Module:-1

Introduction to life insurance

Life insurance is obtained by purchasing a policy with the insurance company promising to pay a lump
sum amount at the time of the policyholders death.

Purpose of life insurance protect someone who depends on you from financial laws related to your
death

There are two categories of life insurance

• Term life insurance

• Permanent life insurance

Insurance in India can be traced back to the Vedas called yogakshema

Bombay mutual assurance society the first Indian life insurance society was formed in 1870

Insurance is a legal contract that transfers risk from a policyholder to an insurance company

Solomon Huberner’s is the father of insurance education

LIC:-Government of India/central or union government.

The origin of the concept of life insurance can be traced to ancient Rome, Caius Marius, A Roman
military leader created a burial club among his troops so in the event of the unexpected death of a club
members, other members would pay for the funeral expenses.

Meaning of life insurance:- life insurance can be defined as a contract between an insurance
policyholder and an insurance company where the insurer promises to pay a sum of money in exchange
for a premium upon the death of insured person or after a set of period.

• Life insurance is a contract of human life insured against old age illness accident death etc.
• Insurer the person who guarantees the payment is called insurer
• The person on whose life the payment is guaranteed is called insured or assured.
• The document evidencing the contract is called policy
• It means an agreement in which one party agrees to pay a given sum of money upon the
happening of a particular event contingent upon duration of human life in exchange of the
payment of a consideration
A contract where an insurance company undertakes in consideration of regular payment of
premium to pay a certain sum of money to the assured on maturity of policy or death,
whichever is earlier
Objectives of insurance
• Granting security to people
• Minimizing of losses
• Diversifying the risk
• Mobilizes the saving
• Understand the benefits of life insurance
importance or need of life insurance
 • Secure the family’s financial future
• Bring Peace of Mind
• Save tax under section 10(D)free
• Dealing with debt

principles of life insurance

1. principle of at most good faith

2. Principle of insurable interest
3. Principle of indemnity
4. Principle of contribution
5. Principle of subrogation
6. Principle of mitigation of loss
7. Principle of causa proxima
• Principle of utmost good faith:- The fundamental principle is that both the parties in an
insurance contract should act in good faith towards each other that is they must provide clear
and concise information related to the terms and conditions of the contract. The insured should
provide all the information related to this subject matter and the insurer must give precise
details regarding the contract
Example:- X took a health insurance policy at the time of taking insurance he was a smoker and
failed to disclose this fact later he got cancer here the insurance company will not be liable to
bear the financial burden.
• Principle of insurable interest:-The principal says that the individual must have an insurable
interest in the subject matter insurable interest means that the subject matter for which the
individual enters the insurance contract must provide some financial gain to the insured.
Example:-The owner of a vegetable cart has an insurable interest in the cart because he is
earning money from it however if he sells the cart he will no longer have an insurable interest
on it. To claim the amount of insurance the insured must be the owner of the subject matter
both at the time of entering the contract and at the time of accident.
• Principle of indemnity:-This principle says that insurance is done only for the coverage of laws
hence injured should not make any profit from the insurance contract in other words the
insured should be compensated the amount equal to the actual loss and not the amount
exceeding the loss principle of indemnity is observed strictly for property insurance.
Example:-The owner of a commercial building enters an insurance contract to recover the cost
for any loss or damage in future if the building sustains structural damages from fire then the
insurer will Indemnify the owner for the costs to repair the building by way of reimbursing the
owner for the exact amount spent on repair.
• Principle of contribution:- Contribution principle applies when the insured takes the same
subject matter it states the same thing as in the principle of indemnity the T’s injured cannot
make a profit by claiming the loss of one subject matter from different policies or companies.
Example:-A property worth of rupees 5 lacks is injured with company a for three LAX and with
company B4 rupees one Lac the owner in case of damage to the property for three lacks can
claim the full amount from company a but then he cannot claim any amount from Company B
now company a can claim the proportional amount reimbursed value from company B.
 • Principle of subrogation:-Subrogation means one party stands in for another as per their
principle after this injured that is the individual has been compensated for the incurred loss to
him on the subject matter that was ensured the rights of the ownership of the property goes to
the insurer that is the company.
Subrogation gives the right to the insurance company to claim the amount of loss from the third
party responsible for the same.
Example:-John and Sam were involved in a car accident as a result John’s car was severely
damaged and he required 3000 for the repair of the vehicle John’s car was injured and he
recovered the full cost of repair of 3000 through an insurance claim an investigation determined
that Sam was responsible for the accident as he exceed the speed limit John’s insurance
company decide to recover the amount of claim from Sam. Subrogation provides a legal right to
third party to collect a debt or damages on behalf of another Party.
• Principle of mitigation of loss:-Mitigation means Reducing risk of loss from the occurrence of any
undesirable event.
Example:-If a fire break out into factory you should take reasonable steps to put out the fire you
cannot just stand back and allow the fire to burn down the factory because you know that the
insurance company will compensate for it.
• Principle of causa proxima:-This is also called the principle of proximate cause or the nearest
cause this principle applies when the loss is the result of two or more causes the insurance
company will find the nearest cause of loss to the property if the proximate cause is the one in
which the property is injured then the company must pay compensation.
Example:- An insured suffered injuries in an accident he was admitted to the hospital he
contracted an infectious disease while undergoing the treatment he dies due to dis infectious
disease the court held that proximate cause of his death was infectious disease and not the
injury so the claim cannot be payable under personal accident insurance.

Life insurance products/ Types or kinds of Life Insurance Products

The two basic elements in life insurance cover are (a) death cover and (b) risk cover. All types of
insurance covers are mix of these basic elements. The following are the various kinds of life insurance
products:

1) On the basis of Time

a. Term Life Policy – This is the simplest and the cheapest form of life insurance sold in the market.
The term insurance provides life protection for the selected term (period of years) only. In case
the person (whose life is insured) dies during the period, the benefits are payable under the
policy, and in case of his survival till the end of the selected term, the policy normally expires
without any benefit becoming payable. The premiums of a term life policy are very low. Term
life insurance is a type of life insurance that provides a death benefit to the beneficiary only if
the insured dies during a specified period. If the policyholder survives until the end of the
period, or term the insurance coverage ceases without value and a payout or death claim cannot
be made. Term Life insurance is income replacement that remains active for a specified number
of years. Term life insurance is (one of) the most affordable types of life insurance. It can further
be classified into level term insurance, decreasing term life insurance and increasing term life
insurance.
 b. Whole life insurance policy – Whole life insurance policy are intended to provide life insurance
protection over the life time of the assured. The whole life insurance provides for payment of
promised amount upon the insured’s death regardless when it occurs. Under whole life policy
the payment of promised sum is obviously paid, unlike term insurance policy, but the time of
payment is uncertainty. Whole life insurance is an insurance plan that provides you coverage
throughout your lifetime provided the policy is in force. Whole life insurance policies also
contain a cash value component that increases over time. You can withdraw your cash value or
take out a loan against it as per your convenience. In addition, in case of your unfortunate
demise before you pay back the loan, the death benefit paid to your beneficiaries will be
reduced.

[Link] the basis of premium payment

a. premium policy – Single premium policy is useful to those who desire to provide the whole premium
in one instalment at the time of taking the policy. Single premium policy becomes matured on the
insured death or on the expiry of selected term whichever is earlier.

[Link] premium policy – unlike single premium policy, under this policy premiums are paid on regular
basis for a selected term or till prior death. It is useful to those persons having regular earnings. The sum
assured by the insurer becomes payable if the assured reaches a particular age or on the death
whichever is earlier.

[Link] the basis of claim payment

[Link] sum policy – under fixed sum policy, the benefit assured by the insurer is settled as single
payment immediately after the maturity of the period of policy or on the death of insured whichever is
earlier.

b. Annuity Policy – annuity is a contract that provides regular income to an individual for a specific
period of time. Annuity schemes are those wherein the sum assured by insurer to the insured is settled
in regular intervals payments. They are usually taken as retirement benefits.

[Link] the basis of number of persons insured

[Link] life policy – single life policy covers the risk of life of only one individual. It may be taken on
one’s own life or on another’s life. The policy amount is payable to the insured on maturity of the
selected term or on the death of the insured whichever is earlier.

[Link] life policy – multiple lie policy can be a joint life policy or last survivorship policy. Unlike
single life policy, multiple life policy covers the risk of life of two or more individuals.

[Link] the basis of participation in profits

[Link] profits policy – with profits policy are also termed as participating policies. With profits policy
holders are entitled to get bonus or benefits along with the sum assured at the maturity of the policy as
per terms and conditions.

[Link] profits policy – they are also termed as non-participating policies. Under this policy, sum
assured will become payable without any benefits or bonus. Only the sum assured is settled at the
maturity of the life policy.
Kinds of General Insurance or General Insurance products.

1) Fire Insurance :-Fire insurance is a contract of insurance against the loss/damage by accidental
fire or other occurrences customarily included under a fire policy. A fire insurance covers the
following perils – fire, lightening, explosions, air craft damage, riots, strikes, cyclones,
hurricanes, floods and bush fires.
2) Marine Insurance :-Marine insurance is a type of insurance policy that provides coverage
against any damage or loss caused to cargo vessels, ships and terminals, in which the goods are
transported from one point of origin to another point of destination. Marine insurance coverage
includes loss or damage caused to the shipment/cargo/ ship while it is grounded, and also from
untoward perils like – sinking, collision, burning, whether conditions, navigation errors, theft,
hook damage, strike, war and natural perils. Marine insurance also provides for inland water
transportation.
3) Motor Vehicle Policy :-A Motor Insurance Policy is mandatory to be able to drive legally in India.
Broadly there are two types a) Third-Party Liability b) Comprehensive Package Policy.
A Third-Party Policy covers for losses faced in a situation where your vehicle damages any third-
party such as a public property, person or third-party vehicle. The same is the minimum
requirement to be able to drive legally in India, as stated by the Motor Vehicles Act.
A Comprehensive Package Policy covers both third-party damages and liabilities and
damages/losses caused to you and your own vehicle. The losses may arise due to an accident,
theft, fire, natural calamities, and others.
4) Home Insurance :-You build your home with your toil and hard earned money. Everything you
buy is a priceless possession for you and hence it needs to be protected. A Home Insurance
Policy protects your valuable and other assets. It is a comprehensive package policy that covers
all valuables. It gives protection for Home against Burglary, Loss/Damage of Jewellery, by Fire
and Natural Disasters.
5) Travel Insurance:- Travel Insurance covers your financial liability, if any, when you travel within
or beyond the Indian boundaries. The financial liability may arise due to medical or non-medical
emergencies. The duration of the travel for one time can be 180 days at the maximum. The
policyholder can take more than one trip in a year. Your Travel Insurance will cover: Loss of
Baggage, Loss of Passport, Hijacking, Medical Emergencies, Delayed Flights, Accidental Deaths,
and Adventure Sports.
6) Commercial Lines or Commercial Insurance

The lines of insurance that affects the business operations in the real terms are categorized under the
Commercial Lines of Insurance. Type of the insurance covers that one can buy may include: Property
Insurance, Engineering Insurance, Liability Insurance, Employees Benefit Insurance, mobile insurance
and etc.

Depending on the type of occupation, risk exposure, and the money involved, the insurance could be
different for each industry or business. For example; an insurance that is specific to a cement plant,
versus one for an IT company will be different. The premium charged for a cement plant will be higher
than a showroom of air conditioner. Therefore, Insurance is completely based on the level of the risk
exposure. A worker in the cement plant is more prone or susceptible to injury than to the one who is
working in the showroom.
Annuity policy and Kinds of Annuity policy

Annuity is a contract that provides an income for a specified period of time. Annuity schemes are those
wherein policyholder’s regular contributions over a period of time (or one time contribution)
accumulates to form a corpus with the insurer. This corpus is used to yield a regular income that is paid
to policyholder’s until death starting from the desired retirement age. Annuities are completely opposite
to life insurance contracts.

Pension and annuity are both funding schemes after retirement. Pension is the amount of money paid
regularly to a person who has retired because of having reached a certain age. A pension fund is
generally maintained and created by an employer for employees.

Types of Annuities

[Link] the basis of commencement of income:

Immediate annuity – The immediate annuity commences immediately after the first income period. The
Annuitant starts receiving their regular income soon after entering into the annuity contract. The
payments begin within one year of purchase.

Deferred annuity: In the case of deferred annuity, the payments to the annuitant starts after a certain
deferred period. A deferred annuity is made with either a single purchase payment (single premium
deferred annuity) or several purchase payments over time (flexible premium deferred annuity).

[Link] the basis of number of lives covered

[Link] life annuity – under annuity only one single person’s life is contracted to an annuity plan. This
annuity pal is most beneficial to those who do not have dependents and want to use all the savings
during life time.

b. Life Annuity – In this annuity more than one life is contracted to an annuity plan. This annuity is also
of two types: (i) Joint life annuity where payment of annuity stops at the first death, and (b) Last survivor
annuity plan, where the payment continues up to death of the last person of the group.

[Link] the basis of Mode of Premium paid

[Link] premium annuity – the annuity in this case is purchased by payment of a single premium.
Generally the life insurance amount is utilized for purchasing this annuity.

[Link] premium annuity – for availing the annuity, the annuitant can deposit some amount periodically
so that, at the end, he can get the sufficient amount of annuity in equal instalments. During the
accumulation period i.e., before commencement of payment of annuity, he is given an option to get the
surrender value in cash or to get the paid up values reduced in proportions to the premium paid to the
annuities payables. At the death of the depository, the annuitant can get the surrender values or
premiums paid whichever is higher.

[Link] the basis of disposition of proceeds

[Link] Annuity – this offers a regular income to the annuitant throughout his life-time. No payment is
made after his death. This is beneficial not in every case. When the annuitant dies before receiving all
the amounts of purchase price he is at loss. But if he survives for a longer period than expected, he is
benefited by this annuity.

[Link] minimum annuity – annuity payment upto a period is guaranteed by the insurer. If the
annuitant dies before the specific period, annuity will continue up to the unexpired period. The
nominees receive the continued annuity till the expiry of the annuity plan.

