SECTION -A

1. What is meant by insurance?

Insurance is on arrangement under which people facing common risks
come to gather and make their small contributions to the common fund.
While it may not be possible to say in advance which person will suffer the
losses, it is possible to work out how many persons or an average out of the
group, may suffer losses. When risk occurs the loss is made good out of the
common fund.
2. Define of insurance.
[Link]: insurance is a plan by which large number of people
associate themselves and transfer, to the shoulders of all, risks attached to
individuals.

3. mention any four features of insurance.

i) contract ii) consideration iii) co – operative device iv)

protection from financial risk v) insurance is not gambling.

4. what is meant by life insurance?

Life insurance is a contract where by the insured promises to pay a uniform

rate of premium at fixed intervals of time against which the agrees to pay a
fixed amount on the happening of the event which may be the death of the
assured or the expiry of a certain number of years.

5. what is meant by co –operative device.

It is a co –operative device under which a group of persons who agree to

share the financial loss may be brought together voluntarily or through publicity
or through solicitations of the agents. An insurance would be unable to
compensate all the losses from his own capital. So by insuring a large number
of persons, he is able to pay the amount

1
6. what do you mean by insurable interest?

For an insurance contract to be valid the insured should have an

inscrutable interest is the pecuniary interest where by the insured is benefitted
by the existence of the subjects matter and is prejudiced by the death or damage
of the subject matter. The subject matter of insurance may be a property or life
and legal liability.

7. what do you understand by principal of causa proxima?

The maxim “cause proxima non remeta spectature” means that

proximate (nearest) cause and not the remote one is to be taken note of at the
time of determining the liability of the insurer is not liable for remote causes
even of it is one of the insured perils. There fore if the immediate cause is an
insured risk for the occurrence of which the insured is to be paid.

SECTION-B

1. Explain the features of insurance.

i) Contract:

The insurance is a written agreement between the insurer and the insured
where in the insured makes an offer and the insurer accepts his offer.

ii) Consideration :

It is contract under which the insurer in a consideration called premium.

Agrees to take over a particular risk of the other party and promises to pay
the insured or his nominee, a certain sum of money on the happening of an
uncertain event.

2
iii) Co – Operative device:

It is a cooperative device under which a group of persons who

agrees to share the financial loss may be brought together voluntarily or
through publicity or through solicitations of the agents. An insurer would be
unable to compensate all the losses from his own capital.

iv) Protection from financial risks:

It offers protection to those risks which be measured in terms of

money ie. Financial risks.

v) Certainty and contingency:

The life insurance is a contract of certainty as the insurer has to

pay the amount as compensation to the assured if he survives till the date of
maturity of policy or to the nominee if the dies earlier. In other insurance the
contingency, namely fire, the earth quake, accident or the marine piers. May
or may not occur.

vi) Insurance is not gambling :

The insurance cannot be considered as gambling as the insurer

has to indemnify the loss incurred by the insured on the happening of an
uncertain event as stipulated in the contract of insurance where the game of
gambling may ether result into profit or loss.

vii) Insurance is not a charity

The concept of insurance is entirely different from the concept

of charity. The charity is offered to the loss incurred by the insured poor or
needy without expecting any consideration from them. But the insurer offers
protection to the insured‟s life and property only after getting.

viii) Based upon certain principals.

3
 The contract of insurance is based upon certain principles such as
insurable interest, utmost good faith, indemnity, subrogation, cause –
proxima, contributions etc.

ix) Regulated by low:

In India, life insurance and general insurance are regulated by life

insurance corporation of India Act 1956 and general insurance Business
(Nationalization) Act 1972 and IRDA regulations.

x) Value of risk:

Before insuring the subject matter of the insurance contract, the

risk is evaluated in order to determine the amount of premium to be charged
on the insured.

xi) Large number of insured persons:

Large number of persons have to be insured to spread the loss

cheaply and smoothly. If only small number of persons are insured. The cost
of insurance to each member will group. Ultimately, it will become
unmarketable. Therefore to make the insurance cheaper, large number of
persons or property.

xii) Investments

The amount of premium collected from the insured by the

insurer is being invested in different securities. Such securities fetch income
to the insurer in the form of dividend and interest.

4
 SECTION-C

1. Types of insurance:

Broadly speaking there are two main branches of insurance in our

country viz. life insurance into three types, namely, fire insurance, marine
insurance and miscellaneous insurance.

1. Life insurance:

It refers to a contract in which the insurer agrees to pay a specified

amount on the death of the assured or on the expiry of a certain fixed period,
whichever is curlier. In consideration of this, the insurer collects from the
insured, since the sum of which a policy is taken is assured to be paid
whether there is death or not, life insurance is also often referred to as “ life
assurance” in India the life insurance business is being undertaken by life
insurance corporation (LIC) of India and tweet private insurance compares
such as Allianz Bajaj life insurance co. ltd. Birla sum dice insurance. Ltd.

General insurance:

Except life insurance, all other insurance come under general

insurance. Before 1971 there were about 107 general insurance companies in
india. Both Indian and foreign. These companies wore mismanaged –
insurance was meant for big industrialist service to clients was partial, there
were no service conditions to stuff. In view of these limitations. The govt. of
India has enacted general insurance business (nationalization) act 1972. To
take over general insurance business. Under the provisions of this act the
general insurance business in india. National insurance co, ltd., ho. Calcutta,
the new india assulrance.

These four companies were established to achieve the following

twin objectives.

5
 a) To ensure that these are so situated as to render their combined
services effectively and in all parts of India. And
b) To ensure proper service to the public through mutual completion.

In 1999, the IRDA act introduced an amendment to the general

insurance business (Nationalization) Act 1972 by which the excusive
privilege enjoyed by GIC and its four subsidiaries for carrying on general
insurance business.

As stated earlier, the general insurance includes fire insurance, maize insurance
and miscellaneous insurance. A brief description about these insurance as
follows.

(i) Fire insurance

This insurance borers the risk of fire to property because there is

every likelihood of fire spreading big factories, god owns houses, shops and
ships. The insurance not only covers the risk of fire but also the
consequential losses from such loss.

(ii) Marine insurance

This is the oldest form of insurance and covers all the marine perils.
Due to marine the ship can be damaged or destroyed, colugo can be lost and
consequently there can be loss of freight therefore, the marine insurance
covers the risk to ship, corgo and freight on the high seas.

(iii) Miscellaneous insurance

All other general insurance fall under the miscellaneous category. It

includes motor insurance, public liability insurance, product liability
insurance, professional indemnity insurance workman compensation
insurance. Personal occident insurance. Individual medic claim policy,

6
overseas medical policy Bhagrashree child welfare policy, rajeswari mahila,
kalian bima yojna, burglary insurance. Duty insurance, electronic equipment
insurance, neon sign policy, students safety insurance and Rural insurance.

7
 SECTION-A

1. Who is an insured?
In the insured contract the person. Whose risk is insurance is know the
insured or assured.
2. Who is the insurer?
The person who agreed to compensate. The loss arising from the risk is
called. The insurer or assurer or enter writer.
3. What is an suspension agent?
Rockwood additives specialize in the supply of an extensive range of
natural additives, synthetic additives and suspension agent. Many of these
are utilized for critical functions by manufacturers of industrial products and
consumer suspension agent market.
4. Define „License”
License means a certificate of license to act as an insurance agent.
(i) An individual
(ii) A firm
(iii) A company formed under the companies act and includes a banking
company as defined in clause of the act.
5. Code of conduct.
1. Every person holding a license. Shall adhere to the code of conduct
specified below.
2. No insurance agent shall.
3. Every insurance agent shall, with a view to conserve the insurance
business already procured through him, make every attempt to ensure of
the premium by the policyholders orally and in writing.

