses of individuals, firm and organizations.
4. 4. Which of the following is/are the role of an insurance broker?
1. a. Acting promptly on instructions from a client and providing him written acknowledgements and progress reports.
2. b. Assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4 of 1938)
3. c. Providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover.
4. d. All of the above
5. 5. Who brings innovative marketing practices to the insurance marketplace, which deepens and broadens insurance markets by increasing consumers’ awareness of the protections offered by insurance?
1. a. Insurance Agents
2. b. PoS Persons
3. c. Insurance Intermediaries
4. d. Insurance Brokers
6. 6. Which the following statement is true with regard to insurance agents?
1. a. Public-Relation (PR) building exercise and business development tactics need not be to be pursued aggressively by agents
2. b. The insurance agent helps in promoting and selling of insurance products and services to its customers, and giving sound financial advisory services and customer support to the clients.
3. c. Adherence to the prescribed code of conduct for agents is of crucial importance. Agents must, therefore familiarise themselves with provisions of the code of conduct.
4. d. Agents must provide the office with the accurate information about the prospect for a fair assessment of the risk involved. The agents’ confidential report must, therefore, be completed very carefully.
7. 7. What is the identity document required for a PoS Person?
1. a. Passport and Driving License
2. b. Aadhar and PAN Card
3. c. Bank Passbook and Ration Card
4. d. Aadhar and PAN Card
5. e. All of the above
8. 8. IRDAI has adopted a mission which includes?
1. a. To bring about speedy and orderly growth of the Insurance industry (including annuity and superannuation payments), for the benefit of the common man, and to provide long term funds for accelerating growth of the economy.
2. b. To ensure speedy settlement of genuine claims, to prevent Insurance frauds and other malpractices and put in place effective grievance redressal machinery.
3. c. Both a & b
4. d. Neither a nor b
9. 9. How many life insurance and non-life insurance companies exist in India?
1. a. 29 & 45
2. b. 57 & 24
3. c. 19 & 41
4. d. 24 & 33
10. 10. Which of the following entities are regulated by IRDAI?
1. a. Insured or Policy Holders
2. b. Corporate agents, brokers, TPAs, surveyors and loss assessors.
3. c. Re-insurance companies and agency channel
4. d. Both c & d

Module-3

EXERCISE –MCQs

1. 1. According to the principle of subrogation
1. a. The insured can claim the compensation only to the extent of actual loss either from all insurers or from any one insurer.
2. b. When the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer
3. c. The insured must always try his level best to minimize the loss of his insured property, in case of uncertain events such as a fire outbreak or blast, and so on
4. d. On the happening of a loss the insured shall be put back into the same financial position as he used to occupy immediately before the loss
2. 2. The principle of indemnity asserts that
1. a. When a loss is caused by more than one causes, the proximate or the nearest or the closest cause should be taken into consideration to decide the liability of the insurer.
2. b. If the insured has more than one policy for the same property of the same value and if the loss is suffered due to damage to such property then the loss is shared and contributed between all the insurers in equal proportions or as per the proportion of the sum insured or as mentioned in the policy.
.
3. c. It is the main responsibility of the insured to act diligently and take all steps to cut losses to the insured property.
4. d. The insured shall get neither more nor less than the actual amount of loss sustained, subject to the limit of the sum insured and also subject to certain terms and conditions of the policy
3. 3. Utmost Good Faith or Uberrimae Fide means
1. a. Both parties involved in an insurance contract—the insured (policy holder) and the insurer (the company)—should act in good faith towards each other.
.
2. b. The person getting insured must have insurable interest in the object of insurance.