Benefits or Importance of Insurance

The process of insurance has evolved to safeguard the interests of people from uncertainty by providing
certainty of payment at a given contingency. The insurance comes to be more and more useful in
modern affairs. The role or importance of insurance, here has been discussed in two phases:

1. Uses to an Individual

[Link] safety and security – the insurance provides safety and security against the loss on a
particular event. In the case of life insurance payment is made when death occurs or the term if
insurance is expired. The loss to the family or security at the premature death and payment in the old
age are adequately provided by the insurance.

b affords peace of mind – the security is the prime motivating factor. By the means of insurance, the
security is provided and in turn peace of mind is afforded.

[Link] protects mortgaged asset – at the death of the owner of the mortgaged property, the
property is taken over by the lender of money and the family will be deprived of by the asset. On other
hand, the mortgagee wishes to get the property insured because at the damage or destruction of the
property he will lose his right to get the loan repaid. The insurance will provide adequate amount to the
dependents at the early death of the property owner to pay off the unpaid loans. Similarly, the
mortgagee gets adequate amount at the destruction of the property.

[Link] eliminates dependency – at the early death of the earning member of the family, the
destruction of the family need no elaboration. The economic dependency of the family on relatives and
friends is reduced to at least some extent.

[Link] insurance encourages savings – the savings with insurance has certain extra advantages (i)
systematic saving is possible because regular premiums are required to be compulsorily paid, (ii) in
insurance the deposited premium cannot be withdrawn easily before the finish o time, and (iii) the
insurance will pay policy money irrespective of the complete premium deposited or not on the death of
insured.

f. insurance fulfil the needs of persons – the life insurance apart from providing security on the death of
individual, also is taken to fulfil certain needs like, family needs, children education needs, old age
needs, marriage needs, property purchasing needs and etc.

Uses to the society

[Link] of the society is protected – the loss of particular wealth can be protected with insurance. Life
insurance provides loss of human life, property insurance provides for loss of property by fire, theft or
accident, cattle, crop and machines are also protected from insurance. With the advancement of
society, the wealth or property of the society attracts more hazards and so new types of insurance are
also invented to protect them against possible losses.

[Link] in economic growth of the country – for economic growth of the country, insurance provides
strong hand and mind. The agriculture will experience protection against loss of cattle, machines, tools
and crop. This sort of protection stimulates more production in agriculture, in industry, in factory
premises. The insurance provides more confidence to start and increase production, which in turn
increases the GDP of the country.

C Insurance helps in reduction of the inflation – the insurance reduces inflationary resource in two
ways. First by extracting money in supply through the amount of premium. Secondly, by providing
sufficient funds for production, narrow down the inflationary gap.

Life insurance products:-

[Link] Life Insurance:- Term life insurance is a type of life insurance that provides a death
benefit to the beneficiary only if the insured dies during a specified period. If the policyholder
survives until the end of the period, or term the insurance coverage ceases without value and a
payout or death claim cannot be made. Term Life insurance is income replacement that remains
active for a specified number of years. Term life insurance is (one of) the most affordable types
of life insurance. It can further be classified into level term insurance, decreasing term life
insurance and increasing term life insurance.
[Link] Life Insurance:-Whole life insurance is an insurance plan that provides you coverage
throughout your lifetime provided the policy is in force. Whole life insurance policies also
contain a cash value component that increases over time. You can withdraw your cash value or
take out a loan against it as per your convenience. In addition, in case of your unfortunate
demise before you pay back the loan, the death benefit paid to your beneficiaries will be
reduced.
[Link] Policy:- An endowment policy is defined as a types of life insurance policies that
is payable to the insured if he/she is still living on the policy’s maturity date, or to a beneficiary
otherwise. Endowment life insurance plans provide you with a dual combination of protection
and savings. In this policy, if the insured dies during the term of the insurance policy, the
nominee receives the sum assured plus the bonus or participating profit or guaranteed
additions, if any. The bonus or profit is paid for the number of years that the insured survives in
the policy term.
[Link] back policy:-Money back policy gives you money during the policy tenure it gives you
a percentage of the sum assured at regular intervals during your policy term if you leave
beyond the terms of the insurance policy then you will receive the remaining portion of the
corpus and accured bonus also at the end of the policy term.
But in case of an unfortunate event before the full term of the insurance policy over the
beneficiaries are entitled to receive the entire sum assured regardless of the number of
installments paid out money back policies are the most expensive insurance options offered by
insurance companies as they provide returns to the insured during the policy tenure.
Money back policy gives way for a person to plan the course of his life with a sum that is
expected in regular intervals. Plans are just children’s education children marriage can be
executed in a better way with the help of this policy.
 [Link] and investment plans:- saving and investment plans are the types of insurance plans
that provide you the assurance of lump sum of funds for you and your family the future
expenses while providing an excellent savings tool for your short term and long term financial
goals these plans also assure your family a certain sum by way of an insurance cover this is a
broad categorization that covers both the traditional and unit linked plans.
[Link] plan :-These plans provide you with income during retirement called the
retirement plan. These plans are offered by life insurance companies in India and help you to
build a retirement corpus. On maturity this corpus is invested for generating a regular income
stream which is referred to as pension and annuity.
[Link] linked insurance plan:-ULIPs is a type of life insurance plans that provide you with a dual
advantage of protection and flexibility in investment. It is a type of life insurance where the cash
value of a policy varies according to the current value of the underlying investment assets. The
premium paid by ULIPs is used to purchase units in investment assets chosen by the
policyholder.
[Link] insurance policy:-A child insurance policy is a saving cum investment plan that is
designed to meet your child’s future financial needs. It allows your kids to leave their dreams
and give you the advantage to start investing in the children plan right from the time the
children born and provisions to withdraw the savings once the child reaches adulthood. Some
child insurance policies do allow intermediate withdrawals at certain intervals. Life insurance is
not just to fulfill the daily expenses of the family in the absence of breadwinner it should be
capable enough to bail out the family during large financial exigencies. So, one should always
choose one or two best types of life insurance which can support his or her family in different
stages of life.
[Link] life insurance:-Group life insurance policy is the type of life insurance coverage that is
provided to a group of individuals generally employees working in a company or organization.
The main purpose of group life insurance plans is to offer financial freedom support and
protection to the family of the concerned employee in case of any eventualities. In case of the
employees death when employed with the company the corresponding group insurance plan
would offer the much required financial guarantee to the inconsolable family. This policy is not
only limited to an employer employee group but also extended to the organizations like bank
customers nonbank financial organizations, NGOs microfinance institutions and professional
groups from group insurance policies also offer coverages for outstanding loans to a group of
debtors while some come up with a disability and critical illness benefits.

General insurance:-

General insurance is designed to protect the things you value insurance company will pay you the Sum
assured or an agreed amount to cover some or all the loss under certain situation.

General insurance is a contract that do not come under the life insurance

General insurance or non life insurance policies including automobile and homeowners policies provide
payments depending on the loss from a particular financial event.

General insurance helps us to protect ourselves and the things we value such as our homes our cars and
our valuables from the financial impact of risk big and small from fire flood storm and earthquake
General insurance products

• Fire
• Personal liability
• Homeowners
• personal motors
Fire insurance:-Fire insurance is a contract of insurance against the loss or damage by accidental
fire or other occurrences including under a fire policy.
Types of fire insurance
• Valued policy
• Specific policy
• Floating policy
• Average policy
• Excess policy
• Blanket policy
• Comprehensive policy
• Consequential loss policy
Valued policy:-Undervalued policy the value of a subject matter is decided upon which the
insurer pays if it is destroyed or damaged. This policy does not work on the principle of
indemnity. the agreed value that is compensated can be more or less than the market price. this
policy is designed for the goods and properties which actual value cannot be decided after their
damage or loss.
Example work of art, jewelry, paintings, crafts etc
• It is usually taken where it is not easy to ascertain the value of property
• In this policy the indemnity is a fixed amount agreed upon at the time of signing the contract
• The insured is benefited when the market value of the property declines but suffer loss when
the market value appreciates

Specific Policy:-This policy paid to this specific amount the risk is insured.. in case of a fire loss the
insurer will pay for the loss that is less that the specific amount or up to the sum insured. A specific
policy is a type of policy in which the property is insured for a specific sum irrespective of its value

Example:-A policy is taken to cover a property worth value of 80,000 for sum insured is 50000 when
the property sees a loss of 40000. The insurers have paid the full amount. If the loss is up to 50000 the
full amount will be paid. If it exceeds 50000 the insurer will pay upto the insured amount.

Floating policy:-This policy is tailor made for the businessman who deal in import and export business. It
is taken to cover loss on goods which are lying in different places and the stock of which is almost
continuously fluctuating. It is taken out for those goods which are frequently changing in a warehouse.

Example:-Some of goods of other traders are kept in one go down and few kept in another go down
some kept in the railway go down or some at the seaport open only one premium covering all the
related goods.

Average policy:-When an average clause is applicable to fire policy this clause is used to penalize the
policy holder for taking a policy with a lesser amount than the actual value of the property.
 Where a property is insured for a sum which is less than its value the policy contain a clause that the
insurer shall not be liable to pay the full loss but only that proportion of laws which the amount Insured
For bears to the value of the property.

Example:- A value of property is 1 lakh it is insured for 60,000(60% of total value).the amount of loss is
60000 the insurance company will not pay 60000 To policyholder but will pay 36000.

Excess policy:-The insured might have to take another insurance policy to cover the maximum amount
of stocks which might reach sometimes.

Example:-Home is damaged in a storm the cost of repairing the damage might be 4000 if you had 600
access you would pay the first 600 and the insurer would pay the reminder.

Blanket policy:-A blanket policy is that which covers all assets fixed as well as current under one policy

comprehensive policy :-This policy provides extensive coverage not only against fire related perils but
also provides coverage against any other such as robbery theft etc.

Consequential loss policy:-A fire outbreak in a workplace like a factory may disrupt the workforce that is
production might go down but the fixed expenses continue at the same price all losses can be covered
under this consequential loss policy.

Insurable objects in fire insurance:-

• Building
• Electrical installation in buildings
• Machinery plant and equipment
• goods in factories
• Shops hotels etc.
• Furniture fixture pipelines located inside or outside the compound etc.

Scope of fire insurance:-

1) Lost due to fire

2) Lightning
3) Explosion
4) Strikes
5) Earthquake
6) Flood
7) Cyclones
8) Landslide

Personal liability:-It protects the insured if they are sued for clients that are covered by the insurance
claims.

Doctor surgeons nurses and most other medical professionals are sometimes required to purchase
personal liability insurance before becoming employed by a facility or opening a private practice
personal liability insurance covers injury or damage compensation claims made against you by a third
party it is also called comprehensive personal liability insurance or umbrella insurance policy.
if the policyholder is liable for any third party loss or damage then the insurer will recompense the
damage incurred.

Types of personal liability:-

• Public liability cover

• Professional indemnity insurance
• Employer liability
• Product liability
• Third party liability

Homeowners:- It is a form of property insurance that covers losses and damages to an individual
residence along with furnishing and other assets in the home.

Types off homeowners:-

• Standard fire and special perils policy

• Damage is caused due to explosion or implosion
• Damages caused by direct contact of railroad vehicle with own vehicle not included
• Damage caused due to bursting or overflowing of water tanks pipes etc.
• subsidence including rockslides and landslides
• Missile testing operation

Home structure/building insurance:-This type of cover is used cover the structure of house from any
kind of danger and risks. The policy also protects any permanent fixtures within the house this include
kitchen and bathroom fittings Ceiling and roof.

Public liability coverage:-If any guest or third party damage caused to them or their property inside
provides coverage against the same.

Personal accident:-This type of home insurance covers you and your family a compensation is given in
case of permanent disablement or death of the injured person due to accident if it has happened
anywhere in the world

Burglar and theft in case of any occurrence of burglary or theft in injured house if any valuable contents
are stolen or damaged the policy covers for it

contents insurance :-houses and as well as contents inside documents jewelry TV refrigerator etc. are
covered it does not help when you have To replace the interiors of houses flooded or burned to ashes by
break out of fire

Tenant’s insurance

landlords insurance

Personal motors it is a unique insurance policy meant for vehicle owners to protect them from
incurring any financial losses that may arise due to damage or theft of vehicle.

Risk and Uncertainty

Meaning of Risk:- Risk is a condition in which there is a possibility of an adverse deviation from a desired
Outcome that is expected or hoped for.

According to Fran Knight “Risk is a measurable uncertainty”.

According to Lrving Fisher “Risk may be defined as combination of hazards measured by Probability”.

According to Life Insurance Corporation of India, risk is defined as “A condition where there Is a
possibility of an adverse deviation from a desired outcome that is expected or hoped for, there is No
requirement that the possibility be unmeasurable, only that it must exist.”

In most of the risky situations, two elements are commonly found:

[Link] outcome is uncertain i.e. there is a possibility that one or other(s) may occur. Therefore,

Logically, there are at least two possible outcomes for a given situation.

[Link] of the possible outcomes, one is unfavorable or not liked by the individual or the analyst.

Meaning of Uncertainty

Uncertainty can be perceived as opposite of certainty where you are assure of outcome or What will
happen. Uncertainty is often confused with risk. Uncertainty refers to a situation where the Outcome is
not certain or unknown. Uncertainty refers to the state of mind characterized by doubt, Based on the
lack of knowledge about what will or what will not happen in the future.

Difference between Risk and Uncertainty :-

Basis of difference Risk Uncertainty

Meaning Risk is a Uncertainty is
condition in the lack of
which there is a knowledge
possibility of an certainty
adverse about an
deviation from a event.
desired
outcome.
Potential outcomes In risk potential In risk
outcomes are potential
known outcomes are
unknown
Measurement Risk can be Uncertainty
measured and cannot be
quantified using measured
probability
models
Control Risk can be Uncertainty is
controlled if beyond
proper control .
measures are
 taken at right
time.
Insurability Risk can be Uncertainty
insured as the cannot be
potential insured as the
outcomes are outcomes are
known and it unknown and
can be as it cannot be
measured measured.
Evolution of Insurance

Stage1: The origin of insurance is lost in antiquity. The earliest traces of insurance can be found in
India and Babylonia, even before twelfth century. In Rigveda, the most sacred book of India,
references were made to the concept ‘Yogakshema’, which means wellbeing and security of the
people. The ‘Codes of Hammurabi’ of Babylonia and ‘Codes of Manu’ of India, had recognized the
advisability of provision for sharing of future losses. However, there is no evidence that insurance in
its present form was practiced, prior to 12th century.