6. Cancellation of license.

8
 The designated person may cancel a license of on insurance agent. If
the insurance agent suffers, at any time during the currency of the licence.
7. Definitions of on fair practice.
1. “Insurance policy” or “Insurance contract” shall mean any contract of
insurance indemnity. Medical or hospital service, surety ship or annuity
issued proposed for insurance or intended for issuance by any person.
2. “service contract” is intended to cover the product issued by medical and
hospital service plans and should be changed to conform to the lows of
each state.
8. What is an unfair insurance practice?
Insurance code 790.03 (h), which is called the unfair practices act sets
forth a variety of acts by an insurance company that are considered unfair
practices and there fore are improper. Enforcement is the responsibility of
the DOI (“Department of Insurance”).
9. What are the procedure of unfair insurance practices?
Failing to settle claim promptly when liability has become apparent
under one portion of the insurance policy coverage in order to influence
settlements under one portion of the insurance policy coverage. Directly
advising a claimant not be obtain the services of an attorney.
10. What are the procedure of terminate.
This section details the procedure which will be followed where.
1. The board forms an intention to revoke or terminate a legal aid
certificate.
2. The board makes a decision to revoke or terminate a legal aid certificate.
3. A person seeks a review of a decision.
4. A person appeals against a decision.

SECTION –B

9
1. Explain the issue or renewal of license.
i) A person desired to obtain or renew a license to act as a corporate
agent or a composite corporate agent shall proceed as follows.
a) The applicant shall make an application to the designated person in
form DRDA – corporate agents –A -1.
b) The fees payable by the applicant to the authority shall be specified
in regulation 7.
ii) The designated person may, on receipt of the application along with
the evidence of payment of fees to the authority and on being satisfied
that the corporate insurance executive of the applicant.
a) Possesses the qualification as specified under Regulation 4.
b) Possesses the practical training as specified under regulation 5.
c) Has passed the examination as specified under regulation6.
iii) The designated person shall grant or raven the licence with in a period
of 3 months from the data of application.
iv) The designated person shall, if the consideration of the application is
likely to get delayed, within 60 days of the receipt of the application
inform the applicant the reasons for such a delay and the likely time it
would take to do so.
v) If the designated person refuses to grant or renew a licence under this
regulation, he shall given the reasons there of the applicant.

2. Explain the code of conduct for agents.

According to the insurance act, provisions have been laid down for the
code of conduct for agents these include.

10
 1. Disclosing the licence to the prospect on demand.
2. Explaining all available options to the prospect.
3. Explaining the nature of information required in the proposal form.
4. Impress upon the prospect and the need to disclose all information.
5. Informing the insurer about any adverse habits and material facts of the
persons to be insured.
6. Revealing to the prospect the commission that he is likely to receive, if
asked for.
7. Advising policy holders to effect nomination.
8. Not interfering with the proposals introduced by other insurance agent.
9. Not demand or receive a share of proceed under an insurance contract.
3. Explain the intention to with draw, revoke, or terminate.
1. Where a person‟s solicitor furnished the board with the information from
which the board formed the intention to institute the revocation /
termination of a legal aid certificate, the board will.
Notify the person directly in writing;

Advice the person of the right to show cause either through the solicitor
or directly with the board in writing.

Notify the person‟s solicitor of the intention.

2. Where the board formed the intention to institute the revocation /

termination of a legal aid certificate by reference to information receive
otherwise than from the solicitor.
- The solicitor will be advised.
- The person will be notified of some in writing through his / her
solicitor and will be advised that any exercise of the right to show
cause should be transmitted through the solicitor.

4. Explain the insurance licensing process:

11
 Step 1: register for insurance principles and the appropriate basics course.

The 30 hour insurance principles course is mandatory for all new

insurance license applicants. The specialized basics course is mandatory for
everyone seeking a license.

Step 2 : schedule your exam.

Register for the exam completing your courses, but your mandatory
education must be completed before taking the exam. See the about exam page
for more information.

Step 3: complete your mandatory education

Courses must be completed in their entirety before taking the exam.

Step 4: take the exam

You must bring with you 2 forms of identification. One must be a form of
government issued identification which bears your signature and has your
photograph.

Step 5: apply for your license

The final step is to make application to the department of commerce for

your permanent license. Applicants should to go and compete the application
information online.

5. Explain the appointment of agent.

Appointment may refer to:

Law

1. Power of appointment the legal ability of a testator to select another

person to dispose of the testator‟s property.

12
 2. Recess appointment a method of filling vacancies under U.S. federal law.
3. Appointment, a form a Royal warrant.
4. Judicial appointment in Canada

Religion

1. Papal appointment the oldest method of the selection of the pope.

2. Appointment of catholic bishops.
3. Appointment of church of England bishops.
4. Letter of appointment in charch of jesus Christ of latter –day saints
history.

Others

1. Appointment to the order of Canada.

2. Court appointment one of the traditional positions within a royal, ducal,
or noble household.
3. Appointment, a means of funding postdoctoral research
4. Main page
5. Contents
6. Featured content
7. Current events.

SECTION- C

1. Explain the Procedure for becoming an agent?

The insurance Act.1938 lays down that an insurance agent

must possess a license under section 42 of that act. The license is to be

13
issued by the IRDA. The IRDA has authorized designated persons in each
insurance company, to issue the license on behalf of the IRDA. The fee
for the license the manner of making an application etc., have been
described in the IRDA regulation.
A license issued by the IRDA will be valid for three years. The
license may be to act as an agent for a life insurer, for a general insurer as
a “composite insurance. Agent “working for a life insurer as well as a
general insurer. No agent is allowed to work for more than one life
insurer or more than one general insurer.
The qualification necessary before a license can be given are that
the person must.
Be at least 10 years old.
Have passed at least the 12th standard or equivalent examination, if
he is to be appointment in a place with a population of 5000 or
more, or 10th standard otherwise.
Have undergone practical training for at least 100 hours in life or
general insurance business as the case may be from an institution,
approved and notified by the IRDA.
Have passed the pre – recruitment examination conducted by the
insurance institute of india or any other examination body
recognized by the IRDA.
He has been found to be of unsound mind by a court to competent
jurisdiction.
He has been found guilty of criminal breach of trust,
misappropriation. Cheating, forgery or abetment attempt to commit
any such offence.

14
 SECTION–A

1. Meaning of definition of agents.

Section 182 of the Indian contract act defines the word „agent‟ and
principal an agent is a person employed to do any act for another or to represent
another in dealing with a there person.

2. Type of duties and agent

Appointing agents

Training of agents

Motivating agents

Fixing the targets

3. Who is an insurance intermediary?

An insurance intermediary means individual agents, corporate agents

including banks and brokers –they intermediate between the customer and the
insurance company.

4. Who is an agent?

An agent is a person who is licensed by the authority to solicit and

procure insurance business including business relating to continuance renewal
or reveal of policies of insurance.

5. What does designated person of a corporate agent?

A designated person means an officer normally in charged of

marketing operations, as specified by an insurer and authorized by the authority
to issue or renew licenses under the applicable regulations.

15
6. Who is a composite insurance agent?

A composite insurance agent means an Insurance agent who holds a

license to act as an insurance agent for a life insurer and a general insurer.

7. Who is an insurance broker?

An insurance broker means a person licensed by insurance regulatory

and development authority who arranges insurance contracts with insurance
companies on behalf of his clients.

8. What is the difference between an “agent” and a “broker”.

While an agent represents only one insurance company (one general,

one life or both if he is a composite agent apart from a health insurance
company) a Broker may dealt with more than one life or general or both.