3. c. The insured must take all possible measures and necessary steps to control and reduce the losses
4. d. None of the above
4. 4. The principles of utmost good faith and insurable interest are applicable
1. a. In life insurance contracts
2. b. Both life insurance and general insurance contracts
3. c. Not applicable to either life or general insurance contracts
4. d. Both a & b
5. 5. In fire insurance if the property at the time of loss is of greater value than the sum insured mentioned in the policy then the difference in the total value at the time of claim and the sum insured mentioned in the policy would be treated as uninsured and the insured would bear a rateable proportion of the loss. This is known as
1. a. Uberrimae Fide
2. b. Causa Proxima
3. c. Condition of Average
4. d. Subrogation
6. 6. The principle of insurable interest states that
1. a. Property may be insured against some but not all causes of loss, and when a property is not insured against all causes, the nearest cause is to be found out
2. b. If the nearest cause is one in which the property is insured against, then the insurer must pay compensation, if it is not a cause the property is insured against, then the insurer does not have to pay
3. c. It means that the subject matter of the contract must provide some financial gain by existing for the insured (or policyholder) and would lead to a financial loss if damaged, destroyed, stolen, or lost
4. d. If the insured has more than one policy for the same property of the same value and if the loss is suffered due to damage to such property then the loss is shared and contributed between all the insurers in equal proportions or as per the proportion of the sum insured or as mentioned in the policy
7. 7. Principle of contribution is a corollary of
1. a. The principle of subrogation
2. b. The principle of indemnity
3. c. The principle of loss of minimisation
4. d. The principle of Causa Proxima
8. 8. According to Section 10 of the Indian Contract Act a valid contract must have the following?
1. a. Legal consideration and free consent
2. b. Possibility of performance and certainty
3. c. Writing and registration and agreement
4. d. All the above
9. 9. Which of the following is not true with regard to offer and acceptance?
1. a. In insurance, the certificate of insurance and premium receipt are invitations to offer
2. b. Where a policy contains a term allowing cancellation by the insurer, it will usually also provide for a portion of the premium to be repaid to the insured
3. c. If the offer is made by the insurer, the communication of an acceptance to a third party, such as a broker, is insufficient unless the broker is the agent of the insurer, which is not usually the case.
4. d. None of the above
10. 10. A consideration in insurance means
1. a. An essential element for a contract wherein the parties to the contract must be competent parties, or of undiminished mental capacity.
2. b. An exchange of money for the guarantee of an act preformed or another benefit provided
3. c. The terms of an insurance agreement must be certain and not vague, indefinite or ambiguous
4. d. The insurance agreement must not be have been expressly declared void by any law in force in the country
11. 11. What are the factors that invalidate free consent in an insurance contract?
1. a. Coercion & Fraud
2. b. Misrepresentation and Mistake
3. c. Agreement and Approval
4. d. Both b & c
12. 12. ___________________ is the most basic requirement for the functioning of the insurance contract between the insured and the insurance company, and it needs to be completed by the proposer who may seek the assistance of a life insurance advisor to fill it up
1. a. Insurance policy
2. b. Cover note
3. c. Proposal form
4. d. Premium Receipt
13. 13. What is a level premium?
1. a. When the premium charged under a policy remains the same throughout the duration of the contract
2. b. The policyholder is charged a single up-front premium payment to fully fund the policy
3. c. A discount on the premium rate given by insurance companies payable on the basis of sum assured and the mode of payment of premium.
4. d. All of the above
14. 14. Which of the following is true about Section 64VB of Insurance Act?
1. a. For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer
2. b. Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to, the insurer, the premium so collected in full without deduction of his commission within 24 hours of the collection excluding bank and postal holidays.
3. c. Both b & c
4. d. Neither b nor c
15. 15. What is a first premium receipt?
1. a. A contract between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay
2. b. An important and powerful document on the basis of which the assured can ask the insurer to issue the policy bond, which is treated as evidence of the contract of insurance
3. c. An amendment or addition to an existing insurance contract which changes the terms or scope of the original policy
4. d. A promise by the insured party that statements affecting the validity of the contract are true
16. 16. Which of the following is not a basic component of an insurance policy?
1. a. Recital Clause
2. b. Declarations
3. c. Exclusion and conditions
4. d. Photographs of the property insured
17. 17. What is an endorsement?
1. a. An amendment or addition to an existing insurance contract which changes the terms or scope of the original policy
2. b. A statement attesting that something the insured person says is true
3. c. A statement made by the proposer to the insurer relating to a proposed risk.
4. d. A formal request to an insurance company for coverage or compensation for a covered loss or policy event
18. 18. Returning a portion of the premium or the agent's/broker's commission on the premium to the insured or other inducements to place business with a specific insurer is known as
1. a. Warranty
2. b. Rebating
3. c. Representation
4. d. Single premium
19. 19. Which of the following statements are false?
1. a. With regard to representation, if the insurers want to avoid the contract on grounds of misrepresentation, it has to be proved by the insurers that the misrepresentation relates to a material fact.