Stage2: Marine Insurance – Marine Insurance is the oldest form of insurance. Traces were found that
marine insurance was started at the beginning of 14th century. The travelers and transporters by sea
and land were very much exposed to risk of losing their vessels and merchandise, because of theft or
robbery by pirates and vessel get sunk in the deep waters of ocean due to bad weather or attack by
enemies of kings. Therefore, to safeguard them the marine traders devised a method of spreading over
them the financial loss of the unfortunate individual victim, who lost the vessel or merchandise. This
device is marine insurance. This was quite voluntary in the beginning, now in modern it has been
converted into modified shape of premium.

Stage 3: Fire Insurance – Fire Insurance has been originated in Germany in the beginning of 16th century.
The fire insurance got its momentum in England after ‘The Great Fire’ in 1666 when the fire losses were
tremendous. About 85% of the houses were burnt to ashes and property worth 10 crore sterling was
completely burnt off. Fire insurance office was established in 1681 in England. In India the general
insurance started working since 1850 with the establishment of the Triton Insurance Calcutta.

Stage 4: Life Insurance – life insurance made its first appearance in England in sixteenth century, the
first recorded evidence in England being the policy on life of William Gybbons on June 18, 1653. Life
insurance did not prosper in United States during the 18th century, because of serious fluctuations in
death rates, but soon after 1800, some active interest began to be shown in the enterprise because of
the application of level premium, which had by them been in operation in UK for more than a
generation. In India some Europeans started Life insurance company in Bengal Presidency, viz., the
Orient Life Assurance Company in 1818.

Stage 5: Miscellaneous Insurance – The miscellaneous insurance took the present shape at the later
part of 19th century with the industrial revolution in England. Accident insurance, fidelity insurance,
liability insurance and theft insurance were the important forms of miscellaneous insurance.

Annuity policy and Kinds of Annuity policy

Annuity is a contract that provides an income for a specified period of time. Annuity schemes are Those
wherein policyholder’s regular contributions over a period of time (or one time contribution)
Accumulates to form a corpus with the insurer. This corpus is used to yield a regular income that is Paid
to policyholder’s until death starting from the desired retirement age. Annuities are completely
Opposite to life insurance contracts.

Pension and annuity are both funding schemes after retirement. Pension is the amount of money paid
Regularly to a person who has retired because of having reached a certain age. A pension fund is
Generally maintained and created by an employer for employees.

[Link] the basis of Time :-

[Link] Life Policy – This is the simplest and the cheapest form of life insurance sold in the Market. The
term insurance provides life protection for the selected term (period of years) Only. In case the person
(whose life is insured) dies during the period, the benefits are payable Under the policy, and in case of
his survival till the end of the selected term, the policy Normally expires without any benefit becoming
payable. The premiums of a term life policy Are very low.

[Link] life insurance policy – Whole life insurance policy are intended to provide life Insurance
protection over the life time of the assured. The whole life insurance provides for Payment of promised
amount upon the insured’s death regardless when it occurs. Under whole Life policy the payment of
promised sum is obviously paid, unlike term insurance policy, but The time of payment is uncertainty.
[Link] insurance policy – An Endowment life policy is designed primarily to provide Living
benefit, and secondarily to provide life insurance. Therefore, it is more of an investment In nature than a
whole life policy. A life insurance contract is that, where the insurer pays the Promised sum on the death
of the insured or on the expiry of the term of contract, whichever Is earlier. Premium of endowment
policy is much higher than whole life policy and term life Policy. Many people use endowment life
insurance to fund the anticipated financial needs, Such as education, purchase of a property or
retirement.

[Link] the basis of premium payment :-

[Link] premium policy – Single premium policy is useful to those who desire to provide the Whole
premium in one instalment at the time of taking the policy. Single premium policy Becomes matured on
the insured death or on the expiry of selected term whichever is earlier.

[Link] premium policy – unlike single premium policy, under this policy premiums are paid On regular
basis for a selected term or till prior death. It is useful to those persons having Regular earnings. The
sum assured by the insurer becomes payable if the assured reaches a Particular age or on the death
whichever is earlier.

[Link] the basis of claim Payment:-

[Link] sum policy – under fixed sum policy, the benefit assured by the insurer is settled as Single
payment immediately after the maturity of the period of policy or on the death of Insured whichever is
earlier.
[Link] Policy – annuity is a contract that provides regular income to an individual for a specific period
of time. Annuity schemes are those wherein the sum assured by insurer to the insured is settled in
regular intervals payments. They are usually taken as retirement benefits.

[Link] the basis of number of persons insured

[Link] life policy – single life policy covers the risk of life of only one individual. It may be Taken on
one’s own life or on another’s life. The policy amount is payable to the insured on Maturity of the
selected term or on the death of the insured whichever is earlier.

[Link] life policy – multiple lie policy can be a joint life policy or last survivorship policy. Unlike single
life policy, multiple life policy covers the risk of life of two or more individuals.

[Link] the basis of participation in profits

[Link] profits policy – with profits policy are also termed as participating policies. With profits Policy
holders are entitled to get bonus or benefits along with the sum assured at the maturity Of the policy as
per terms and conditions.

[Link] profits policy – they are also termed as non-participating policies. Under this policy, Sum
assured will become payable without any benefits or bonus. Only the sum assured is Settled at the
maturity of the life policy.
 Module:-2

Life insurance underwriting

Life insurance underwriting it is a process where insurance carrier assign applicants classification based
on several factors. It is a process ensures used to determine the risk of insuring your small business.

Insurance underwriting is how an insurance company evaluates its risk it helps an insurance company
decide whether taking a chance on providing coverage to a person or business would be profitable.

• It helps determine whether an applicant is insurable and at what amount and what goes to the
applicant.
• Underwriting is a term used to describe the consideration given to a life insurance application to
determine whether a policy applied for should be issued or there or changes to be made
depending on the persons risk profile.
• Underwriting is how insurance companies measure the risk of ensuring you to set your premium
and under writer weighs your age,health,gender ,hobbies, occupation, driving record and
medical history.

Key factors considered in underwriting:-

▪ Age
▪ Coverage amount
▪ Criminal history
▪ Driving record
▪ Drug use
▪ Existing coverage
▪ Gender
▪ Health history
▪ Income and networth
▪ Insurable interest
▪ Military service
▪ Occupation
▪ Tobacco use

Two parts of life insurance underwriting:-

❖ Financial underwriting:- it helps the underwriter to make sure the amount purchasing is in line
with your family’s and needs is the process of assessing whether the proposed sum insured and
product are reasonable when considering possible financial loss to client.
❖ Medical underwriting:-Here, the underwriters determine how much of a risk you are to
insure by evaluating.
Life insurance underwriting is a process that large financial service provider users to know the eligibility
of customers to receive that product

“Life insurance underwriting is a process that large financial service provider uses to know the
eligibility of customers to receive their product”. It is the process of accepting proposal of customer
based on guidelines formulated by insurance company.

Underwriting process:-

• Every insurance company has its own underwriting manual.

• Guidelines-manual-insurance company uses to determine premium rates.
• Manual-physician statement-prescription-height,weight, health classifications.

Process:-
Step:-1 Application quality check

• Before underwriting process begin insurance company go through application to check all the
information.
• Application is first step for policy
• Insurance company looks for accurate information-completely filled.

Step:-2 Paramedical exam

• Results of paramedical exam (checkup with doctor)

• Lab-medical technician- perform exam
• Information=Basic-height, weight,[Link] test, heart disease, stroke, diabetes, blood borne
disease Drug test-cocaine -raise in premium.
• Insurance company pays for paramedical exam
• Paramedical exam results can be used for other insurance companies

Step:-3:-Attending physician statement

• Based on results of medical exam

• Ask for physician statement
• Medical history from doctor
• Status of each condition
• How long to been treated, how long symptoms have been present.

Step:-4:-Medical information bureau check

• Trade group that help insurance company share medical data

• Insurance company can find out any frauds by seeing previously applied for life insurance in 6
months

Step:-5:-Prescription check

• Underwriter check all medication prescribed 5-7yrs

• Paramedical exam with the application
 • Higher coverage amount policies require the prescription check.

Step:-6:-Motor vehicle report

• Driving history
• Determine the risk
• Speed, reckless, crimes, accident
• 5-7yrs rate depends on driving habits

Step:-7:-Actuarial tables

• Determine what risk person pose to the insurer

• Determine the rate insurance company should charge
• Mortality table (based on age and gender mortality probability for given population
• Build table (body mass index) based on height and weight

Step:-8:-Credit system

• Based on tests, tools and checks the credit system to give better premium rates
• Prescription check underwriter know what steps are taken to keep health problems from getting
worse.

Step:-9:-Final rating

• Once underwriting is complete owner of life insurance policy is finally rated

• Process takes 3-8weeks
• Skipping paramedical exam, physician statement offer lower coverage amounts.

Need for selection:-

It is the process where by we can determine the degree of risk present in applicant for
insurance=premium established for person or additional premium should be charged or rejected.

• The main objective of selection risk is to decide whether the proposal should be accepted or
not.
• To decide the rate of premium to be charged.
• Insurance risk may be classified into standard or substandard on the basis of selection because
all the person cannot pay the same premium but it is not practical to charge huge premium.
• To avoid any discrimination on the part of lives assured
• To avoid anti selection:-selection of person for insurance who are not insurable and charging
lesser premium for those who are to be charged higher premium.

Factors affecting rate of mortality:-

▪ Age
▪ Gender
▪ Occupation
▪ Environments
▪ Habits:-smoking, intoxicating, nicotate effects
 ▪ Conditions of health as evidenced by family history
▪ Longevity
▪ Heredity
▪ Personal history
▪ Chronic diseases:-heart disease,cancer, diabetes
▪ Acute diseases:-cold, cough etc
▪ Standard impairments:-deafness blindness etc
▪ Residence:-geographical location, atmosphere, climate, travel.
▪ Race/nationality:-few countries like India believe high race/caste are expected
to live long.
▪ Economic status:-income of the person will help to improve health coverage
▪ Defense service:-people engaged in navy, airforce, military.

Sources of data:- Information on the factors affecting with is collected before it can be [Link]
determine the degree of risk it is collected from the following

➢ Proposal form:-The first and the important source of risk information is application form it is
divided into two parts:-
[Link] statement 2. Application form.
➢ Examination Report. Opinion of medical examines is required. He has to declare findings are
true and [Link] information given by medical Examiner in deemed to be correct and
[Link] he would give true and fair picture.
➢ Agents Report: The agent is required to State whether the life to be assured is insurable & not.
The has to furnish information of assured name & address, monthly income, Relationship with
agent, the agent report can be great value to underwriting department because he has personal
acquaintances with life proposed & can give full & correct information Of all factors affecting
the risk.
➢ Inspector Report: Sometimes investigation is conducted without the knowledge of applicants.
Nowadays Insurers ( Ins co) have their own inspection staff who are generally know as
inspectors. In this case inspector interviews the inspector the applicants neighbour, business
employee’s, bankers, business associates & others who have had special information pertaining
to business personal life, habit, social. Behaviour & health.
➢ Friends Report: Since friends are fully aware of personal & private life of proposal, they can give
better information than the agent.
➢ Attending physicians:-A family physician Can give better records health, history of proposed life
and his family. Normally giver the information after charging certain amount of fees.
➢ Medical Information Bureau: It is common in USA but in India such bureau has not started. The
Insurers (Ins co) are members Of this bureau and pay a certain fees annually.
➢ Neighbour business associates:- confidential report about applicant can be easily obtained from
the neighbour and business associates.
➢ Commercial credit investigation bureau:-This bureau assembles financial and social information
of business.

Mortality Rate:-A person belonging to particular group categorized according to age or some other
factors such as occupation will die. It is one of the basic factor in setting a Life insurance premium.
Concept of Extra Mortality.

The difference between the mortality of substandard life & mortality rate of standard life in a body of
assured. Life is known as extra mortality. A prematured death or one that occurs before average life
expectancy for a person of a particular demographic Category.

Mortality charges:-

It is a actual cost insurance technically called mortality charge. This is deducted usually every month
from your policies account value. The Insurance company Can charge from time to time but it cannot
exceed the maximum limit as specified in policy.

Example:-Ravi pays premium of Rs 10,000 towards. Life insurance policy. Life coverage of Re 1,00,000
Mortality charge. 200 p.a (10,000-200) 9800 annual premium that Ravi Paid After deduction of
mortality charge the same is kept aside by insurance companies is Life Fund – Death benefit It is kept
very safely so as to pay sum assured to families of policyholders.

Occupational hazards:- An occupational hazard is the risk associated with working in specific
[Link] occupational safety and health administration (OSHA) describes five categories of
occupational hazards,

1. Physical safety hazards

2. Chemical hazards
3. Biological hazards
4. Physical hazards
➢ Physical safety hazards include anything that could lead to injury in a workplace accident. This
could be slipping hazards the operation of machinery,electrical hazards or any other dangerous
condition that exist in a workplace.
➢ Chemical hazards include solvents, paints, toxic dusts, acids etc.
➢ Biological hazards include infectious diseases,moulds,posionous plants,animal materials.
➢ Physical hazards include excessive noise, radiation, explosion etc.
➢ Ergonomic risk factor include repetitive actions such as heavy lifting or the use of tools with
vibration etc. Awkward postures, repetition.
 Module:-3

Legal aspects of insurance

In general, an Insurance contract must meet four conditions in order to be legally valid:-

• It must be for a legal purpose

• The parties must have a legal capacity to contract
• There Must be evidence of a meeting of minds between the insurer and the insured
• There must be a payment or consideration

Legal aspects of insurance

• Concealment :-it is the willful failure to disclose pertinent information

It is the act of hiding or not putting forward any relevant fact in front of the insurer that need to be
revealed

• Representation:-Representation is how something is presented, false Representation is

a misstatement of a material fact by the insured prior to the finalization of contract.
• Warranty:- it is a statement or promise of the injured that relates to their risk and
appears in the contract.
• Subrogation :-it is the right of the insurer under certain circumstances to assume the
legal right of the insured.