9. Are “surveyors” and “Third party administrators” also intermediaries.

Surveyors and third party administrators are also termed as

intermediaries but they are not involved in marketing of insurance.

[Link] Agent and Broker required to be licensed.

Yes, agents and Brokers have to be licensed by the insurance

Regulatory and Development authority ( IRDA) for life insurance or general
insurance or both. They also are bound by a code of conduct laid down in the
respective regulations.

[Link] the intermediary give me a discount on the premium I am supposed to

pay.

No intermediary can offer any discount to you to induce you to take the
policy. If any such inducement is resorted to. It is in violation of section 41 of

16
the insurance Act.1938 and all parties involved would be subject to prosecution
as provided by the law.

Any discount on premium you receive would be only in terms of what the
policy allows and it is given by the insurance company.

[Link] compensation.

The issue of executive compensation in corporate India has gained

increasingly in significance since the advent of economic liberalization in 1993
-94 the subsequent rise of India as a leading center for international investment,
and the rapidly increasing domestic equity participation from retail investors in
Indian capital market.

[Link] is the horizontal compensation.

The horizontal agency costs can arguably be further exacerbate by the

fact that Indian companies have continued to benefit from passive state equity.
Investment not with standing liberalization and the changing architecture of
company ownership as increasing levels of foreign direct investment gradually
alters the allocation of interests and influence.

[Link] horizontal agency.

This is an important economic focus in this business where we proxy

these horizontal agency costs by the proportion of promoters equity and whether
a firm is part of a closely held business group.

[Link] definition.

Composite insurance agent “means an insurance agent who hold a

license to act as an insurance agent for a life insurer and a general insurer.

17
[Link] agent.

Corporate agent means a person other than an Individual as specified in

agents under corporate sector is culled corporate agent.

[Link] the license.

License means a certificate of license to act as an insurance agent issued

under IRDA regulation.

SECTION –B

1. What are remuneration given to agents.

The issue of executive compensation in corporate India has gained

increasingly in significance since the advent of economic liberalization in 1993-
94 the subsequent rise of India as a leading center for international investment,
and the rapidly increasing domestic equity participation from retail investors in
Indian capital market. Salaries for senior management have grown sharply since
1994, and are sizable in the Indian context.

Particularly when compared against non – managerial employee

salaries. The sharp rise in salary levels and the wide regulatory latitude afforded
to boards to set executive pay after 1993 -94 reforms, have prompted concerns
long analyzed in developed markets in relation to the play of incentives
governing executive employment contract and in particular the better alignment
of pay with performance to reduce “agency cost”, and the use and abuse of
managerial power to extract rents and there by disgorge shareholder value.

From an economic perspective, the agency costs that are of greatest concern
in an Indian context are horizontal agency cost between controlling.

These are fundamently different from the vertical “agency cost between
managers and dispersed shareholders that are widely regarded as a potential

18
explanation for high CEO pay among widely – herd anglo – American listed
companies.

Conform to what is in the best interest of share holders and when

managers act in a self – serving manner that is sub – optimal from the
perspective of shareholders.

2. The horizontal of compensation of agency.

These horizontal agency cost an arguably be further exacerbated by

the fact that Indian companies have continued to benefit from passive state
equity investment not with standing liberalization and the changing architect
ere of company ownership as increasing levels of foreign direct investment
gradually alters the allocation of interest and influence.

The Indian corporate environment presents an extremely interesting

analytical laboratory to examine whether horizontal agency – related
misalignments in the interest of controlling and other shareholder lead to higher
executive compensation in the same way as vertical agency costs.

This is an importance economic focus in this chapter where we proxy

these horizontal agency cost be the proportion of promoters „equity and whether
a firm is part of a closely held business group.

From a regulatory perspective an analysis of Indian executive compensation

is interesting for several resan.

First institutionally as in other emerging economics concerns have been

raised with respect to inefficiencies in the enforcement of sanctions for
corporate misfeasance.

Specifically in India, with strong codification of laws but a slow –

moving court system, the responsibility for in enforcement has come to rest

19
largely with the securities and exchange board of India (SEBI) the equivalent of
the US SEC.

The SEBI has thus far evidenced and uneven record on the enforcement
of securities laws in the Indian context, arguably obscuring an understanding of
the compliance profile of the Indian companies.

3. What are steps taken renewal of licence.

(1) A person desiring to obtain or renew a licence (hereinafter referred to
as the applicant) to act as an insurance agent or a composite insurance
agent shall proceed follows.
(a) The applicant shall make an application to a designated person.
(i) In form IRDA – Agents –VA, IF the applicant is an
individual.
(ii) Inform IRDA – Agents –UC, IF the applicant is a firm or
a company.
Provided that the applicant, who desires to be a composite
insurance agent, shall make two separate applications.
(b) The fees payable by the applicant to the authority shall be as
specified in regulation 7.
(2) The designated person may, on receipt of the application along with
the evidence of payment of fees to the authority, and on being satisfied
that the applicant.
(i) Possesses the qualifications as specified under regulation4.
(ii) Possesses the practical training as specified under regualtion5;
(iii) Has passed the examination as specified under regulation 6;
(iv) Has furnished the application complete in all respects
(v) Has the requisite knowledge to solicit and procure insurance business
and

20
 (vi) Is capable of providing the necessary service to the policy holders.
Grant or renew, as the case may be alliance in from IRDA – Agents
UB, along with identity card in form IRDA – Agents v2.
(3) If the designated a licence issued in accordance with this regulation
shall entitle the applicant to act as insurance agent for one life insurer
or one general insurer or, both, as the case many be.
(4) The designated person shall grant or renew licence within a period of
3 month from the data of applications.

SECTION-C

1. Where the applicant referred to under sub – regulation?

(a) An associate / fellow of the insurance institute of India, Mumbai;
(b) An associate / fellow of the institute of chartered accountants of India,
New Delhi;
(c) An associate / fellow of the institute of costs and works accountants of
India, Caluctra;
(d) An associate / fellow of the Actuarial society of India, Mumbai;
(e) An associate / fellow of the institute of company secretaries of India,
New Delhi;
(f) A master of Business administration of any institution / university
recognized by any state government of the central government.
(g) Possessing any Professional qualification in marketing from any
Institution / University recognized by any state government or the central
government.

He shall have completed, at least fifty hours‟ practical training from an

approved institution.

21
 Provided that such applicant shall have completed from an approved
institution at least, seventy hours‟ practical training in life and general insurance
business.

(2) An applicant who has been granted a licence after the commencement of
these regulations, before seeking renewal of licence to act as an insurance agent
shall have completed at least twenty – five hours.

Provided that such applicant before seeking renewal of licence to act as a

composite insurance agent shall have completed from an approved institution at
east fifty hours practical training in life and general insurance business.

Examination :

The applicant shall have passed the pre- recruitment examination in life
or general insurance business or both, as the case may be, conducted by the
insurance institute of India Mumbai, or any other examination.

Fees payable:

(1) The fees payable to the authority for issue or renewal of licence to act as
insurance agent or a composite insurance agent shall be rupees two
hundred and fifty.
(2) The additional fees payable to the authority, under the circumstances
mentioned in sub- section.
(3) Section 42 of the act, shale be rupees one hand red.

(d) disclose the scales of commission in respect of this insurance product

offered for sale, if asked by the prospect.

(e) indicate the premium to be charged by the insurer for the insurance product
offered for sale.

22
(f) explain to the prospect the nature of information required in the proposal
from by the insurer and also the importance of disclosure of material
information in the purchase of an insurance contract;

(g) bring to the notice of the insurer any adverse habits or income inconsistency
of the prospect in the form of a report along with every proposal submitted to
the insurer any material.