.
2. b. On the other hand, with regard to warranty any breach whether material or immaterial is enough for the insurers to avoid the contract.
3. c. A representation does not appear in the policy, but a warranty must appear in the policy either expressly or by way of reference
4. d. None of the above
20. 20. What is FNOL?
1. a. For Negotiation of Loss
2. b. First Nominee of Loss
3. c. First Notification of Loss
4. d. Financial Non-Operating Loss
21. 21. Which of the following are the duties/responsibilities of surveyors?
1. a. He should investigate, quantify, validate and deal with losses and report thereon; carry out the work with competence, objectivity and professional integrity by strictly adhering to the Code of Conduct.
2. b. He should maintain confidentiality and neutrality without jeopardizing the liability of the Insurer and the claim of the Insured.
3. c. He should examine, inquire, investigate, and verify the cause and circumstances of the loss including extent of loss, nature of ownership and insurable interest.
4. d. All of the above
22. 22. A surveyor and loss assessor, whether appointed by insurer or insured, is expected to submit the report to the insurer within ____________ of being appointed—and a copy of the report to the insured as well, with comments on the assessment of loss
1. a. 30 days
2. b. 60 days
3. c. 25 days
4. d. 180 days
23. 23. On receipt of intimation of loss or damage insurers check whether
1. a. The insurance policy is in force on the date of occurrence of the loss or damage.
2. b. The loss or damage is caused by an insured peril
3. c. The property (subject matter of insurance) affected by the loss is the same as insured under the policy
4. d. All of the above
24. 24. ____________ is which has to be filled in when making an insurance claim
1. a. Survey report
2. b. Proposal form
3. c. Claim form
4. d. Endorsement form
25. 25. Section 64 UM of the Insurance Act, 1938 states that
1. a. On the happening of a loss the insured shall be put back into the same financial position as he used to occupy immediately before the loss.
2. b. Rebating is illegal and no intermediary is allowed to induce anyone to take a policy
3. c. In case of a claim of less than INR 20,000/- in value on any policy of insurance it is not practicable for an insurer to employ an approved surveyor or loss assessor the insurer may employ any other person for surveying such loss
4. d. Parties entering into the contract should enter into it by their free consent. The consent will be free when it is not caused by, coercion, mistake, undue influence, fraud, or misrepresentation.
26. 26. _______________ represents culmination of insurance claim, which is evidence of payment.
1. a. Claim form
2. b. Discharge voucher
3. c. Premium receipt
4. d. Survey report
27. 27. Which of the following is false with regard to intimation of insurance claim?
1. a. A policyholder need not necessarily inform his/her insurance company as soon as a claim occurs.
2. b. Insurers like to know as soon as the claim is made so that they can get into the thick of things and investigate all documents and assess the losses. A
3. c. Some insurers may not specify the time within which you are supposed to intimate a claim, some insurers may put it down clearly. When you sign up for the policy, this is a question you need to ask and get an answer to
4. d. All the above

Module-4

EXERCISE –MCQs

1. 1. Which of the following is not true about general insurance?
1. a. A general insurance policy typically has a period of a few years
2. b. general insurance plans provide financial protection from the impact of fire, storm, flood, earthquake, car accidents, theft and other travel accidents
3. c. General insurance virtually covers all forms of insurance including life
4. d. The premium and cover of general insurance depends upon the type and extent of insurance.
2. 2. Which of the following is not a type of general insurance?
1. a. Rural insurance
2. b. Term insurance
3. c. Vehicle insurance
4. d. Commercial insurance
3. 3. Which of the following is a type of commercial insurance?
1. a. Shopkeeper insurance
2. b. Marine insurance
3. c. Liability insurance
4. d. All of the above
4. 4. What is a family floater health insurance plan?
1. a. This type of plan is customized for families, wherein a fixed sum insured is available for all insured members for one or more claims during the policy tenure.
2. b. This type of plan offers fixed coverage and benefit payouts if the insured member is diagnosed with a specified illness or is hospitalized.
3. c. Family members can be enrolled under this plan but a different sum insured has to be chosen for each member.
4. d. This plan covers defined hospitalisation and surgery costs. Medical bills will have to be submitted to the insurer to receive the benefits.