This transfer of all the rights and remedies from insured to insurer is called subrogation.

• Estoppel:-Is when one party leads this second to a false conclusion that the second part
is realizes upon.

A Illegal rule which prevents someone from saying in code that something they have previously stated
as true in court.

A contract is an agreement between parties enforceable at law the provisions of Indian contract act
1872 governs all contracts in India including insurance contracts.

An insurance policy is a contract between parties the company called insurer and the policy holder
called the insured.

Essentials of a valid contract:-

The insurance act should fulfill the following legal elements:-

1) Offer and Acceptance: There must be lawful offer and a lawful acceptance of the offer.
There must be two parties to an agreement, one making the offer and the other
accepting it. The offer must be definite, unambiguous and certain. It must be
communicated. Acceptance must be absolute and unqualified Le it should not be
conditional. It must be communicated to the offeror.
2) Intention to create legal relationship: There must be an intention among the parties that
the agreement should be attached by legal consequences and create legal obligations
 Agreement of a social or domestic nature does not involve any legal obligations so they
are not a contract.
3) Lawful consideration :-consideration means something in return. An agreement is
enforceable only when each of the parties to it gives something and get something
consideration must be something of value. It may be past, present or future.
4) Capacity of parties. The parties to an agreement must be competent to contract Parties
must be of the age of majority and of sound mind and must not be disqualified form
contracting by any law to which they are subject (Section 1 If any of the parties in the
agreement suffers a from minority, lunacy, idiocy, drunkenness, etc, the agreement is
not Enforceable
5) Free consent One of the essentials of the valid contract is that there should be
consensus ad idem they agree upon the same thing in the same sense at the same time
and that their consent is free and real Coercion is said to be free whom it is not caused
by:-
• Coercion
• Undue influence
• Fraud
• Misrepresentation
• Mistake:-When there is no consent, there is no contract
6) Lawful object: The object of the must be lawful. It should not be illegal immoral or
opposed to public policy. If the object of the agreement is performance of unlawful act,
the agreement is unenforceable, for example, An agreement to commit an assault or to
beat a man has been held unlawful and void.
7) Writing and registration According to the Indian Contract Act, a contract may be oral or
in writing. But in certain special cases, if lays down that the agreement, to be valid must
be in writing or/and registered. For example, it requires that an agreement to pay a time
barred debt must be in writing and an agreement to make a gift for natural love and
affection must be in writing and registered.
8) Certainty: The terms of agreement must be certain and not vague, indefinite or
ambiguous. For example, A. agree to sell B” a hundred tons of oil.” There is nothing
whatever to show what kind of oil was intended, the agreement is void for uncertainty.
9) Possibility of performance: A contract must be capable of performance. An agreement
to do un act impossible is itself is void.
10) Agreement not declared void: The agreement must not be have been expressly declared
void by any law in force in the country. (Section 24-30 and Section 56).

Nature of insurance contract:-

A contract of insurance is an agreement whereby one party, called the insurer, undertakes, in return for
an agreed consideration, called the premium, to pay the other party, namely the insured, a sum of
money or its equivalent in kind, upon the occurrence of a specified event resulting in a loss to him. The
policy is a document which is an evidence of the contract of insurance. As per Anson, a contract is an
agreement enforceable at law made between two or more persons by which rights are acquired by one
more persons to certain acts or forbearance On the part of other or others.
The Indian Contract Act. 1872, sets forth the basic requirements of a Contract As per Section to of the
Act: All agreements are contracts if they are made by the free consent of parties competent to contract,
for a lawful consideration and with a lawful object, and are not nereby expressly declared to be void.

An Insurance policy is also a contract entered into between two parties, viz, the Insurance Company and
the Policyholder and fulfills the requirements enshrined in the Indian Contract Act.

INSURANCE ACT 1938

The insurance act originally passed on the year 1938. However It amended for several times, la latest
amendment of the insurance art was the, the IRDA itself when it became the authority to perform many
tasks required to be done under the insurance act such as issuing licenses issuing registration
certificates, monitoring compliance with the provisions of the Act, issuing directives, laying down norms.
The all above said functions were performed by the controller of Insurance earlier as per the Insurance
Act, 1938. The provisions of the Act may be briefly Described as follows.

[Link]: To obtain the certificate of registration is compulsory to the every insurance company
The Registration should be renewed annually. The paid up capital must be of Rs. 100 crores for life
insurance or general and Rs 200 crores for re insurance business. Every insurer has to deposit in cash or
approved securities, a sum equivalent to 1% in life insurance of 3% in general insurance of the total
gross premium in-any financial year commencing after 31st March. 2000 with the Reserve Bank of India.
The amount is not being exceeding Rs 10 crores The deposit amount is Rs 20 crores for reinsurance
businesses

Every insurance company must keep the accounts separately of all receipts and payment in respect of
each class of insurance business such as the marine or miscellaneous insurance. Insurers must invest his
assets only in those investments which approved under the provisions of the Act.

Every insurance company has to do a minimum insurance business in the rural or sector, as may be
specified in the order. The authority can be investigated the affair of the insurer at any time.

[Link] of seats: License to the poem for being the gorion can’t work as an insurance agent unless
he has obtained a license from the authority There is some disqualification as per the act for a person to
be an agent, as follows

• Being unsound mind.

• Being convicted of criminal misappropriation or criminal breach of the o cheating or forgery or
Abetment of Attempt to commit any such offence
• Being found have been guilty of or connived at any fraud, Dishonest, misappropriation against
any insured on insurer.

[Link] of surveyors and loss assessors: No insurer can settle any claim equal to or exceeding Rs
20000/- without the report on the loss from a licensed surveyor. The person can act as a surveyor or
loss assessor only after obtaining license from the authority. The authority can’t issue the license
without get satisfaction about the applicant.

[Link] margin: The authority for the insurer also decides the solvency margin. The act clarifies
how the assets and liabilities have to be determined and the extent to which the assets are to
exceed the liabilities. These provisions exist to ensure the adequacy of insurer’s solvency.
 [Link] of premium before assumption of risk: A risk can be assumed by the Insurance company
after receiving the premium or a guarantee that the premium will be paid within the prescribe time.
Sometimes agents collect the premium amount and dispatch or deposited to the insurance
company. They have to deposit the NY within the 24 hrs. except the bank and postal holiday The
agent has to deposit the premium in full without deducting his commission. If any refund of, the
premium will be due, the insurer directly shall paid the amount to the insured by crossed or order
cheque or by postal money order.

Indian contract act:-

The Indian contract act 1872 prescribes the law relating to contracts in India and is the key act regulating
Indian contract law the act is based on the principles of English common law.

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. An agreement as every promise and every set of
promises forming the consideration for each other.

Indian contract act 1872:-The law of contract in India is contained in the Indian contract act 1872 that
came into the force from first day of September 1872 it is completely based on English common law
which is largely made up of judicial procedures it extends to the whole of India except the state of
Jammu and Kashmir

Some specific kinds of contracts are:

• Contracts of indemnity and Guaranty (section 124 -147)

• Contracts of bailment and pledge (section 148-181)
• Contract of agency (section 182-238)

Features of insurance contract:-

1. Aleatory:- insurance contracts are aleatory as promise comes into picture only one
occurrence of event this occurrence of event is based on probability and occurrence of
event is not controlled by any party aleatory means that something is dependent on an
uncertain event or a chance of occurrence.
2. Adhesion:-Here contract is prepared by insurer and insured accepts given terms and
conditions without any negotiation. Adhesion contracts are standard contracts were in
contract is drafted by one party and signed by another party.
3. Unilateral:-Here insurer makes any enforceable promise injure doesn’t make any
promise but bound by the terms and conditions of policy where contract can be lapsed
if renewal premiums are not paid a contract in which only one party makes an
enforceable promise
4. Personal contract:-Life insurance is a personal contract or agreement between the
insurer and the insured the owner of the policy has no bearing on the risk the insurer
has assumed people who buy life insurance policies are called policy owners rather than
policyholders policy owners actually own their policies and can give them way if they
wish.
5. Conditional:-An insurance contract is a conditional this means that the insurer’s promise
to pay benefit depends on the occurrence of an event covered by the contract.
Example:-The timely payment of premium is a condition for keeping the contract in force if premiums
are not paid the company is received off its obligation to pay a death benefit.

6. Valued or indemnity contract:- An insurance contract is either a valued contract a

valued contract pays it stated some regardless of the actual loss incurred life insurance
contract are valued contracts if an individual acquires a life insurance policy injuring her
life for five lacks that is the amount payable at death there is no attempt to value actual
financial loss upon a persons death. An indemnity contract however is one that pays an
amount equal to the loss.
8. Utmost good faith:-Insurance is a contract of utmost good faith This means both the policy
owner & the insurer must know all material facts and relevant information.
9. Material facts:-All facts which need can affect the occurrence of risk must be declared. It
becomes part of the contract. Facts are presumed to be, material because they affect the
insurer’s decision to “accept or reject an applicant.
10. Insurable interest:-Another element of a valid insurance contract is insurable interest. Insurable
interest means that the subject matter for which the individual enters the insurance contract
must provide some Financial gain to the insured.

Insurance laws:-

Insurance law is the practice of law surrounding insurance including insurance policies and claims.

Insurance is a method of spreading over a large number of persons a possible financial last oh serious to
be conveniently borne by an individual.

The practice of law governing insurance including insurance policies and claims is known as insurance
law.

Parties in an insurance contract:-

• Insurer
• Insured

Life insurance can be defined as mutual agreement by which one party agrees to pay a sum upon the
happening of a particular event during a certain life, in consideration of the payment of a small amount
of premium by the other party.

Nomination:-Nominee is the person who is entitled to the benefit which the nominator would have
been entitled to get in the case of demise of the nominator this process is known as nomination.

Assignment:-Assignment of an insurance policy is the transfer of assignment of all rights title and
interest and liability of the policy in favor of the assignee. Assigner is the policy holder who transfer the
policy and assignee is the person who receives the policy.

Two types of assignment:-

• Conditional assignment
• Absolute assignment

[Link] Assignment
It would be useful where the policyholder desires the benefit of the policy to go to a near relative in the
event of his earlier death. It is usually effected for consideration of natural love and affection. It
generally provides for the right to revert the policyholder in the event of the assignee predeceasing the
policyholder or the policyholder surviving to the date of maturity.

2. Absolute Assignment

This assignment is generally made for valuable consideration. It has the effect of passing the title in the
policy absolutely to the assignee and the policyholder in no way retains any interest in the policy. The
absolute assignee can deal with the policy in any manner he likes and may assign or transfer his interest
to another person.

Life insurance products/types:-

• Endowment policy
• Whole life insurance policy
• Term life insurance
• Money back policy
• Joint life insurance policy
• Group insurance policy
• Pension plan or annuities
• Unit linked insurance plans
• Child insurance

General insurance types/products:-

• Personal liability
• Home owners
• Personal accident
• Personal motors

Marine insurance:-Marine insurance covers the loss or damage of ships, cargo, terminals, and any
transport by which the property is transferred, acquired, or held between the points of origin and the
final destination.

Types of marine insurance:-

• Marine hull insurance:-it is the insurance provided to the loss or damage to hull and
machinery the hull is the structure of the vessel machinery is the equipment that
generates the power to move the vessel and control the lighting and temperature
system such as boiler,engine,cooler,and electricity generator.
• Marine cargo insurance:-It provides insurance coverage for goods in transport from one
place to another place in ship.
• Freight insurance:-It offers protection against potential losses caused to the shipment
during the transit(carrier).

Fire insurance:-fire insurance, provision against losses caused by fire, lightning, and the removal of
property from premises endangered by fire. The insurer agrees, for a fee, to reimburse the insured in
the event of such an occurrence.
Insurance act

The insurance act 1938 is a law originally passed in 1938 in British India to regulate the insurance sector.

The act was passed to control the working and activities of the companies carrying on business of life,
fire, marine, accident insurance.

Apart from the above act, the Indian insurance business is governed by the following special acts:-

• The life insurance corporation act, 1956

• The marine insurance act 1963
• The general insurance business act 1972.

Prior to the law, only the marine insurance act,1906of England existed in British India but it only applied
to marine insurance.

[Link] life insurance corporation act 1956:-

• Basis for establishment of LIC as a body corporate

• Maximum 16members appointed by central government
• LIC was formed on 1september 1956

Objectives of LIC in India:-

• Spread life insurance widely and in particular to the rural areas, to the socially and
economically backward with a view to reaching all insurable persons in the country and
providing them adequate financial cover against death at a reasonable cost.
• Maximization of people’s savings for nation building activities
• Provide complete security and Promote efficient service to the policyholders at
economic premium rates.
• Conduct business with utmost economy and with the full realization that the money
belongs to the policyholders
• Act as trustees of the injured public in their individual and collective capacities
• meet the various life insurance needs of the community that would arise in the
changing social and economic environment
• Involve all people working in the corporation to the best of their capability in furthering
the interest of the insured public by providing efficient service with courtesy.
• To diversify the risk
• Generation of capital

Role and functions of LIC:-

• It collects the savings of the people through life policies and invests the fund in a variety of
investments
• it invest the fund's in profitable investments so as to get good return hence the policyholders
get benefit in the form of lower rates of premium and increased [Link] short, LIC is
answerable to the policy holders.
• I to subscribe to the shares of the companies and corporations it is a major shareholder in a
large number of blue chip companies
 • it provides direct loans to the industries at a lower rate of interest it is giving loans to industrial
enterprises to the extent of 12% of its total commitment.
• It provides refinancing activities through SFCs in different States and other industrial loan giving
institutions
• It has provided indirect support to industry through subscriptions to shares and bonds of
financial institutions such as IDBI,IFCI, ICICI,SFCs, etc. at the time when they are required initial
capital it also directly subscribe to shares of agriculture refinancing corporation and SBI.
• It gives loans to those projects which are important for national economic welfare the social
oriented projects such as electrification sewage and water channelizing are given priority by the
LIC.
• it nominates directors on the board of companies in which it make sets investments
• it gives housing loans at reasonable rates of interest
• It acts as a link between the saving and the investing process it generates the savings of the
small savers middle income group and the rich through several schemes.