(h) inform promptly the prospect about the acceptance or resection of the
proposal by the insurer.

(i) obtain the requisite document at the time of filling the proposal from with
the insurer for completion of the proposal.

2. Explain the cancellation of licence.

Cancellation of licence

The designate person may cancel a licence of an insurance agent, if the

insurance agent sluggers, at any time during the currency of the license, from
any of the disqualification mentioned in sub – section (4) of section 42 of the
act, and recover from him the licence and the identity card issued earlier.

Issue of duplicate licence

The authority may issue a duplicate licence replace a licence lost

destroyed or mutilated on payment a fee of rupees fifty.

Non – application to existing insurance agent.

Nothing contained in Regulation 4 to 6 of these regulation shall apply to

the existing agents before the commencement of these regulation.

Repeal and savings

23
 From the data of coming into force of the insurance regulatory and
development authority (licensing of corporate agents) regulation 2002, the
insurance regulatory and development authority ( licensing of Insurance agents)
Regulation 2000 or any part there of applying to corporate agents shall cease to
have any part there of applying to corporate agent shall cease to have to effect
except as respects things done or committed to be done there under.

3. Explain the IRDA.

IRDA (LICENSING OF CORPORATE AGENTS REGUALTIONS)

IMPORTANT PROVISIONS:

These regulation are on similar lines as the IRDA (Licensing of Insurance

Agents) regulation 2000. The important provisions are as follows.

1. A corporate agent can be a firm a company under the company act, a

banking company a corresponding new bank a regional rural bank a
cooperative society including a co – operative bank, a panchyat, a local
authority, a non – government organization, a micro lending finance
organization, a non – banking finance company or any other institution or
organization that may be approved by the IRDA.
2. The partnership deep or the memorandum of association or any other
document that states the objective of the person wanting to be the
corporate agent, must state clearly that soliciting and procuring insurance.
3. The corporate agent has to nominate its partner ( in the case of firm)
director (in the case of a company), or one or more of its partner ( in the
case of a company) or one or more of its officers or employees, as a
corporate insurance executive. The issue of licence to the corporate agent
is subject to the corporate insurance executive.
(a) Satisfying the requisite educational and other qualification.

24
 (b) Undergoing the minimum training requirements and
(c) Passing the examination conducted by the insurance institute of India,
as in the case of individual agents.
4. The corporate agent also has to nominate one or more of its partners
directors or employees as specified persons. Who will be responsible for
soliciting insurance business on behalf of the corporate agent. The
specified of the corporate agent. The specified person must have a
minimum educational qualification on the same line as individual agents
and must also not suffer from any. The disqualification like being insane,
being convicted for a criminal offence, etc. he must obtain a certification
which will be given to him after under goes the prescribed training and
passes and examination.

The fees for the certification is Rs.500 the certification will be

valid for 3 years and can be renewed.

25
 SECTION–A
1. Define the term agents.
The term agent has a wider application than the meaning used loosely in
insurance practice to describe one who introduces business to the insurer.

Section 182 of the Indian contract Act defines the word „agent‟ and
„principal‟. An agent is a person employed to do any act for another of to
represent another in dealing with a third person. The person for whom such act
is done of who is represented is called the principal.

2. Define the term captive agent?

Insurance agents working solely for a particular insurance company are

called „captive agents‟ independent insurance agents, also called „brokers‟ work
for several companies.

3. Explain the term surveyor.

Such intermediaries are related to only non – life business. When a

claim is reported under a policy issued by an insurance company, it is necessary
to valuate the loss of damage suffered. For this purpose, it appoints surveyors,
and loss assessors, who are independent professional dully licensed by the
insurance regulatory development authority. The function of such intermediaries
are to survey and assess any mishap or disaster and evaluate the financial loss to
the insurance companies, which on the basis of their evaluation, makes
financial assistance to the party.

4. What is corporate of insurance agents?

As per the regulations issued by the insurance regulatory and

development authority (IRDA) individuals and – or corporate bodies like banks,
firms, co- operative societies obtain license to act as insurance agents. As the

26
name itself suggests, corporate agents, is a corporate body set up with the
explicit objectives of selling insurance products.

5. Outline a suitable selection process for insurance agents.

The selection process involve a number of steps. The basic selection

process to solicit maximum possible information about the candidate ascertain
their suitability for appointment as agents. As per insurance regulatory
authority norms, the following standard selection process has to e adopted by
the insurance companies for selection of professional agents.

 Screening the applications

 Selection tests
 Interviews
6. What do you understand by Banc assurance?

Bancassurance is a word coined in the western world, when banks

began to get involved in the marketing of insurance business. In India it means
that the insurance coverage is manufactured and under written by a commercial
bank‟s own insurance company and distributed through the bank‟s distribution
channels.

7. Define the term assignment.

According to the insurance Act 1938, under section (38), the following
procedures are laid down.
Procedure : A transfer or assignment of life insurance can be made either by
endorsement on the policy itself or by executing a separate instrument.
Notice : on a valid assignment, a written notice must be given to the insurer
together with a certified copy of the endorsement of instrument.
Priority : the date on which the notice of assignment or transfer is delivered
to the insurer. Regulates the priority of all claims between an assignee and a
third person.
27
8. What do you understand by surrender valve?
The term surrender valve refers to the amount of money which the
insurer agrees to pay. In case the assured decides to surrender his policy
before its maturity. It is said that the policy holder wishes to surrender his
policy to the insurer and gives up his claim on it. Surrender of policy
indicates termination of the contacts of insurance.
9. What do you understand by paid up value?
If a policy holder discontinues the payment of premium after at least
two years premium have been paid and subsequent premium is not paid, the
policy does not become void but continues as a paid up policy.
[Link] do you understand by payment of claims?
A person claiming money on the maturity of the policy, must satisfy
the insure that he is entitled to receive the money either as the owner of the
policy or because the actual claim is vested in him as legal representative or
as nominee or as assignee.
[Link] do you understand by lapsed policies?
When the premium, is not paid within the days of grace, the policy
lapses. It may be revived during the life time of the life assured. It can be
revived within a period of five years from the due date of the first unpaid
premium and before the date of maturity.
[Link] do you understand by under writing?
LIC has been the largest under writer of capital issues in the Indian
capital market till the year 1978, after which it has reduced its activities in
favors of socially oriented projects. In the year 1983 itself, LIC underwrote
firms and preferred large and established companies, it also prefers further,
issues. As an underwriter, it influences the capital market considerably and is
also able to stabilize the market during the downswing or depression periods.

28
 SECTION–B

1. Who can become an agent?

A person is eligible to be an agent or can be appointed as an agent if
he:
1. It is a citizen of India
2. Is at least 18 years of age on the day of appointment.
3. Has not been found to be of unsound mind by a court or competent
jurisdiction
4. Has not been found guilty of criminal branch of trust or of cheating or of
an abatement or attempt to commit any such offence by court of
competent jurisdiction.
5. Possess the minimum educations qualification of a pass in 12 th or
equivalent examination conducted by any recognized board / institute of
education, if the applicant resides in a place wit population of five
thousand or more as per the last census and 10th pass if the applicant
resides in any other place.
6. Has passed the pre. Recruitment examination in life or general insurance
business to be conducted by the insurance institute of India.
7. Has not been guilty of or has not knowingly participated in or connived
against the general insurance Business.

2. write short notes on

a) code of conduct of agents

b) rights of agents

a) code of conduct of agents.