5. 5. Which of this is not a feature of health insurance plane?
1. a. The insurance provider covers specific medical expenses of the insured based on the premium paid by the insured.
2. b. Some policies also provide for hospitalisation where less than 24 hours hospitalisation is required.
3. c. If no claim is made in the policy year, the policy gets cancelled by default and cannot be renewed
4. d. The individuals also enjoy tax deductions as per the Section 80D of Income Tax Act
6. 6. Which of the following is not a POS product?
1. a. Endowment policy
2. b. Term insurance
3. c. Two wheeler insurance
4. d. None of the above
7. 7. What is a third party insurance in a motor insurance policy?
1. a. It protects a policy holder against losses which arise due to bodily injury/death to a third party or any damage to property.
2. b. This insurance protects you, your vehicle and co-passengers against losses which arise due to bodily injury/death.
3. c. The insurance plans include third-party premium and own-damage premium
4. d. All of the above
8. 8. Which of these is/are a feature(s) or two-wheeler insurance?
1. a. Bike owners can also opt for personal accident cover and bike cover along with third party liability cover under a single two wheeler plan.
2. b. Most two wheeler policies are for one or two years though some insurance companies are also offering two wheeler policies for three years.
3. c. Group two wheeler cover can be availed for a set of bikes by family, company, corporate or any legal entity.
4. d. All of the above
9. 9. Which of the following is not a type of health insurance?
1. a. Unit linked health plans
2. b. Comprehensive plans
3. c. Critical illness plans
4. d. Fixed benefit hospitalisation plans
10. 10. Which of the following statement is true about commercial vehicle insurance?
1. a. Bodily injury or death caused by the use of the vehicle is generally not covered.
2. b. Any damage to the property caused by the use of the vehicle is covered.
3. c. Claims take a long time to process due vehicles being used for commercial purposes.
4. d. Only trucks are covered under this policy?
11. 11. What is named driver policy?
1. a. This is an ideal choice for businesses that have multiple vehicles and several drivers that keep rotating routes or vehicles
2. b. A named driver motor insurance policy is a policy which is in the name of the person driving the vehicle the most.
3. c. This cover helps companies take care of various legal obligations and lower the risks associated with running a fleet of vehicles.
4. d. None of the above
12. 12. Which of the following is not a type of travel insurance policy?
1. a. Asia travel insurance policy
2. b. Schengen travel insurance policy
3. c. Senior citizen travel insurance policy
4. d. None of the above
13. 13. Which of the following are the features of travel insurance policy?
1. a. It offers coverage for any surgical or emergency medical treatment when you are away from home
2. b. It offers coverage for expenses to take the insured's mortals or human remains back to the home country
3. c. Both a & b
4. d. None of the above
14. 14. What is a Schengen travel insurance?
1. a. If you are travelling to any of the Asian countries or Southeast Asian countries, then thus travel insurance comes into the picture
2. b. A type of student travel insurance plan that offers medical as well as financial support to the students travelling abroad for higher studies
3. c. Anyone travelling to Schengen countries for a maximum 90 days such as Austria, Belgium, Czech Republic, Denmark, Poland, Finland must need to mandatorily have this travel insurance policy
4. d. All of the above
15. 15. Travel insurance taken as a comprehensive cover for people belonging to a group travelling to same/similar destination, is known as ________
1. a. Group travel insurance plan
2. b. Multi-trip insurance plan
3. c. Corporate travel insurance plan
4. d. Family travel insurance plan
16. 16. Which of the following is not a permanent total disability?
1. a. Loss of sight of both eyes,
2. b. Loss of toe or a finger
3. c. Person in comma for longer period
4. d. Loss of one hand and one foot
17. 17. What are the additional features of a personal accident insurance policy?
1. a. There is a provision of a fixed amount payment for broken bones resulted because of an accidental mishap.
2. b. In the case of the demise of the policyholder in an accident, the education expenses of the dependent child are covered under the policy up to a certain limit.
3. c. The charges paid to an ambulance to ferry the injured person to the nearest hospital are waived off under the policy
4. d. All of the above
18. 18. What is a Term Return of Premium (TROP) policy?
1. a. On survival, policyholders are returned the total amount of premiums paid by them during the policy tenure, excluding tax.
2. b. The sum assured on death as well as the premium decreases at a certain rate throughout the policy term.