Functions of corporation:-

• Subject, to the rules, if any, made by the Central Government in this behalf, it shall be the
general duty of the Corporation to carry on life insurance business, whether in or outside India,
and the Corporation shall so exercise its powers under this Act as to secure that life insurance
business is developed to the best advantage of the community.
• Without prejudice to the generality of the provisions contained in sub-section (1) but subject to
the other provisions contained in this Act, the Corporation shall have power
(a).To carry on capital redemption business, annuity certain business or reinsurance business in
so far as such reinsurance business appertains to life Insurance business.
(b).Subject to the rules, if any, made by the Central Government in this behalf. To invest the
funds of the Corporation in such manner as the Corporation may think fit to take all such steps
as may be necessary or expedient for the protection or realization of any investment, Including
the taking over of and administering any property offered as security for the investment until la
suitable opportunity arises for its disposal.
(c). To acquire hold and dispose of any property for the purpose of its business
(d) to transfer the whole or any part of life insurance business carries on outside India to any
other person or persons if in the interest of the corporation it is expedient to sold to do;
(e). To advance or lend money upon the security of any movable property .
(f) To borrow or raise any money in such manner and upon such securities corporation me think
fit
(g). to carry on either by itself or do any subsidiary any other business in any case where such
other business was being carried on by a subsidiary of an insurer who controlled business has
been transferred to and invested in the corporation under this act
(h) to carry on any other business which may seem to the corporation to be capable of being
conveniently carried on in connection with its business and calculated directly or indirectly to
render profitable the business of the corporation
(i) To do all such things as maybe incidental or conducive to the proper exercise of any of the
powers of the corporation in this discharge of any of its functions of the corporation sail act as
so far as maybe on business principles.
 Management of the corporation:-
The central office of the Corporation shall be at such place as the Central Government may, by
notification in he Official Gazette, specify. The Corporation shall establish a zonal office at each
of the following places, namely, Bombay, Calcutta, Delhi, Kanpur and Madras, and, subject to
the previous approval of the Central Government, may establish such other zonal offices as it
thinks fit. The territorial limits of each zone shall be such as may be specified by the Corporation.
There may be established as many divisional offices and branches in each zone as the Zonal
Manager thinks Fit.
Other committees:-
1. The Corporation may entrust the general superintendence and direction of its affairs and
business to an Executive Committee consisting of not more than five of its members and the
Executive Committee may exercise, all powers and do all such acts and things as may be
delegated to it by the Corporation.
2. The Corporation may also constitute an Investment Committee for the purpose of advising it in
matters relating to the investment of its funds, and the investment Committee shall consist of
not more than eight members of whom not less than four shall be members of the Corporation
and the remaining members shall be persons (whether members of the Corporation or not) who
have special knowledge and experience in financial matters, particularly matters relating to
investment of funds.
It may appoint one or more persons to be the managing director or directors of the Corporation,
and every managing director shall be a whole-time officer of the Corporations, and shall exercise
such powers and perform such duties as may be entrusted or delegated to him by the executive
committee of the corporation.
Funds of the corporation:-
corporation shell have its own fund and all receipts of the corporation shall be credited there to
and all payments of the corporation shall be made their from.
Audit:-
• The accounts of the corporation shall be audited by auditors Julie qualified to act as
auditors of company under the law for the time being in force relating to companies and
the auditor shall be appointed by the corporation with the previous approval of the
central government and shell received such remuneration from the corporation as a
central government may fix.
• Every auditor in the performance of his duty shall have at all reasonable times access to
the books accounts and other documents of the corporation.
• The auditors shell submit their report to the corporation and chill also forward a copy of
their report to the central government.

Annual report of activities of corporation:-

The corporation shell as soon as maybe after the end of each financial year prepare and submit to the
central government in such form as may be prescribed a report giving an account of its activities during
the previous financial year and the report shall also give an account of the activities if any which are
likely to be undertaken by the corporation in the next financial year.
liquidation of the corporation

No provision of the law as provided in the companies act relating to the winding up of companies or
corporation shall apply to the corporation established under this act and the corporation shall not be
placed in liquidation sale by order of the central government and in such manner as a central
government may direct.

2. Marine insurance act 1963:-

Under section 3of the marine insurance act 1963,as an agreement where by the insurer undertakes to
indemnify the assured, in the manner and to the extent there by agreed against Marine losses. The act
applies both to ship and cargo.

Types:-

a. Marine hull insurance

b. Marine cargo insurance
c. Freight insurance

[Link] insurance business act 1972:-

The act was enacted to nationalize all private companies undertaking general insurance business in
India.

The main objectives of GIC:-To carry on the general insurance business other than life such as
accident,fire etc. There are totally 16 general insurance companies in India. They are classified into two
broad categories:-

d. Public sector undertakings

e. Private insurance companies

Life insurance act

LIC act was passed on 19th June 1956 the headquarters is at Mumbai,India.

The LIC of India was set up under the LIC act 1956under which the life insurance was Nationalized.

It is basically an investment institution inasmuch as the funds of policyholders are invested and
dispersed over different classes of securities industries to safeguard their maximum interest on long
term basis the life insurance corporation was formed with a capital contribution of 5,00,00,000 from the
Government of India.

Objectives of LIC:-

[Link] life insurance widely and particularly to the rural areas.

[Link] mobilization of peoples savings by making insurance.

[Link] as trustees of the insured public in their individual and collective capacities.

[Link] relief

Functions of LIC:-
Primary functions:-

f. Certainty of compensation of loss

g. Insurance provides protection
h. Risk sharing

Secondary functions:-

i. Prevention of losses
j. Providing funds for investment
k. Insurance increases efficiency
l. Encouragement of savings
m. Solution to social problems

Types of LIC policies:-

n. Term life insurance

o. Endowment plans
p. Whole life insurance
q. Pension plans
r. Money back plans
s. ULIPS

Advantages of LIC:-

t. Death benefit
u. Valuable return on investment
v. Tax benefit
w. Availability of loan
x. Guaranteed income
y. Security of business

Disadvantages of LIC:-

z. Can be expensive for old aged people

aa. The returns on life insurance are not significant
bb. Insurers may not pay the benefit
cc. Exclusions

Insurance regulatory and development authority of India (IRDA)

The IRDA act 1999 spells out the mission to Protect the interest of the policyholders to regulate promote
and ensure orderly growth of the insurance industry and for matters connected therewith or incidental
thereto.

Subhash Chandra khuntia appointed as IRDA chairman

Debashish panda is the CEO of IRDA , headquarter is at Hyderabad, where it moved from Delhi in 2001.
Composition of authority:-As per the Section 4 of IRDAI act 1999 insurance regulatory and
development authority of India which was constituted by an act of parliament specify the composition
of authority.

The authority shall consist of following:-

a. A chairperson:-should have knowledge in life insurance and general insurance, shall hold
an office for the term of 5years, the age of retirement is 65years.
b. Five whole time members:-should have knowledge of Life insurance and general
insurance, shall hold an office for the term of 5years, the retirement is 62years.
c. Four part time members:-These persons shall be appointed by central government.

Objectives of IRDA:-

[Link] promote growth of insurance industry in the country including registration of insurance companies.

[Link] protect interest of policyholders and investors

[Link] act as judge on disputes

[Link] the provisions of Insurance Act.

Functions of IRDA

a. Ensure orderly growth of insurance industry

b. Protect interest of policyholders

[Link] consumer protection guidelines to insurance companies.

[Link] modify and suspend licenses for insurance companies

[Link] and audit of insurance companies and other related agencies

[Link] information about the industry.

Duties and responsibilities of IRDA section 14 of IRDA ACT,1999.

• Issue to applicant a certificate of registration renew modify withdraw suspend or cancel such
registration
• Protection of interest of policyholders in matters concerning assigning of policy, nomination by
policyholders, settlement of insurance claim, surrender value of policy and other terms and
conditions of contract of insurance.
• Specifying qualifications code of conduct and practical training for intermediary or insurance
agents or intermediaries.
• specifying the code of conduct for surveyors and loss assessors.
• Leaving fees and other charges.
• Specifying the form and the manner in which books of account shall be maintained and
statement of accounts shall be rendered by insurers and other insurer intermediaries.
• Promoting efficiency in the conduct of insurance business
• Promoting and regulating professional organizations connected with the insurance and
reinsurance business.
• subject to the provisions of this act and any other law for the time being in force the authority
shall have the duty to regulate promote and ensure orderly growth of the insurance business
and reinsurance business.
• Calling for information from undertaking inspection of conducting inquiries and investigations
including audit of the insurers intermediaries insurance intermediaries and other organizations
connected with the insurance business.
• control and regulation of the rates advantages terms and conditions that may be offered by
insurers in respect of general insurance business not so controlled and regulated by the tariff
advisory committee under section 64 u of the insurance act 1938
• Control and regulation of the rates advantages terms and conditions that may be offered by
insurers in respect of general insurance business not so controlled and regulated by the tariff
advisory committee under section 64 you of the Insurance Act 1938.
• Regulating maintenance of margin of solvency
• Regulating investment of funds by insurance companies
• Adjudication of disputes between insurers and intermediaries or insurance intermediaries.
 Module :-4
Product development
Product development is the process of fixing the rates or premium that insurers charge for their policies.

Insurance product development process:-

1) Analyzing market for ascertaining the customer needs and expectations:- Conduct systematic
market research to understand the customer needs and expectations regarding the insurance
products and services.
2) idea generation:-New insurance product idea can be obtained from the following sources:-
• Market research
• Customer need And evaluation needs
• Evaluation of customers various risk exposures
• competitors plans
• IRDAI suggestions
• Meeting and interacting with customers
• Experts opinions
• Conducting focus groups and depth interviews
3) Product feasibility studies:-
• Evaluate the idea whether it is possible for the firm to develop and market the new
insurance product or not ?
• what resources it requires?
• Are required resources available with firm?
• is there demand for this type of insurance product in the market?
• can we satisfy the customers requirements?
• do we have the necessary skills and expertise? Etc
4) Underwriting guidelines:-
• Fixing of standard rates to undertake the risk
• provision for charging extra premium depending on the risk factor
• Imposition of special conditions to protect the organization against possible losses
arising out of covering the risks of the policyholders.
• clear guidelines on what grounds the insurance proposal can be rejected.
5) Product planning and designing:-
• Product planning and designing includes the presenting the product concept to the
consumer symbolically to get their reactions and feedback.
• product planning presents consumers with elaborated versions of product concept.

Measure the product dimensions by having consumer respond to questions like:-

• Communicability and believability are the benefits clear and believable to you
• Need level do you feel the product solving a problem or filling a need for you
• Gap level do other products currently meet this need and satisfy you
• Perceived value is the price reasonably in relationship to value
 • Purchase intention would you buy the product
• User targets purchase occasions purchasing frequency who would use this products
when and how often.
6) Setting the pricing:-
• Selecting the pricing objective
• Determining demand
• Estimating costs
• Analyzing competitors cost prices and offers
• selecting a pricing method
• selecting the final price
7) State filing:-
• Insurers must submit premium rates charge on the new insurance policy to the state
rating authority and get approval before introducing the new product into the market.
8) Marketing campaign and strategic planning:-
• First part:-The first part of the marketing campaign describes- the target market size,
structure,and behaviour; sales and profit goals.
• Second part:-It outlines planned price distribution strategy and an estimated marketing
budget.
• Third part:-The third part of marketing campaign and strategic planning describes long
term sales and profit goals along with marketing mix strategy overtime.

Product design and evaluation:-

Product design is a process of creating a new product or improving an existing one it involves generating
ideas testing and finally mass producing the product.

Product design includes identifying a market need researching the competition developing a product.

A Common axiom holds that 80% of a product’s cost is determined during the first 20% of development.
So if insurers make a few wrong turns at early stage, the prod development costs would skyrocket.

To achieve maximum benefit for the design process, the cross-cultural research team should be included
in development discussions and in each step of the way. This allows the research team to find
enhancements that may add little or nothing to the cost, but contribute significantly to the perceived
value and profit margin

[Link] the Procedures: The following steps should be taken:

• Begin research planning with line managers by early identifying the overall research objective.
Confirm the consistency of the objective in each of the national market.
• Define all aspects of the procedural operations to ensure reliability in the data Collection
process. The same instructions should be followed during each questionnaire, interview, and
observation.

Incorporate Study Control: A thorough investigation of external Factors should be done to minimize
their impact on results.
Cultural Similarities:-Alongwith the differences in culture should be looked for, the similarities should
not be ignored. Differentiating a product for a certain group may Create more problems that solve it.
Main purpose of the insurer is to come to global decision on a new product design. Counting the Costs:-
The depth and breadth of the actuarial research, the competitive analysis, and the market analysis
determine the costs. One way to hold down the costs is to use internal resources to the fullest extent.

Premium Rating and Product Design: With the deregulation, new foreign entrants and increasing
consumer awareness – innovative products desi-n, new marketing techniques and timely product
launches is essential to stay ahead of the competition. Sophisticated premium rating and the flexibility
to respond quickly to changing market trends are increasingly recognized as the key to meet this
challenge.

(2) Analysis of the Market: Determine the exact nature of the market and the requirements of the
customer base. This will include:

(a) Estimating the size of the current and potential market.

(b) Analyzing market trends and profitability.
(c) determining the products and rating methods used by the competition
(d) Evaluating competing products in terms of price and cover
(e) investigating who actually makes the decision to buy a particular type of product
(f) identifying the principal reasons for buying the product.
(g) comparing the benefits of different distribution methods and advising on the Most
effective methods for remunerating sales distribution channels.

(3) Analysis of DATA: Accurate premium rating depends critically on collecting relevant data in an
appropriate format, and then analyzing this data using the right Statistical techniques. The insurers can
address these central issues by:

• Advising on the design of databases and the collation of statistical information,

• Analyzing claims experience to determine the effect that rating factors have upon the risk
• comparing these theoretical results with the relativity's implicit in the existing rating structure,
and interpreting the results.
• considering the possible effect upon the portfolio of introducing particular rating changes.
• Providing financial projections of future results, based on the calculated premium rates
• Undertaking sensitivity analysis

Hence, new product design and development must identify the similarities and differences of
various cultures. This understanding shall allow companies to capitalize on commonalties or respond
to differences appropriately. A well-designed product would answer most consumer needs.