29
 According to the insurance act, provisions have been laid down for the
code of conduct for agents.

1. Disclosing the license to the prospect on demand.

2. Explaining all available options to the prospect.
3. Explaining the nature of information required in the proposer form
4. Impress upon the prospect and the need to disclose all information.
5. Informing the insurer about any adverse habits and material facts of
the persons to be insured.
6. Advising policy holders to effect nomination.

Rights of agents.

The following are the rights of the agents.

1. He can issue renewal notices on behalf of insurers directly.

2. He can give receipts for premiums collected which are remitted to the
office.
3. He can introduce business on behalf of the insurers
4. He can collect premiums at the homes of the policy holders and obtain
new business.
5. He is entitled to the agreed payment for his duties.
6. He is entitled to receive reimbursement of any payment properly made on
behalf of his insurers.

3. what are the types assignment?

Assignment is of two types:

a) Absolute – for valuable consideration – or gift.

b) Conditional – for natural love and affection

30
 Conditional assignment made by a Muslim is valid Muslim personal law dies
not made it absolute until a notice of assignment is received by the insurer. The
assignment will not be operative as against the insurer. Therefore, it is important
for the agent to note and advise the policy holders that the notice of assignment
should be submitted promptly.

If the assignment is in favour of a minor, in the event of claim, policy money

cannot be paid to his as he cannot give a valid discharge. It is therefore
desirable that where the assignee is a minor, guardian should be appointed.

a) No stamp fee is required in the document appointing the guardian

b) If conditional assignee dies, the benefits revel to the life assured.
c) If absolute assignee dies, than the benefits would go to the estate of the
assignee.

An assignment automatically cancels nomination. Therefore after re-

assignment a fresh nomination should be made.

4. write short notes on

a) days of grace

b) proof of death

c) proof of age

a) days of grace:

insurance company allows certain days after stipulated period of

insurance during which the insured can pay the premium to renew or continue
the policy. Life insurance corporation allows fifteen days of grace from the date
to pay monthly premium and thirty days of grace for the payment of quarterly
half yearly premiums.

b) proof of death:
31
 in case of policies payable at death, the death of the insured has to be
proved. The usual proof is a death certificate and a declaration as to the identity
of the person described in such a certificate. Death may be proved by direct
evidence or by death certificate or by evidence of prolonged absence or other
from which the facts of death may be properly inferred.

c) proof of age

in life assurance, the age of the life to be assured is important because

premium and annuity rates are based upon age attained at the inception of the
contract. It is particularly important in endowment policies where in the money
is payable to the assured on attaining a certain age.

5. what are the difference between surrender value and paid – up value?

[Link] Surrender value Paid – up value

1 Surrender value is the amount which the In paid up value, the
insurer is prepared to pay before the date of policy holder is entitled
the maturity to the paid up valve of
the policy at the
maturity.
2 If a policy holder wishes to surrender his If a policy holder
policy, it means the assured does not want to discontinues the payment
continue the policy. of premium. The policy
does not become void
but continues to be a
paid up policy.
3 Surrender value represents the present cash Paid up value represent
value of a policy the value payable on
assureds‟ death or at the
maturity of the policy.

32
4 Surrender value is calculated on the basis class Paid up value is
of policy and number of years it has been in calculated on the basis of
force. sum of years premium
paid, sum assured with
accrued profits.
5 Surrender value increase with each payment of Paid up value is always
premium higher than the surrender
value since it is not
required to be paid
immediately.

SECTION-C

1. What are rights and duties required of insurance agents?

The duties of the agent clearly reveal their importance in the

insurance business. While performing their duties. They render the following

valuable services to the insurance company, policy holders, government and

the society.

 He should perform his duties in order to achieve the objectives of the

insurance company.

 An agent should develop a close relationship with policy holders and

the development officer.

 The agent should crate mutual trust between the policy holders and the

insurance.

 An agent should render continuous service to the policy holders.

33
 The agent should give personal help and guidance relating to savings

and investment plan of the policy holders.

 The agent should motivate the policy holders to renew the policy in

case the policy lapses.

 An agent should help the policy holder in case of emergency to apply

a loan or surrendering the policy.

 The agent should help the policy holder to appoint a nominee or for

the execution of an assignment.

 Death claim cheques should be personally delivered by the agent.

 He should be ready to solve any service problems to existing policy

holders.

 He should explain his ways of prospecting service and record keeping

in the branch meetings.

 The agent must act with reasonable care and skill and must comply

exactly with any instruction given to him

 Implement advertising about various insurance schemes in

consultation with the development officer.

 An agent should plan and organize for implementing various policies

issued by the insurance companies.

 Feedback information should be given to the development officer and

branch manager about insurance market potential.

 He should achieve the targets before the fixed period

34
2. What are the essential qualities required for a successful agent?

A successful agent requires a number of qualities and personal

traits on his part to discharge his duties and responsibilities. The qualities of

a successful agent can be classified into:

I physical : physical qualities of an insurance agent can be described as

Personality : in order to achieve the target of insurance business, an agent

should have sound physical qualities. Pleasing personality is an essential

requirement to a successful agent for selling insurance products.

Voice: an agent should have a pleasant facial expression and deeply tuned

voice to procure new insurance business.

Optimistic :an optimistic and ambitions insurance agent can be bold enough

to de the headwork in order to draw larger business.

Emotional vitality: to persuade the prospective customers and maintaining

good relationship with the public, it is essential that an insurance agent must

possess the qualification of patience and tolerance i.e. emotional vitality.

II mental qualities: an insurance agent must possess the mental qualities of

confidence, mental alertness, rich imagination and intelligence, initiative and

enthusiasm, sharp memory and tactfulness and resourcefulness which are

required to enable him to assess the customer needs. i.e. the various type of

cover required and match them to the best seller of insurance in the market

place.

35
III social qualities: basically, insurance agent is part of a society. Hence, he

must possess the social qualities like.

Good disposition: friendly nature, respectful with sweet talk are the basic

elements of good disposition. It is always essential for an insurance

agent for rendering good service to the society.

Poise: a successful insurance agent must possess the qualities of self

control, and self assurance which are essential in creating trust and

confidence in the customer.

Good mannered : pleasing personality and good manners are the best

qualities in the overall personality of a successful insurance agent which

are required to attract to more customers.

Conversational ability: good conversational ability in the process of

communication is considered as an essential factor for a successful

insurance agent.

Co –operative: co – operation is the outcome of collective thoughts.

Purpose and actions an insurance agent should be have in a co –

operative manner with his customers.

Honest and faithful: contract of insurance is based on the principles of

utmost good faith on part of both the parties to a contract.

Loyalty: a successful insurance agent must possess the quality of loyally

for rendering services in accordance with the set rules and laws.

36
 IV . professional qualities

Knowledge

Ambition

Aptitude

Discipline or code of conduct

Knowledge of accountancy and law

Training and guidance

3. Difference between assignment and nomination.

Nomination Assignment

It can be done at the time of the It is not possible at the time of

proposal proposal, as he has not acquired any

property which can be transferred.

It can be done only by an It is possible both by endorsement or

endorsement on the policy not by a by a separate deed.

separate deed.

Life assured alone can nominate Assignment is possible by the owner

who can be an assignee also.

It dose not take away the ownership It cannon be cancelled without the

and therefore life assured can change assignee‟s consent.

the nomination any time he likes

It does not need a consider action It has to be for a consideration unless

37
 it is for love and affection

It need not be with nessed It must be with nessed

It has to be notified to the insurer so Notice of assignment is required so

that the nominee‟s interest is that the now assignee gets a priority

protected. over the earlier assignee.

Nominee has no right to the policy The assignee is the owner of the

money as long as the life assured is policy and can give a valid discharge

alive to the insurer even if the assured is

alive.