3. c. A convertible term plan that allows the policyholder to convert his/her policy into a permanent one during the policy tenure
4. d. A no-frills insurance plan that provides coverage against a specific set of risks on payment of a pre-decided premium amount.
19. 19. Which of the following is not a feature of term insurance policy?
1. a. Term insurance policies offer flexible premium payment options, allowing policyholders to choose a payment plan based on their convenience
2. b. On the death of the policyholder during the policy term, his/her dependents stand to receive the amount chosen at the time of choosing the policy
3. c. Policy holders cannot claim any tax exemption under this insurance.
4. d. While a regular term insurance plan does not have any survival benefits, a number of insurers have designed plans that also offer survival benefits in the form of premium refunds on maturity.
20. 20. Which of the following is true about motor insurance?
1. a. If no claims have been made during a particular policy period, policyholders can enjoy no claim bonus in the form of premium discounts.
2. b. The premium charges for motor insurance is calculated based on the IDV of the vehicle.
3. c. Premium discounts can be enjoyed by vehicle owners by choosing a higher deductible.
4. d. All of the above

Module-5

EXERCISE –MCQs

1. 1. Which of the following statement(s) is/are true about grievances redressal cell of insurers?
1. a. It is incumbent upon the insurers on continuous basis to have in place an independent and transparent grievance redress machinery to resolve grievances in conformity with Redress of Public Grievances Rules, 1998
2. b. The annual reports of the IRDAI contain information about the number of grievances received by the public and private insurers, grievances settled and disposed and those pending with them.
3. c. Both a & b
4. d. Neither a nor b
2. 2. Within how many days if the in-house grievance cell of insurers fails to resolve grievance of policy holders the aggrieved insured has a right to make complaint for amicable resolution at industry level through ‘insurance ombudsman’ so as to get rid of the conflict of interest between insured and insurer?
1. a. 25 days
2. b. 30 days
3. c. 45 days
4. d. 15 days
3. 3. Which of the following statement is false with regard to the procedures to be followed in case for filing and addressing grievance at the in-house grievance redressal cell of the insurer?
1. a. It is enough if the aggrieved insurer give a verbal/oral complainant within 3 working days of receipt of the grievance.
2. b. The insurer shall inform the complainant about how he/she may pursue the complainant, if dissatisfied
3. c. All insurers should publicize its grievance redressal procedure and ensure that it is specifically made available on website.
4. d. Insurers shall also have in place a system to receive and deal with all kinds of calls including voicemail, e-mail, relating to grievances from prospects and policyholders.
4. 4. What does IGCC stand for?
1. a. International Grievance and Call Center
2. b. Indian Grievance and Consumer Center
3. c. Insurance Grievance and Consumer Complaints
4. d. IRDAI Grievance Call Center
5. 5. ___________ will act as a gateway for policyholders to register their complaints with the insurance companies first and if required these complaints can then be escalated directly to the IRDAI Grievance Cell
1. a. Insurance Ombudsman
2. b. Integrated Grievance Management System
3. c. Lok Adalat
4. d. Consumer Forums
6. 6. Which of the following statement is not true about filing complaints by policy holders at the consumer court?
1. a. The consumer law provides protection to all affected consumer whose insurance services suffer from the deficiencies and defects.
2. b. Consumer courts are the first place for a policyholder to file grievance incase insurer’s grievance redressed cell does not take any action
3. c. Approaching the consumer forum would be the simplest, fastest and most economical remedy
4. d. The forum is better accessible, and awards compensation and costs. 
7. 7. __________________, is a technique for the resolution of disputes outside the Courts, where the parties to a dispute refer it to one or more persons by whose decision (the award) they agree to be bound
1. a. IGCC
2. b. DARPG
3. c. Alternative Dispute Resolution (ADR)
4. d. Consumer Forums
8. 8. Which of the following statements are true with regard insurance ombudsman?
1. a. If a policyholder is unhappy with the company’s response, he can approach the insurance ombudsman in his city 30 days after you first lodged the complaint with the insurer.
2. b. Unlike the Grievance Cell, the Ombudsman does have the power to pass orders. Cases of up to Rs 20 lakh fall under the ambit of the Ombudsman’s powers.
3. c. If the need arises, the Ombudsman can also award compensation to the policyholder.