Evaluation is a process that critically examine a program it involves collecting and analyzing information
about program programs activities characteristics and outcomes.

product evaluation is to evaluate the quality of products in order to summarize experience as the
guidance for follow up design.
Marketing and servicing:-

“Marketing is the process by which individuals and group obtain what they need and want through
creating and exchanging products and value with others”.

Marketing is the action or business of promoting is selling products or sources. Including market
research and advertising. It is a activity a company undertakes to promote the buying & Selling of a
product.

MARKETING CONCEPT:-Over the years, marketing has undergone substantial changes both in nature,
me and functions. Modern concept of marketing is different from the traditional concepts. Under the
former,. Marketing is conducted the philosophy, that products made matched with markets, i.e., the
firm takes the responsibility on itself to design, develop and sell its products to suit the needs of its
customer-the basic principle followed is Caveat Vendor”, i.e., let, the seller beware. The main objective
behind this thinking is to satisfy customer through constant study of their changing needs and wants.
While under the later, the firm does not take any responsibility for its goods- the philosophy that works
is of “Caveat Emptor”, i.e., let the buyer beware. The goods are produced as per the decision of the
marketing manager and are put on the market, and the purpose of marketing ends.

Marketing of insurance products:-

The Indian insurance industry poised for interesting and demanding time do they industry has been
serving customers since 19th century, the nationalization of the industry in 1956 titled the scales in favor
of the provider, the Life Insurance Corporation (LIC). While the LIC did expand aggressively to cover
various part of the country, the customer has no choice when it came to selection the life insurance
provider. The transition of the industry from public monopoly to a competitive environment now
present very interesting opportunities, both to the new players and to the customers. It is apparent that
the new players have an opportunity to test out their various hypothesis but also to apply learning's
from overseas markets, the customers will have a greater choice when it comes to choosing a provider
or a solution for his needs. For the customers, the most important functions of an insurance company
include produce design distribution services, delivery and investment performance. The common link
between the provider and the customer. The distribution chain in now assuming focus with new players
exploring various possibilities to reach out to customers and to service them effectively. The future of
Insurance market and accordingly the marketing strategy is likely to be influenced by three new
developments: (a) the convergence of financial services, (b) rise of E-commerce and (c) the emergence
of new distribution channels. In fact, the marketing strategies for the players would be significantly
influenced by the value propositions of time and cost reduction, effective CRM and profitability.

Issues in Insurance :-

The peculiar nature of the insurance industry creates implementation of marketing strategy a difficult
task in the following ways:

• Insurance is unpatented, subjective, requires prior experience and physical evidence is difficult
to establish,
• There is a involvement of customers in production of services, mass production is impossible.
• The services cannot be inventoried and standardized.
Critical success factors for insurance players:-

In the current industry scenario, the following factors must be carefully examined for the success of
the any insurance company in particular and the industry in general:

• Change in the Attitude of the Population

Insurance has always been used as a tax saving tool. But, in light of the Kelkar Committee
recommendations, the lusture would wipeout once they are implemented. Therefore only those will
survive who can educate the people to secure/insure their future against any unknown calamity and
make a shield around their families and businesses.

• Open and Transparent Environment Created Under the IRDA

It has been seen that any sector open up in India there are always gray areas and unsure policies.
These are not exactly what any players, be it Indian or foreign, looks for. It creates an air of
uncertainty in all the decision making process. Insurance as a sector requires players who are strong
financially and are willing to wait for returns.

There confidence can be bolstered only if there are open and a transparent policy Guidelines. This
will also help the consumers feel safe that the regulatory is an active One and cares to do everything
possible to keep things under control and help the Insurance environment grow maturely.

• Well-established Distribution Network:-Distribution is going to be key area for the success

of an insurance company in Indian market. Public Sector banks like SBI, PNB etc. can be one
of the leaders in distribution because of their huge network and long existence.

• Trained Professionals to Build and Sell the Product:-

Conventionally, insurance agents are considered to be the only and best salesman. For insurance
products. In wake of the growing competition, the players will require an Excellent sales team to sell
their products. There will be mass shifts in the industry, Which is evident from the fact the new
players are poaching a lot of LIC personnel.

• Rationale Approach to the Investment Criteria

This is a very critical area as far as the government and the players are concerned. IRDA has framed
guidelines, which provide for the investment pattern for the players to meet its social obligations.
The players feel that the compulsion is unjust and will affect their return on investments. This
factors has been elucidated as a success factor as it is in the larger interests of the society. The more
the people insured, the better the revenues, followed by better security, followed by better morale
and productivity.

• Stringent Accounting Practice to Prevent Failures Amongst the Insurers:- Every insurer has
the hard-earned money of the masses. Any failure of the insurer on account of unwarranted
profligacy will cost the nation in general and the insured in particular. To prevent any
underhand working of the insurer and to prevent them from going bust, a stringent
accounting practice is imperative.
 • Level Playing Field at all Stages of Development in the Sector for all the Players:- It is the
responsibility of the government to provide an unbiased environment in order to have level
playing field for the players.

Servicing:-Perform routine maintenance or repair work .Business services are referred to as

the activities that assist business yet does not deliver a tangible commodity.
Tax planning:-
Tax planning means reduction of tax liability by the way of exemptions, deductions and
benefits.
Section 80C can claim deduction from your taxable income on account of premium paid
towards life insurance of self, spouse or children allowed to maximum deduction up to 1.5lakh.
Legal framework :-

Insurance regulatory and development authority of India (IRDAI)