On the death of the nominee, On the death of the assignee. His

nomination becomes invalid successors inherit the right to the

policy.

A nominee merely receives the The assignee is the owner of the

money on behalf of the beneficiaries. property which is the insurance

He does not own it. policy.

The creditor can get the policy A creditor of the life assured has no

attached right to an assigned policy.

It is automatically cancelled by a An assignee can further assign the

subsequent assignment. policy.

38
4. Write short notes on:

a) Termination of insurance agent

b) Training of agent

c) Definition of insurance agent

d) Recruitment and selection of agent

a) Termination of insurance agent.

In case of cancellation or non. Renewal of the agent‟s licence.

In case of permanent incapacity of an agent

In case an agents conviction for any criminal breach of trust.

In case of agents involved in cheating or forgery

An agent can be terminated by the insurer in terms of the appointment

of an agency.

In case of an agents non – performance of minimum business expected

from him.

In case of any violation of the code of conduct.

b) Training of agents:

The following training methods have been adopted by the insurance

companies for making an agent capable of rendering valuable service to the

insurance company and to the policy holders.

On – the job training

 Sharing experience

39
  Coaching

 Understudy

 Special lectures

 Carrier agent schemes

 Vestibule school

 Systematic training programs

 Time management

 Arranging group meetings

 Narrating experiences.

Off – the – job training

 Special courses and lectures

 Conferences

 Case analysis

 Role playing

 Brain storming

 Sensitive training

 Transactional analysis

 Field force analysis

c. definition of insurance agent:

40
section 182 of the Indian contract act defines the word „agent‟ and „principa‟ an

agent is a person employed to do any act for another or to represent another in

dealing with a third person. The person for whom such act is done or who is

represented is called the principal.

d. Recruitment and selection of agent:

sources recruitment of agents. Normally insurance companies consider the

following sources for the recruitment of their agents.

 Advertisement

 Employment agencies

 Public employment agencies

 Private employment agencies

 Life insurance agency career

 Colleges clubs and other educational institutions

 Employee recommendation

 Labour unions

 Gate hiring

 On campus recruitment

5. Explain the mandatory training for insurance intermediaries.

On of the important changes made by the insurance regulatory and

development authority (IRDA) Act, 1999 is to insist that the new insurance

41
agents should be trained for 100 hours and pass the prescribed test. This was

done with the view of preparing the agents to market life as will as general

insurance in the right manner and to enable from to render proper service to

their customers the new companies that have come into the industry are

recruiting new agents and getting them trained.

The training cover should include both classroom and practical

components. The class room training should be consisting of.

 Code of conduct and legal liabilities, altitude

 Product knowledge, with stress on product designing

 Investment pattern under the IRDA Act 1999.

 Solvency and outcome of market research vis – a – vis – recess for

advertising and publicity.

 Value – added service before and after the sale

 Information technology.

The practical training, at first instance should include

 The office – its out look and purpose

 Process of working, including basis of under writing or risks.

 Office discipline and expectations from on intermediary

 Paper – work and use of information technology

42
 The role of an intermediary and that of the office (under writing

marketing, product designing and so on).

The passing percentage of marks initially was 50% but, with the number

of agents failing the mandatory examination to qualify as an insurance agent is

going up, the IRDA lowered the pass mark to 35% with respective effects.

 Checking of references

 Physical examination

 Approval by an appropriate authority

 Placement

43
 SECTION-A

1. What do you mean by life insurance ?

Life insurance is a contract whereby the insured promises to pay a

uniform rate of premium at fixed intervals of time against which the insurer
agrees to pay a fixed amount on the happening of the event which may be the
death of the assured or the expiry of attain number of years.

2. Define the term life insurance.

According to section 2(11) of insurance Act 1938, “life insurance is the

business of effecting contracts of insurance upon human life, including any
contract where by the payment of money is assured on death (except death by
accident) or the happening of any contingency depend at on human life and any
contract which is subject to the payment of life insurance.

3. Three features of life insurance.

(i) Production element
(ii) Investment element
(iii) Convenience element.
4. What do you understand insurable interest?

In life insurance, the insurable interest must exist at the time of a

contract and need not exist at the time a claim is made. In fire insurance, the
insurable interest should be present both at the time of insurance and at the time
of loss. The insurable interest should be present at the time of loss.

5. What is surrender value,?

In case the policy holder is unable to pay premium continuously he can
surrender the policy for a surrender value amount with the life insurance
carnation.

44
6. Three classification of life insurance.
In life insurance the lives are graded in three categories.
i) Standard life
ii) Sub –standard life and
iii) Life liable
7. What is „Premium‟
In case of life insurance, the premium depends upon the age, health,
sex, occupation of the insured. Where as in non - life insurance the premium
various according to the degree of risk.
8. Write the meaning for indemnity?
According to this principals, the insurer agrees to make good the loss
suffered by the insured. The insurer will indemnity the „actual‟ loss suffered
by the insured and not mare than that. Under any circumstances the insured
will not be allowed to make profit out of the loss. Hence, the insured shall
not, be paid anything in excess of loss or the amount of the palicy.
9. Give the meaning for consideration?
The premium paid is the consideration and on receipt of the premium
by the insurance company, the contract comes into force.
[Link] do you mean by warranty?
“A warranty is that by which the insured undertakes that some
particular thing shall or shall not be done or that some consideration shall be
fulfilled or whereby he affirms or negatives the existence of particular state
of facts.

[Link] is meant by physical hazard?

It refers to the inherent risk of fire in the property which may on
account of the situation, inflammable nature, construction, artificial lighting
and heating, lack of fire. Extinguishing appliance, etc.,

45
[Link] is meant by moral Hazard?
The term maral hazard refers to the with full and malicious setting on
fire of the property by the owners or somebody else. Moral hazard may be
in anyone of the following farms.
(i) It refers to the deliberate destruction of one‟s own property by fire.
Some insured indulge in such activities to realize the insured amount
from the insurer.
[Link] marine insurance?
Marine insurance Act 1963 defines marine insurance as “an agreement
whereby the insurer undertakes to indemnity the assured in a manner and to
the extent there by agreed against marine losses. That is to say the losses
incidental to marine adventure”.
14. What is meant by marine insurance?
Marine insurance is a farm of insurance by which the insurer
undertakes to indemnity the insured against losses. Incidental to marine
adventure. The insured agrees to pay a certain sum of money called the
premium. In consideration of the insurer‟s guarantee to make good the losses
arising from certain specific perils which may include “periods of the sea”
voyage.
[Link] a short note on lloyd‟s association?
As lloyd‟s association has contributed a lot for the development of marine
insurance at the international level, it is better to have knowledge about its
origin and operation.
[Link] do you mean by perils of sea?
They refer to all risks, perils and dangers peculiar to the sea. They include
accidents, capture of the ship or its cargo by pirates, losses by collision, etc.
a point to note here is that losses caused by perils of the sea cannot be

46
 prevented by any reasonable care, skill and diligence on the part of human
beings.