4. d. All of the above
9. 9. Notwithstanding anything mentioned in regulation 2(e) above, a prospectus of any insurance product shall clearly state
1. a. The extent of insurance cover and in an explicit manner explain the warranties, exceptions and conditions of the insurance cover
2. b. In case of life insurance, whether the product is participating (with-profits) or nonparticipating (without-profits)
3. c. Both a & b
4. d. Neither a nor b
10. 10. Which of the following matters must be stated in the life insurance policy?
1. a. The name of nominee (s), age of nominee(s) and their relationship and name of guardian in case of minor nominees.
2. b. The date of commencement of risk, the date of maturity and the date(s) on which survival benefits, if any, are payable.
3. c. The policy conditions for conversion of the policy into paid up policy, surrender, foreclosure, non-forfeiture, and discontinuance provisions in case of linked policies.
4. d. All of the above
11. 11. The insurer shall inform clearly by the letter forwarding the policy to the policyholder that he has a free look period of ____days from the date of receipt of the policy document and period of ____ days in case of electronic policies and policies obtained through distance mode, to review the terms and conditions of the policy.
1. a. 10 days and 60 days
2. b. 15 days and 30 days
3. c. 45 days and 180 days
4. d. 30 days and 45 days
12. 12. Which of the following matter must be stated in the health insurance policy?
1. a. Details of TPA, if any engaged, their address, toll free number, website details.
2. b. Perils covered and not covered.
3. c. Policy migration facility and conditions where applicable
4. d. Both a & c
13. 13. Which of the following is not true with regard to claim procedures with respect to a general insurance policy?
1. a. If an insurer, on the receipt of a survey report, finds that it is incomplete in any respect, he shall require the surveyor under intimation to the insured, to furnish an additional report on certain specific issues as may be required by the insurer.
2. b. On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 45 days offer a settlement of the claim to the insured
3. c. Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made within 7 days from the date of acceptance of the offer by the insured
4. d. None of the above
14. 14. What does a covered product under AML compliance for insurance include?
1. a. Standalone medical/health insurance products.
2. b. A annuity contract other than a group annuity contract
3. c. Reinsurance and retrocession contracts
4. d. Group insurance businesses issued to a company, financial institution, or association
15. 15. Which of the following features must be there for BSA/AML programmer?
1. a. A designated compliance officer responsible for effectively implementing the program
2. b. Ongoing training of appropriate persons, including insurance agents and brokers
3. c. Policies, procedures and internal controls tailored to the AML risks of the institution
4. d. All of the above
16. 16.Which of the following is not true with regard to reporting of Suspicious Activity Reporting (SAR)?
1. a. Companies are required to submit a SAR to the Department of Treasury’s Financial Crimes Enforcement Network.
2. b. Special attention is paid to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose and transactions
3. c. Directors, officers and employees (permanent and temporary) can disclose the fact that a Suspicious Transactions Report or related information of a policyholder/prospect is being reported
4. d. Background including all documents /office records /memorandums pertaining to such transactions, as far as possible, be examined by the Principal Compliance officer for recording his/her findings
17. 17. Which of the following document is a valid proof of address with regards to insurance contracts with partnership firms
1. a. Ration card and voters id of partners
2. b. Registration certificate, if registered
3. c. Written confirmation from the banks where the prospect is a customer
4. d. Passport and/or driving license of partners
18. 18. What are the products that can be sold by a PoS person?
1. a. Personal accident policy
2. b. Travel insurance policy
3. c. Immediate annuity product
4. d. All of the above
19. 19. Every proposal form, in paper or in paperless form, insurance policy and other related documents shall carry provision to record the _____________ and the ______________in order to tag the policy to the PoS person who is selling the said policy.
1. a. Aadhar Card Number or PAN Card Number
.
2. b. Voters ID and Passport
3. c. Bank Account Number and PAN Card Number
4. d. All of the above
20. 20. Which of the following condition is not true with regard to IRDAI allowing individual indemnity based health insurance products to be solicited through PoS channel?
1. a. The indemnity based health insurance products may be offered to only individual policyholders excluding groups and government scheme.
2. b. INR 10 LACS per life/individual will be the maximum sum insured
3. c. Number of such products that can be filed as PoS product is capped at 3 (three) per insurance company
4. d. None of the above