Life insurance corporation (LIC)
Legal aspects of insurance:-

• It must be for legal purpose

• The party must have a legal capacity
• There must be evidence of a meeting of between the insurer and
insured
• There must be a payment or consideration.
Personnel financial planning:-
financial planning is the process of developing a personal road map for your
financial wellbeing.
• Planning
• Strategy -Develop a strategic plan
• Tactics-create specific investment
• Monitor -monitor changing conditions.
Insurance as a product is beneficial in safeguarding your finances.
• Risk coverage
• Financial security
• Different plans for different needs
 • Tax benefits
• Peace of mind
Distribution channels :-
Traditionally, the life insurers have been solely depended on the agency
distribution force. On the contrary, the general insurance business has depended
totally on the development officers. The scenario has been different for the
general insurers a no agency commission was payable for writing business more
than 10 lakh, thus prohibiting brokers. The new private insurer coming in with the
liberalization of the sector will add more channel of distribution in the Indian
market parallel to that existent. Innovation and diversification will become the
buzzards in the business. Emerging scenario is evolving as a generic model in
markets around the globe. Even in markets, which are consolidating like Europe,
re-strategizing distribution has been deciding the success for the insurers. The
situation has become more complex with the development in systems and
software technology and changing social patterns. All these have conspired to
cause an upheaval in the traditional distribution methods. The new evolving
system will now have to integrate. the three players in the insurance market:
The buyers will consist of consumers, employees, and employers. The carriers or
the policy issuers will focus mainly on life and annuities, property and casualties,
health and ancillaries. The critical link in the system will be the distributor. Those
who will provide value-added and low-cost services will be the survivors.
Traditional Channel of Distribution:-
Agents:-
Most of the life insurance companies in India follow the traditional route of
marketing through agents. In case of private players they are nomenclature as
Insurance Advisors /Planners. The companies emphasis on building a good field
force, trained to get people thinking about their family’s financial security and
recommend appropriate policies for their needs. The agents are trained to be
sensitive to the dominant issues in any family’s life like education and marriage of
children. Most life insurance agents are trying to sell the broad concept of pre-
planning your life. The success of LIC with its direct field force, rather, army of
6,51,000 agents is exemplary. In case of non-life also much of the distribution
work is done by the agents or development officers.
Brokers:-Insurance brokers are professionals who assess risk on behalf of a client,
advise on the mitigation of that risk, identify the optimal insurance policy
structure, bring together the insured and insurers, carry out work preparatory to
insurance contracts and where necessary, assist in the administration and
performance of such contracts, in particular when claims arise.
Unlike insurance agents who are retained by Insurance Companies, Brokers are
retained by the insured and therefore their primary responsibility is towards the
insured. Some of the benefits of introducing brokers in the India market are:-
• Improvement in customer service:-With increased competition insurance
brokers have a greater motivation to introduce new and innovative
products to be more responsive to consumer needs and to deliver higher
terms quality services Indian corporate and consumers benefit directly in
terms of service as well as product run policy innovations under
consequently able to secure appropriate insurance cover more effectively.
• Transfer of Technology and Managerial Know-how: Insurance brokers
introduce international best practice in technical skills and products,
training programmes systems and technology, and managerial techniques.
Currently the availability of trained manpower is a major constraint in the
development of the insurance broking business in India and international
players can contribute heavily in bridging this gap.
• Benefits to Insurance Companies: Most major global insurance companies
spend the majority of their time handling commercial and industrial risk.
They find dealing with brokers to be easier and speedier because only the
intricate points or special requirements need detailed discussion. Brokers
also assist in creating insurance awareness, increasing market penetration
and act as a catalyst to increase competition and improve customer service.
• Foreign Exchange Considerations: Brokers enable Indian insurers to
increase their retention capacities by applying their international
reinsurance skills in optimizing their reinsurance programmes, thereby
effecting further saving in foreign exchange outflow. In addition, they can
 assist the local insurers to develop new products and accordingly increase
the premium base.
New distribution channels:-
The new channels of distribution for the Indian insurance industry :-
• Direct Marketing:-Company owned sales team concept is now employed
by a majority of the new players and has proved effective sin customer
creation and retention.
• Brokers/Corporate Agents-authorised by IRDA to sell and customized
products on behalf of insurance companies.
• Independent Financial Advisors-Authorised agents of insurance
companies having tie ups may be with more than one company.
• Telemarketing-marketing through telephonic devices, generating leads
through Cold calls and forwarding the leads to the main sales team of
the company
• Work site Marketing Under this strategy, the seller sends his team to the
target group and explains the products and services suitable to them
Organizations such as the groups: HDFC, ICICI, Kotak Mahindra are using
this kind of distribution strategy effectively.
• Retail Chains-cross selling of products at retail outlets
• Internet Marketing :-internet based product offerings
• Bancassurance: Distribution of insurance products by banks.
Distribution through marketing intermediaries:-
Marketing intermediaries can be divided into two broad classes:-
1. Agency-building distribution under this insurers recruit, train, finance,House
and Supervise their agents.
2 Non-agency building distribution under this insurers do not seek to build
their own agency sales force. Instead, they rely on established agents for their
sales.
[Link] Building distribution: There are four types of agency-building
[Link] company’s products. There are two approaches in career agency
distribution
• The branch office system- This is also called managerial system. The insurer
establishes agencies in various locations; each headed by an agency
manager who is an employee of the insurer. He is charged with the
responsibility of recruiting new agents within a given territory and training
them. He is assisted by an office manager assistant managers, supervisors,
specialist unit managers, or district managers
• The general agency system – The Company appointed general agents
typically represent the company within a designated territory over which
be or she is given control. Insurer pays a stipulated commission on the first
year’s premium plus a renewal on subsequent premiums to therd in return,
the general agent agrees to build the company’s business in that territory.
He is responsible for agent recruitment, and supervision, as with the agency
manager. He also receives a commission on agents sales, called an override
or overriding commission.
[Link]-line exclusive agency [MLEA]:- Multiple-line exclusive agents
are commissioned exclusive agents who sell life and health and property
and liability insurance products of a single group of affiliated insurers. As
contrasted with other agency-building distribution systent, MLEAS often
are not all housed in the same office. Rather each agent has his or her own
office clerical support that services clients and supplements the agent’s
personal sales efforts.
3. Home service – This is also known as the Combination or debit distribution
system, which relies on exclusive agents who are assigned a geographic
territory. The target market for home service distribution is lower-income
consumers. Originally, much of the business Consisted of industrial
insurance with weekly collection of premium Many insurers buys
abandoned the distribution system as being too costly. In India, Janata
policy, which was introduced by LIC of India on the same lines, was not
popular.
4. Salaried - Even though most life insurance is sold by commissioned sales
people, a small share is sold by agents who are paid by salary. It generally
occurs in group insurance. It involves three distinct product lines -
retirement, group life, and group health products. The insurer markets
through group sales representatives who are salaried employees of the
insurer, charged with promoting and possibly servicing the insurer's group
 business Group sales representatives usually are also paid incentive
bonuses based on achievement of production goals.
5. Worksite marketing-Some employers offer their employees individual
insurance though payroll deduction, called Worksite marketing. This
coverage was designed for employers that were ineligible for group
insurance because of their small number of employees. Most of these
agents are exclusive agents (also called tied or captive agents), meaning
that they represent a single insurer only.
Agency management
Effective field management is essential to the success of agency-building
distribution systems. In terms of activities, an agency head’s responsibility
consists of
• Manpower development, including product and sales skills training
• Supervision of agents
• Motivation of agents and staff
• Business management activities (office duties, public relations activities,
interpreting insurer policy, and expense management]
• Personal production
• For agent recruiting he has to find sources of prospective agents,
determining acceptable qualifications, approaching prospective agents,
using selection tools interviewing candidates, contracting with qualified
individuals, replace the turned over agents, raising the standard for view
agents and in increasing their productivity. Appropriate and effective
continuing education program for all agents.
Non-agency building distribution:-
It is a system in which an insurer sells its products through established agents
(with a proven sales record) who are already engaged in selling life insurance.
This age recover higher Commissions than the typical gem. He way he
contracts more than one insurer. Such agents typically pay their own
expenses.
There are four common non-agency-building distribution channels:-
 • Brokerage
• Personal-producing general agents
• independent property and agents
• Producer groups
1. Brokerage: The term broker can refer to at least three distribution channels
• Most career agents broker business the practice of full time agents of
one company. Occasionally selling the policies of other insurers.
• Independent life insurance producers who specialize in particular
products. These brokers are former career agents who have become
independent producers, meeting their own office and other
expenses.
• A sales person whose primary product is not insurance but who sells
insurance as an ancillary service to his customers. This category
includes real estate agents, automobile dealers, accountants,
lawyers, and financial consultants.
2. Personal producing General Agents IPPGAI: They are independent
commissioned agents who typically work alone and focus on personal
production. Although personal producing general agents usually have
contracts with more than one insurer. companies using the traditional
approach try to be the PPGA’s primary carrier. The basic difference
between brokerage and PPGA is the former resembles a career agent
contract and the latter has elements of general agent contract.
3. Independent property and casualty agents: They are commissioned agents
whose primary business is the sale of property and casualty insurance for
several insurers take advantage of property insurance customer
relationships to sell life insurance.
4. Producer groups: Producer groups are independent marketing
organizations that specialize in the high-end market. The group is self-
supporting. And the minimum production requirements apply to members.
The marketing organization typically provides its own continuing education
program, administration, illustration services, pre submission underwriting
and case management (after submission)
Financial Institutions: Financial Institutions engaged in the distribution of
insurance can be classified into :
• Deposit taking institutions – Bancassurance was started in India with the
opening of insurance to private sector Banks, indicate, however, that with
the changing regulatory environment they will strengthen marketing efforts
related to germ life insurance, cash-value life insurance, long-term care
insurance, and disability income insurance and annuities.
• Investment banks – Investment banks like ICICI and their retail marketing
divisions are important distribution channels for variable and fixed
annuities as well as some life and health insurance.
• Other financial institutions Mutual fund organizations like UTI (Unit Trust of
India) also offer insurance through policies like ULIP (Unit Linked Insurance
Plan to investors.
• For selling life insurance, traditional methods have been modified and
these are some of the examples of new marketing models in life insurance.
Financial institutions are gaining market share as more and more
institutions develop relationships with life insurance companies and
strengthen their own distribution system Over time, as sectorial barriers
continue to fall, mic financial institutions will undoubtedly develop or
acquire life insurance companies and Operate them as subsidiaries.
Direct Response System: Under this system life and health insurance are sold
directly without the services of an agent. Even workers who are no longer
employed can keep their old policies in force by paying premiums directly to
the insurance company.
• Mail
• Telephone
• Print Media
• Electronic Media
• Broadcast Media
Under this. Direct mail is the oldest method of direct response marketing. A
sponsored arrangement provides mailing lists of similar groups to offer
products to its members Newspapers, magazines, and other print media reach
a large number of consumers dis a broad basis. Broadcasting and using
television can reach specialized groups of people. Personalization and mass
marketing are combined in Telemarketing Internet’s worldwide web provides
shopping for financial products and services and on-line premium quotations
and accept applications for coverage. The process of adopting automated
teller machines and electronic sales may need some time for their appearance
In India Meanwhile, Networks will play a significant role as sources for
communication and [Link] Effects will be felt in the other
distribution channels through customers being better informed
 Module:-5
Claim management
CONCEPT OF CLAIMS
Concept of claim with reference to the insurance contract differs from the
angle of the parties to the contract. The insurer is under an obligation of
responsibility to perform the contract as per the terms of promise made. The
insured is in an advantageous position once the premium as Demanded the
insurer is paid the payment of insurance premium and acceptance of the
contract by the insurer creates obligation upon the parties to perform some of
the duties before or after the claim is made or on happening of event or the
loss is suffered by one of the parties to the contract.
MEANING OF CLAIM
• Claim is a right of the insured to receive the amount secured under the
policy of Insurance contract. It is the consideration of the insurance
contract
• It is a promise made by the insurer to pay the compensation to the
insured on happening of some uncertain event resulting in loss or
damage to asset insured.
• The claim is a right of the god in all classes of the insurance contract.
The payment of Consideration is linked to the insurable interest of the
insured.
Claims are to be paid either to the insured of the nominees of the insured by
the insurer under the agreement or the terms of the contract of insurance. The
important terms of the insurance contract and payment of the insurance
claims are the payment of insurance claim either on happening of event or on
the date of maturity.
CLAIMS DEPARTMENT
The claims department is one of the key departments in an insurance
company. The claims department has the following functions to perform:-
• To provide customers of insurance and reinsurance companies with a
high quality of Service, so that the company is able to differentiate from
 the rest of the companies. This can also be viewed as a unique selling
proposition of a company. This role of the claims department gives a
long-term edge to the company and hence is referred to as the Strategic
rule.
• It is the claims department that monitors the claims and sees that
whether the benefits of insurance exceed the costs of claims. This role is
referred to as the cost monitoring role of the claims department
• The claims department has to see that the expectations of the
customers are met with regard to the speed, manner and efficiency of
the service. This is called the customer service role of the claims
department.
• It is the responsibility of the claims department to meet the standard of
service, to keep up to the customers' expectations and still operate
within the budget. This is the managerial role of the claims department .
• Both the quality of service and cost of claims is the responsibility of the
claims department
• The department must be able to find out the difference between fake
and genuine claims
• In trying to create a good public image, the cost of claims should not be
overshot. The importance of cost of claims in the insurance industry
cannot be undermined.
• At any point of time the cost of claims should not exceed the available
resources to pay the liabilities. If such a situation arises then the
insurance company is technically insolvent.
• So estimation of future liabilities is just as important as control over the
claim payments As the claims department is in direct touch with the
customer, the quality of service has to be ensured by the department.
The claims department in effect acts as an interface between the customer
service quality and insurance company's objectives. It has to be given proper
weightage and motivation so that the business as a whole functions well.
CLAIMS MANAGEMENT SYSTEM AND ORGANIZATIONAL STRUCTURE
 • The effectiveness of the claims management is dependent on two
important elements such as well defined structure of chips department
and well defined working of the department.
• The effective working is again related to quality of services, timely
settlement of claims, avoiding of litigations, cost effective settlement,
retention of customers and customer relations management.
• To achieve these objectives the information of the insurance business
should be accessible, the information received or the settlement of the
claims should be economical, the information received should be
compact and should provide all the information required for the
purpose of making some decisions.
The claims management system is effective only when it is able to make timely
decisions on the following elements:-
• Decision relating to the use of information Technology
• Using of intermediaries is another area where the managerial decision is
required.
• Customer relations management is one of the important factors of the
organization.
• Decision-making relating to costs of claims is also an important element
of the claims management. Costs of claims enquiry, costs of
intermediaries, costs of the outsourcing, costs of litigations and
settlements, costs of claims due to delay such as interest payments, are
to be considered while making decisions relating to costs.
• Management of resources of the organization and allocation and use of
the available resources is another important functional area of the
management (Forecasting the budget for claims payment, existing and
future claims, establishment of reserves, reserves for unexpected claims
and catastrophe claims are the area where the decisions have to be
made).
Claim settlement in insurance:-All insurance contracts are based on the
information provided by the insured in e proposal form. The correctness of the
information furnished in the proposal form is Verified at the time of a claim, when
physical inspection of the property is done. In case Of any misrepresentation, it
would be the prerogative of the Insurance Company to Ad a claim, or avoid the
policy itself, or pay a claim for a reduced amount. It should Therefore be
understood that the completed proposal form plays an important role as it effects
the claims under the policy. Following are some important points that are of
relevance in a claim settlement procedure:-
• The loss or damage should be reported to the insurer immediately. On
receipt Of claim intimation, the insurer will forward a claim form.
• The completed claim form along with an estimate of the loss has to be
submitted to the insurer. It is preferable to submit an itemized estimate
with separate values. The insurer will arrange for inspection to the
damaged items to assess the loss.
• In case of major losses, a specialist-licensed surveyor is deputed.
• The insured has to provide the required documents to substantiate the
extent of loss.
• In case the cause of loss is not established, it is for the insured to prove that
the loss or damage has occurred due to an insured peril.
On agreement of claim amount between the insured and the insurer, the claim is
Settled.
Broad Pattern of Claim Settlement:-
• Preliminary: Insurers insist on an early notification of a loss and the policy
provides for the time limit within which notice of loss shall be given by the
insured. On receiving of notice of loss, the relevant policy particulars are
checked to see if the insurance is in force. The claim form is thereafter
issued to the insured. The clainr is allotted a number and necessary entries
are made in the claims register. Preliminary intimation of loss is sent to the
co-insurers and facultative reinsurers, if applicable.
• Survey: As per the Section 64 UM of Insurance Act, all losses more than a
20,000 must be surveyed by independent licensed surveyors and assessors
who are appointed by the insurance companies. A typical loss survey report
with, among other things the cause and extent of loss as also the
observation of warranties and other terms and conditions.
• Settlement: The claim is processed on the basis of the survey report, the c
form and other supporting documents. Settlement is made by cross cheque
 payment details are entered in claims register as also in the 1 e relevant
policy Records.
General Guidelines for Settlement of Claims:-
Introduction: The guidelines described are more of a general nature, and it is
many a times there that some of the guidelines laid down cannot in practice be
complied with due to particular circumstances of the case. Such non-compliance
need not, therefore, render the claim as invalid. The Claim Settling Authority uses
discretion by recording the reasons.
Appointment of surveyor:-The insurance Act stipulates that all claims of Rs.
20,000 and above are to be Surveyed by surveyor. Therefore for the claim less
than Rs. 20,000/- survey by licensed Surveyor is not mandatory. Such losses may
not be surveyed by the Company’s officials (in house survey) if survey is required.
Ministry of Finance vides Gazette notification no. Part II Section 3(ii) dated 30/ 70
have exempted certain clauses of claims from the operations of Section 64 UM
section (10) irrespective of the claim amount and hence such claims can be
processed without insisting on a report from a licensed surveyor.
The following must be kept in view before a surveyor is appointed for any claim
(a) The surveyor should be holding a valid license.
(b) The surveyor should be selected depending upon the type of loss
and the nature of the subject matter involved.
(c) For assessment of some losses specific technical expertise may be
required and Consultants having such technical expertise may be
associated with surveyors. The consultant’s remuneration should be
negotiated in advance bearing the expertise in mind. This will be in
addition to the survey fee payable.
(d) Wherever business interruption losses are involved, the surveyors
for the material Damage and the business interruption losses, if
several, should be competent. To complement one another. One
surveyor can be utilized for both the losses if the company is satisfied
about the surveyor’s competence for both the jobs.
 (e) Appointment of the joint surveyors may be done on the merits of the
case. Guidelines for authority for appointment of surveyor will be as
per circulars issued from time to time.
Where a servicing DO is approached for appointment of surveyor even though
they not the policy issuing office, surveyor must be appointed by the servicing DO
immediately, with intimation to the policy issuing office.
Appointment of Investigator:-
Depending upon the circumstances it may be necessary to appoint an investigator
when the claimed version of loss. A separate surveyor appointment may be
considered ay actual physical survey/assessment is possible and called for. The
letter appointing the investigator should mention the terms of reference and
make it clear that the report should contain no inferences or doubts unless these
are well documented and substantiated and can stand the scrutiny of a court if so
required.
In the absence of laid down schedule of fees for investigators, it is advisable to
negotiate and decide the fees to be paid in addition to expenses actually incurred
before Actually appointing the investigator and the determined/decided fee
recorded in the Letter of appointment.
Processing of Claims
Documents generally required for processing of claims are specified on the
respective sections and as far as possible all documents must be called for
from the insured in one and not in the piecemeal.
“ON Account” Payment: Pending final assessment of the claim an “on payment
may be considered subject to confirmation of the following:
• Loss due to occurrence of a peril covered by the policy
• Establishment of the policy
• The minimum liability that might arise under the policy.
After approval of the claim by the competent authority, the insured/claimant
should be advised of the final amount of claim approved, with details thereof.
Remaining formalities of obtaining full and final discharge and bank/financial
institution’s discharge (where required) should be completed before release of
the amount of claim.
If the loss or any part thereof is recoverable from a Third Party, a letter of
subrogation and/or assignment and special power of Attorney, to suit special
cases, is to be sent to the insured for completion on the requisite stamp paper
and return before settlement.
Co-insurance: The leader will process the claim on the behalf of all co-insurers. A
decision by the leader regarding claim settlement, taken at the appropriate level
according to the existing tenets of delegation of financial authority, shall be final
and binding on the co-insurers. Claims decided at the appropriate level by the
leader will not be processed again by co-insurer(s), regardless of the amount. The
leader will intimate to the co-insurer details of a claim settled by him with copies
of all relevant reports and documents. The co-insurer will settle his share of claim
within 15 days from the receipt of such intimation from the leader without any
delay.
In case of a claim requiring board decision, the decision taken by the Board of the
leader shall be binding on the other co-insurers. There shall be no separate need
for the co-insurers to approach their respective Boards for decision in respect of
such claim A suitable note may, however, be placed by the co-insurers before
their respective Boards for information in such cases.
Close Proximity Cases:- Detailed investigation should be immediately instituted
when a loss occurs in a close proximity, i.e., within 5 days for all classes of
insurance (except marine voyage policies), of the date of inception of risk. The
close proximity insurance. Close proximity investigation should also be carried out
in cases where it is taken, i.e., the risk has remained un-insured or inadequately
insured prior to the Insurance cover under reference. mentioned here is in
reference to new insurance or where there has been a break found that insurance
has been taken out significantly later than it ought to have been taken, that is the
risk has remained un-insured or inadequately insured prior to the insurance cover
under reference.
Rectification of Policy after a Loss:-Rectification of a policy after a loss is reported
for reasons other than breach of condition/warranty should be carried out as
under:(a) Where rectification involves collection of additional premium, the
additional premium may be charged only on the affected policy in which the claim
has arisen. (b) Rectification can be done by the Authority Competent for
settlement of the claim.
Repudiation of Claims:-If a claim warrants repudiation, the competent authority
would be the authority competent to settle the claim. Letter of repudiation may
state the reasons and/or the policy condition under which it is repudiated.
Re-opening of Claim Files:-Reopening of claim file can be done by the authority
one step higher than the appropriate claim settlement authority.
ROLE OF INFORMATION TECHNOLOGY IN CLAIM SETTLEMENT:-
Information technology involves the use of computer systems, digital electronics,
and telecommunications to store process and transmit information.
In the context of claims management, it involves storage, processing and
transmission of information relating to settlement of insurance claims, This
results in better distribution channels to policyholders effective service to
customer and Reduction of operating costs
➢ The number of insurance transactions entered into everyday is numerous.
➢ A large number of transactions are handled by brokers and other
intermediaries. This results in the complexity in claims settlement,
increases the necessity of maintaining records, updated information, and
important data and analysis of data.
Advantages of an IT system in claims management:-
➢ Elimination of duplication
➢ Reduced paper work
➢ Electronically communicated information leads to quicker communication
of the origination of risk, the occurrence of loss etc.
➢ Electronic authorization, accompanied by payments made through central
➢ settlement system results in expediting the claims payment.
➢ The use of electronic funds transfer. This leads to faster settlement of
claims.
➢ It helps in reducing administration costs. As paper work decreases the need
to maintain piles of stationery decreases.
 ➢ Faster agreement of valid claims and faster settlement of claims leads to a
greater satisfaction of insured. This adds to the goodwill of the insurer.
➢ An automated check again fraudulent, exaggerated and repeated claims
➢ Expediting payments to be made to brokers,, intermediaries, loss
adjusters, etc
➢ Information on fingertips for decision making purpose is available
Disadvantages
• The cost of installation and operating a system are heavy
• Difficulty may arise in finding the right type of personnel in handle the
system and data
• IT is rapidly changing and the pace is so fast that even experts in this field
and finding it different to cope with this in hardware and software
products becoming obsolete in ridiculously short periods of time.
• The claim management should be continually reoriented to changing
priorities and Changes in software technology or it shall not serve the
purpose.
NATURE OF CLAIMS AND REQUIREMENTS IN THE SETTLEMENT OF CLAIMS:-
The procedure for handing of claims varies according to the types of cover, the
amount of claim whether it is a personal or commercial claim. Claims process is
the procedure of handling claims and differs from case to case. Basically, the
following are the different types of claims which come up before an Insurance
Company.
• Maturity Claims and Survival benefit
• Death Claims
• Accident and Disability Claims and
• Annuity Payments
Settlement of claims under life insurance policies depend upon the nature of a
claim, eligibility to policy moneys, proof of the happening of the event insured
against, proof of title, etc.
MATURITY CLAIMS:-
Payment of Maturity Claims is by far the easiest to manage. These include
benefits payable during the period of assurance called ‘Survival Benefits under
certain types of policies popularly known as “Money Back’ policies. Payment in
these cases is easy because
• There is no need on the part of the policyholder to prove the happening of
the event
• The policyholder is alive o Proof of Title does not pose any problem.
• The Insurance company need not await any claim from the policyholder
and take initiative to settle the claims expeditiously
At the beginning of every calendar year, the Data Processing Department (now
called IT Department) of a Branch Office generates on the computer a list of
policies under which Maturity and survival benefit payments will fall due during
the next financial year.
This list is prepared due month wise in strict policy number order. Of late, due to
the introduction of software package for claims, this list also provides information
regarding the premium status of each policy and also the actual claim amount
payable including Vested Bonus and interim bonus and Terminal Bonus
The requirements for settlement of these claims are very simple. They are:-
1. A Discharge Voucher to be sent in advance
2. Policy Document
3. Any Deed of Assignment, if the same was executed on a separate Stamp Paper.
DEATH CLAIM:-
Life insurance is basically for providing financial security to the families of
deceased policyholders. Death claim settlement naturally assumes very great
importance in the total operations of any Life Insurance Company Despite several
problems encountered, still Life Insurance Companies struggle to efficiently and
effectively attend to this function. Unlike in Maturity and Survival Benefit Claims,
the Policyholder is not alive. This itself poses many problems. Broadly the
problems in settlement of Death claims are
 1) Obtaining satisfactory Proof of Death, and
2) Obtaining satisfactory Proof of Title
The letter of intimation should contain certain particulars
• Policy number and name of the life assured. These two should match;
otherwise the policy number must be wrong.
• Date of death, on which depends the status of the policy and amount
payable.
• Name and address of the claimant as requirements are to be called for
them.
• Usually the death intimation should be sent by the nominee or assignee or
someone near and dear to the deceased life assured.
(If the intimation is received from a stranger, the office should be careful to verify
as to why a stranger should be interested in the policy moneys).
The Life Insurance Corporation of India calls for the following requirements in
cases of death claims
• Death Certificate in original issued by Municipality, Corporation/ revenue
Officials in the form Prescribed by the Government
• Claimant’s Statement: here the claimant furnishes information.
• Statements from the hospital/nursing home where the life assured had
treatment for terminal illness in which the hospital/nursing home
authorities furnish information about the life assured, his/her address,
date of admission, date of discharge/date of death, time of death, reasons
for admission, primary cause of death, secondary causes, duration of
Illness.
• Statement from the Doctor who attended to the diseased life assured.
• If the deceased life assured was an employee of any organization, a
statement from the Employer furnishing details of the life assured.
In case of death due to unnatural causes like accidents, suicide, etc. the following
records are:-
• First Information Report of the Police
• Panchanama Report/Police Inquest Report
 • Postmortem Report
• Chemical Analysis/Forensic Report in cases where postmortem is not
• conclusive about the cause of death
• In very rare cases, Police Final Investigation Report.
ACCIDENT AND DISABILITY BENEFIT
We shall now turn our attention to settlement of Accident and Disability
Benefit claims under:-
Accident Benefit:
• Death should be due to Accident. Death must be directly due to the
accident and there Should be no intervening cause.
• Death should take place within a specified period of time after the
accident. As per the rules of LIC of India, this period is 120 days.
• Proof satisfactory to the insurance company should be
[Link] the requirements called for are
(a) First Information Report
(b) Panchanama or Police Inquest Report
(c) Postmortem Report.
If Viscera was sent for Chemical Examination, then the Report of the forensic
Laboratory is also called for These reports indicate the cause and circumstances of
death whether it is accidental in nature etc.
CLAIM SETTLEMENT:-
• Role Of Central Govt. In Claims Settlement
• Role of Ombudsman in Claim Settlement
• Role of IRDA In Claim Settlement
• Role of Consumer Protection Act In Claim Settlement
Role of central government in claim settlement:-In view of the economic
importance of the insurance sector the Central Government concerns with
protecting the interest of the consumers. The dynamic role of the Central
Government in claims settlement is summarized hereunder
 • The Central Government shall take policy statements relating to payment
of claims. It shall fix norms for disposal of claims and fix time period for
particular activities
• The Central Government shall scrutinize the reports submitted by the
insurers and the IRDA. The Central Government shall direct the IRDA to
investigate and report on the pending claims or investigate delay in
settlement.
• The Central Government shall in general or in a particular case direct the
insurance companies to improve upon their claims settlement machinery or
speed up the process and quality of claims settlement.
• The Central Government, if it feels that it is necessary to do so can make
amendments to the existing laws to facilitate and smoothen the claims
settlement process.
• The Central Government shall appoint or remove officials for the purpose
of achieving expeditious settlement of claims it shall also withdraw the
licenses of insurers who fail to adhere to its directions in respect to
settlement of claims
• The Central Government shall provide for alternative dispute resolution
methods such as Arbitration, Mediation, or Negotiation, and Conciliation to
provide a non litigatory solution to claims settlement.
• Make laws binding on the insurers and other authorities responsible for
settlement of claims
• The central Government has been instrumental in the appointment of
Ombudsman Claims.
ROLE OF OMBUDSMAN IN CLAIM SETTLEMENT
Ombudsman’ is a Scandinavian term, which means an entrusted person or
grievance representative
Scheme of Ombudsman
Complaints of the following types come within the purview of the Ombudsman’s
Consideration.
• Repudiation of liability under claims
• Delay in settlement of claims.
 • Any dispute regarding premiums paid or payable in respect of the policy.
• Any dispute regarding the legal construction of the policies in relation to a
claim; and
• Non-issue of insurance document to customer after receipt of premium.
Role of IRDA in claim settlement:-
The IRDA authority in consultation with the insurance advisory committee hereby
makes the following regulations namely hereby:-
• Life insurance policy shall state the primary documents which are normally
required to be submitted by a claimant in support a claim
• A life insurance company upon receiving a claim shell process the claim
without delay.
• A claim under a life policy shall be paid or be disputed giving all the relevant
reasons within 30 days from the date of receipt of all relevant papers and
clarifications required
• where there is a delay on the part of the insurer in processing a claim for
reason other than the one required by sub regulation the life insurance
company shall pay interest on the claim amount at 10 % per annum
effective from the date of submission of all information and papers
• Every insurer shell setup a proper grievance redressal machinery at its
divisional regional /zonal /head office / central office headed by a senior
executive not having any direct responsibility for underwriting or
settlement of claims.
Every insurer shall place before its Board of Directors at least once every quarter,
statistics of:-
• The number of claims Intimated during the preceding quarter;
• The number of claims settled during the quarter.
• The number of claims outstanding the end of the quarter.
• Analysis of the claims paid by duration elapsed from the date at loss,
namely
• 0-6 months, 6-12 months and more than 12 months together with
explanatory observations regarding delays in settlement in each case.
Consumer protection act:-
A consumer is an individual or group of individuals who purchase
goods and services for their own personal use and not for the
purpose of manufacturing or resale.
Need for the Consumer Protection Act, 2019
The Consumer Protection Act, 2019 was enacted by the Indian legislature to
deal with matters relating to violation of consumer’s rights, unfair trade
practices, misleading advertisements, and all those circumstances which are
prejudicial to the consumer’s rights. The intention of the Parliament behind
enacting the Act was to include provisions for e-consumers due to the
development of technology, buying and selling of goods and services online
have considerably increased during the last few years.
The Act seeks to provide better protection of the rights and interests of the
consumers by establishing Consumer Protection Councils to settle disputes in
case any dispute arises and to provide adequate compensation to the
consumers in case their rights have been infringed. It further provides speedy
and effective disposal of consumer complaints through alternate dispute
resolution mechanisms. The Act also promotes consumer education in order to
educate the consumer about their rights, responsibilities and also redressing
their grievances.