17. What is voyage policy?

When the destination of the ship is voluntarily charged form the
destination contemplated by the policy, it is said to be a change of voyage.
[Link] the matters to be stated in general insurance policy?
(i) To serve better the needs of the economy by securing the development
of general insurance business in the best interests of the community.
(ii) To ensure that the operation of the economic system does not result in
the concentration of wealth to the common detriment.
[Link] of general insurance?
General insurance business nationalization act. Accordingly, the four
subsidiary companies. were delinked from parent company and made as
independent public sector general insurance companies.
[Link] do you mean by fire insurance?
The term “fire” means a visible flame or glow accompanied by heat. In
fire insurance the term “fire”. The presence of flame is a condition pre –
requisite. Thus damage by smoke heating, scorching or charring without
actual burning is not considered as “fire”.
[Link] of fire insurance.
According to [Link] fire insurance is an agreement where by one
party in return for a consideration. Undertakes to indemnity the other party
against financial loss which hey may sustain, by reason of certain defined
subject meter being damaged or destroyed by fire or other defined pails upto
an agreed amount”.
[Link] do you mean by cut most good faith?
According to this principle, both insured and insured are supposed to
disclose all material facts relating to subject matter of insurance to each

47
 other. In case of ordinary to each other. In case of ordinary risks. The
statements made by insured in the proposal form are quite sufficient for a
correct estimation of the risk. Any contrary behavior by either of the parties
will become a breach of good faith.
[Link] a short note on TAC?
The tariff are formulated by the tariff advisory committee (TAC) which
was established under the provisions of insurance act. The main function of
TAC is to govern, control and regulate the rates of premium and the terms
and conditions that of premium and the terms and conditions that may be
offered by the insurer, in respect of general insurance business.
[Link] has an insurable interest?
(a) A person has an unlimited insurable interest in his own life.
(b) A husband has an insurable interest in the life of his wife and vice versa.

SECTION-B

1. What is life insurance? What are its characteristic?

A family depends on the income of its bread winner for its sentence
and for to have a decent life, to provide a standard education to children
leading to the own a roof to live under to have good medical care for all
members and honorable life till the end.

(i) Offer and acceptance:

Like other contracts of insurance the life insurance contract is

alsothe out come of an offer made by the policy owner and its acceptance
by the insurer.

(ii) Agreed sum of money.

The insurer agrees to pay a certain sum of money either on the

death of the policy owner or on the maturity of the life policy.

48
(iii) Premium

The policy owner life its liable to pay periodically the amount of
payment till the death of the policy owner or expiry of the period of
policy.

(iv) Not a contract of indemnity

Life insurance contract is not a contract of indemnity as a losses caused

by the death cannot be measured in terms of money nor money is a
compensation for loss of one‟s life.

(v) Insurable interest

In life insurance, insurable interest must exist when the policy is

sassed though it may not exist when the policy becomes the claim.

(vi) Lending helping hand.

Life insurance provides helping hand to those who are left support less and
helps financially in case of death of the insured. It is also considered to be the
best alternative for making savings.

2. What are the advantages of life insurance?

(i) Creates an estate:

life insurance policy creates an estate. At any pint of time the value of
any other types of savings in the total accumulation in the that account only.
If the savings hobbles unfortunately dies, the amount available to the
dependents is that accumulation only.

(ii) Encourages thrift.

Life insurance encourages thrift forced and compulsory savings. In case

of other types of savings, the moment a person feels the need for money.

49
There is great attraction to withdraw money from the savings accumulation.
Only surrender value which is small percent of the premiums paid will be
available to be policy owner if he wants to withdraw.

(iii) Gift to near and dear:

Life insurance policies cannot be attached by any court of lower

income tax authorities. A married can take a policy under married
women‟s properly act for the benefit of this wife and / or children
separately and create separate estates for their benefit.

(iv) Pralection against liquidation of property.

A life insurance policy can be utilized as a collateral security for a

housing loan. In case of unfortunately death of the policy owner, the
amount available under the life insurance policy is adjusted towards the
outstanding loan and interest and the chouse is released to the
beneficiaries without any encumbrance.

(v) Acts as an emergency fund:

If immediate liquid cash is needed. A policy of life insurance can be

assigned to the life insurance company a bank or any other financial
institution as security for a loan life insurance thus acts as an emergency
fund.

(vi) No stamp duty:

transfer of property contained in a life insurance policy does not

acttract any stamp duty like other property. It can be done by an
assignment under sec. 38 of insurance act 1938, either by an endorsement
on the back of the policy document or on a stamp paper.

(vii) No tax on proceeds of policy

50
The proceed of a life insurance policy including any bonus paid are not liable
for income tax.

(viii) Tax exemption

For gaining income tax exemption under sec. soc of income tax act, a
person can pay premiums under policies on his/ char life or an the life of spouse
or children, whethers major, or minor, married or unmarried.

(ix) Simple claim settlement

Settlement of a claim under life insurance policies is very simple. In

case of death claim. The nominee receives the policy cholder till the date
of maturity of the policies, the maturity claim is paid to the policy holder
himself.

(x) Sage method of investments:

Life insurance is a safe and profitable investment. The IRDA

constituted by the govt. of India in 1998 keeps a constant watch and vigil
over the financial position of life insurance companies. There are strict
seventy margins to be maintained by the companies.

3. Explain the features of life insurance?

(i) Protection element

Like any other farm of insurance, life insurance offers protection to

the family members of the person who has taken a life policy. In the
event of death of policy holler, the insured sum will be paid to his
nominee who may be members of his family.

(ii) Investment element.

51
 Life insurance is one from of investment if the insured wants to get a fixed
amount at a certain age, he can take endowment life policy measurable at that
age. When he attains that age he will be fixed amount. Sometimes with bonus.
Thus the premium paid by him regularly is like depositing money in a bank.

(iii) Convenience element

There is an element of convenience in the life insurance. The policy holder,

whether he takes an denowmead policy or whole life policy, is allowed to pay
the premium amount according to his convenience. The premium may be
payable yearly of haft yearly or quarterly or even monthly.

4. Discuss the features of fire insurance.

(i) A fire insurance contract like any other contract, must fulfill the
essential elements of a valid contract like offer and acceptance, lawful
consideration, legality of object etc.
(ii) A fire insurance contract is a contract of indemnity. This means that in
the event of losses, the insured can recover from the insurer the actual
amount of loss or the maximum amount for which the subject matter
is insured whichever is less.
(iii) In fire insurance the insured should have insurable interest in the
subject matter of the contract both at the time of taking the policy and
at the time of loss.
(iv) Premium is required to be paid at the time of taking the policy and at
the time of policy.
(v) Fire insurance policies are usually taken for one year duration but in
some cases for short periods also.
(vi) Fire policies can be assigned with the prior constant of the fire or
ignition only.

52
 (vii) The loss must be outcome of fire or ignition only.
(viii) Clothing can be recovered under a fire policy if the fire is caused
deliberately
(ix) In case of several policies for the same property, each insurer is
entitled to contribution from other insurers. After indemnification, the
insurer is subrogated to the rights and interest of the policy hobless.
(x) The fire insurance also includes indirect risks such as comprehensive
risks. Consequential risks caused by fire and reinstatement or
rehabilitation of risk which occur after the fire destroys the good
properties.
5. Explain its scope of fire insurance?
According to section 2 of the Indian insurance act 1938, the scope of
fire insurance.
(i) Ordinary scope of fire insurance.

It includes only those risks which define the narrower scope of fire insurance
viz. the doses caused by fire are included in the insurance against fire and
some losses are left out.

(a) Risks covered under fire insurance

The risks causing losses have to be stated in the fire policy and only these
risks are indemnified by the insurance company in case of loss. The
following risks.

a) Fire or ignition
b) Blasting of boiler used for household purposes.
c) Blast of gas cylinders used for house hold cooking.

In the secondary cataloger, the indirect risks or losses are covered. Such risks or
losses are also known as consequential risks or losses.

53
6. Discuss the medical insurance policy?

This policy covers reimbursement of hospitalization domiciliary

hospitalization expenses for illness / diseases or injury sustained in the event of
any claim becoming admissible under scheme, the insurer will pay to the
insured person the amount of such expenses as would fall under different heads
mentioned below and as are reasonably necessarily incurred by or on behalf of
such insured person.