Objective of the Consumer Protection Act, 2019:-

The main objective of the Act is to protect the interests of the
consumers and to establish a stable and strong mechanism for the
settlement of consumer disputes. The Act aims to:
• Protect against the marketing of products that are hazardous
to life and property.
• Inform about the quality, potency, quantity, standard, purity,
and price of goods to safeguard the consumers against unfair
trade practices.
 • Establish Consumer Protection Councils for protecting the
rights and interests of the consumers.
• Assure, wherever possible, access to an authority of goods at
competitive prices.
• Seek redressal against unfair trade practices or unscrupulous
exploitation of consumers.
• Protect the consumers by appointing authorities for timely and
sufficient administration and settlement of consumers’
disputes.
• Lay down the penalties for offences committed under the Act.
• Hear and ensure that consumers’ welfare will receive due consideration
at appropriate forums in case any problem or dispute arises.
• Provide consumer education, so that the consumers are able to be
aware of their rights.
• Provide speedy and effective disposal of consumer complaints through
alternate dispute resolution mechanisms.
Essential provisions of Consumer Protection Act, 2019
The essential provisions of the Consumer Protection Act, 2019 are:Consumer
Protection Councils
The Act establishes consumer protection councils to protect the rights of the
consumers at both the national and state levels.
Central Consumer Protection Council
Under Chapter 2 Section 3 of the Consumer Protection Act, 2019 the Central
Government shall establish the Central Consumer Protection Council which is
known as the Central Council. It is an advisory body and the Central Council must
consist of the following members;
The Minister-in-charge of the Department of Consumer Affairs in the Central
Government will be appointed as the chairperson of the council, and
Any number of official or non-official members representing necessary interests
under the Act.
The Central Council may meet as and when necessary, however, they must hold
at least one meeting every year. The purpose of the Central Council is to protect
and promote the interests of the consumers under the Act.
State Consumer Protection Councils
Every state government shall establish a State Consumer Protection Council
known as the State Council having jurisdiction over that particular state. The State
Council acts as an advisory body. The members of the State Council are:
The Minister-in-charge of the Consumer Affairs in the State Government will be
appointed as the chairperson of the council,
Any number of official or non-official members representing necessary interests
under the Act, and The Central Government may also appoint not less than ten
members for the purposes of this Act.
The State Councils must hold at least two meetings every year.
District Consumer Protection Council Under Section 8 of the Act, the state
government shall establish a District Consumer Protection Council for every
district known as the District Council. The members of the District Council are:
The collector of that district will be appointed as the Chairperson of the District
Council, and Any other members representing necessary interests under the Act.
ROLE OF CONSUMER PROTECTION IN CLAIM SETTLEMENT :-The insurer to bring
profit to his company makes every possible attempt to lessen liability by invoking
the agreement clauses of the policy, the terms and conditions of the policy. Lie
nature of occurrence of the event to see whether it is covered under the policy or
not, the payment of premium etc.
• The insurer invariably looks at facts and figures, whether material or non-
material to the policy to find an excuse and repudiate the claim made by
the insurer.
• True, the investigation and review of a claim is necessary, so that no
claimant gets an amount more than what he should be indemnified with.
• But this practice of the insurers has adversely affected the uneducated and
the innocent. That is the reason why there is a Consumer Protection Act.
ROLE OF CONSUMER PROTECTION ACT IN CLAIM SETTLEMENT:-
The insured is the only person who will be approaching the consumer protection
machinery for the settlements of the claim because of the following grounds,
• The difference of services,
• Delay in services, i.e., settlements of claims and payments,
• Not providing information required as the consumer of product
• Not hearing to the consumers and helping them in the claim application
filing and taking advantage of innocence and helplessness conditions of the
consumer and rejecting the policy payments.
The insurer wants to avoid the payments to reduce the liability on a pretest of
some failures or non-performances of conditions required to be performed by the
insured However, the provisions of consumer protection provide life to the
insured is the settlement of grievances of insurance claims.
CLAIMS REVIEW COMMITTEE: The Life Insurance Corporation of India settles a
large number of death claims every year. Only in case, of fraudulent suppression
of material information will the liability be repudiated. The number of death
claims repudiated is, however, very small. Even in these cases an opportunity is
given to the claimant to make a representation for consideration by the Review
committees at the zonal office and the Central Office. As a result of such review,
depending on the merits of each case, appropriate decisions are taken. The claims
Review committees at the Central and Zonal Offices have among other members
a retired High Court/District Court Judge.
CONSUMER PROTECTION MACHINERY: The redressal mechanism as set up under
Section 9 of the Consumer Protection Act, 1986 consists of a three-tier jurisdiction
system. There are forums at district level called the District Forums; the ones at
State level called the Stale Commissions and at the national level called the
National Commission.