(a) Room, boarding expenses as provided by the hospital /nursing home.

(b) Nursing expenses
(c) Surgeon, anesthetist, medical practitioner consultant, specialists fees.
(d) Anesthesia, blood, oxygen, operation change, surgical appliances, medicines
& drugs, diagnostic material and x-ray, dialysis and chemotherapy, ratio
therpy, pacemaker, artificial limbs & cost of organs and similar expenses.
(i) Sun insured:

One can take sum insured ranging from Rs.15,000 to Rs.3,00,000 in

multiple of Rs.5,000 which is inclusive of domiciliary hospitalization.

(ii) Age limit:

This insurance is available to persons between the age of 5 years and 75

years. Children below the age of 3 months and 5 years of age can be covered
provided one or both parents are covered concurrently. \

(iii) Notice of claim:

Notice of claim should be given to the insurer to writing 7 days from the
data of hospitalization / injury with details of hospital / treatment taken /
nature of disease / policy number.

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 (iv) Payment of claim:

All claims under this policy are payable in Indian currency. All medical
treatment for the purpose of this insurance will have to be taken in India only.

(v) Cumulative bouns:

Sum insured under this policy shall be progressively increased by 5% in

respect of each claim – free year of insurance. Subject to maximum
accumulation of 10% claim – free year of insurance.

7. Discuss the features of medical policy?

(i) Age limit, basic premium, benefits and exclusions are same as per
individual medical policy.
(ii) Maternity benefits allowable under the policy is Rs.50,000 per annum
insured whichever is lower.
(iii) Cost of health check up not payable under this policy
(iv) There will be no cumulative bonus.

8. What are the difference between marine insurance and fire insurance
Although the two classes of insurance are basically contracts of
indemnity and are issued for a short period, say one year or for a specific
voyage, the following differences.
i) Insurance Interest
The marine insurance, the insurable interest should be present only at
the time of loss and need not be present when the insurance is effected.
Whereas in fire insurance the insurable interest must be present at the
time of taking out the policy as well as the time of loss.
ii) Moral Hazard
In insurance marine the possibility of moral hazard does not exist as
much as in fire insurance.

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 iii) Valued policies

The policies issued under marine insurance are generally valued

policies and the market fluctuation is avoided, but the policies issued
under fire insurance strictly adheres to the doctrine of indemnity and
only the market value of property lost in fore evaluable amount will be
compensated.

iv) Profit under a marine

Insurance policy the insured is also allowed a margin of expected
profits say 10% or 15% of the insured amount, whereas under a fire
insurance policy, such practice is not allowed or ordinaly
v) Transfer
A marine policy can be yearly transferred from one party to another.
But a fire insurance policy cannot be transferred with out the
permission of the insurance company.

9. Difference between double insurance and reinsurance

The concept of double insurance differs from the concept of insurance in
the following respects.
a) Meaning :
The insurance business is entered into by the original insurer woth
other insurance out in double insurance, the insured gets the same subject
matter insured with more than one insurer or under more than one policy
with the same insurer.
b) filing Claim
in insurance the insured will claim any part of his loss from the
insurer. But in double insurance the insurer or under with them.
c) Contribution

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 In insurance the reinsured will claim a part of the loss
proportionate to the risk reinsured by him with the reinsures but in
double insurance, each insurer is liable to contribute on pro data
basis towards the loss suffered by the insured.
d) Under insurance
When an insurance, is taken for less than the actural value of the
subject matter under one or more policies, it amounts to under
insurance, by inserting an average clause in the policy, the under
insurance is penalized in such a way that the actiral loss is payable
in proportion to the policy value for the value of the subject matter.

Amount of policy

Claim payable Actual loss

Value of the subject matter

e) Assurance and insurance

Bath these two terms an reused synonymously in the context of
insurance. The term „Assurance‟ is applied in life insurance which
the term insurance is used in other types of insurance like fire or
marine . assurance refers to a contract in which the sum assured is
bound to be payable sooner or later but a contract of insurance is a
contract for compensation of damage or loss and the question of
claim does not arise in case there is no less.

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10. Explain the used terms in Insurance?
There are certain terms which are used very often in Insurance.
Here terms aequire some explanation
(i) Insurer: The party who agrees to pay compensation on the
happening of a contingency is known as insurer. Generally, the
insurance companies are insurers.
(ii) Insured: The party who agrees who has taken a policy for his life or
property in the insurance company is called insured.
(iii) Premium: It is the consideration for which t he insurer gives
production to the insured it is the price of the insurance cover.
(iv) Policy: It refers to the document which contains ins t he terms and
conditions of the insurance company.
(v) Insured Amount: The amount for which the is called the insured
amount or policy money or face value of the policy.
(vi) Peril: It is an event that causes a personal or property loss.
(vii) Proposer: The Person who sends the proposal form for talking and
insurance policy is known as proposer.
(viii) Beneficiary: The person to whom policy amount will be paid in
the event of the death of the assured is called beneficiary.
(ix) Risk: It is defined as a phenomenon closely associated with certain
events or perils such as fire, storms, collision, to which t he object
is exposed or a hazard or a set of hazardous conditions which may
cause a loss or the probability of loss acuring otherwise to the
doctring of indemnity and only t he market value of property lost in
fire (valuable amount) will be compensated.
(x) Profit: under a marine insurance policy, the insured is also allowed
a margin of expected profits say 10% or 15% of the insured
amount, whereas under a fire insurance policy, such practice is not
allowed or ordinarily.

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 (xi) Transfer: A marine policy can be freely transferred frome one party
to another. But a fire insurance policy cannot be transferred with
out the permission of the insurance company.

SECTION-C

[Link] principles of life insurance

The essential elements that are required for creation of a valid

contract such as offer and acceptance, competence of the parties to contact, free
consent of the parties legal object and lawful consideration, are applicable to life
insurance contract too.

(i) Offer and acceptance: There are atleast two parties to life insurance
contract – insurer and insured. The proposal submitted by the
proposer for life insurance is the offer. When it is accepted absolutely
and unconditionally. It is converted into a contract. If the insurer. On
a considering a proposal decides that it can be accepted on terms other
called a counter offer. Once he accepts such as counter offer
absolutely and unconditionally a contract comes into existence.
(ii) Capacity of Parties: The essential of „Competency‟ applies more to the
proposer that a life insurance company. A proposal from a minor is
not entertained by an insurance company. But under certain
circumstances, t he company may issue a policy on the life of a
minor. But in such cases the con tract will be with the guardian or
parent because a contract creating only rights in favour of a minor not
involving any contractual obligation on the part of the minor is valid.
(iii) Free Consent: Free consent is present only when agrees on a thing in
the same sense. If the consetent is obtained by such means, (Example)
by coercion, undue influence, fraud, misrepresentation or mistakes,
Than that will not be called free consent.

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(iv) Legality of object: It is very much essential in a life insurance contract
the life insurance contract should not be based on a more gamling
instinct and the object of insurance and premium is not fraudulent,
immoral and forbidden by law.
(v) Consideration: Consideration is something that moves from one party
to the other and in return for that, other party fulfils his part of
obligation (e.g) premium is a consideration and is paid by insured to
insurer to bear risk of the insured‟s life.
(vi) Allmost good faith (principle of cberrimae fidei): The contract of life
insurance aequies utmost good faith on the part of bath the parties so
that the person undertaking to shoulder the burden of risk may
correctly ascertain the true nature and extent of it before fixing its
price. This form contains many questions with regard to the age,
income, occupation, health and family history of the applicant who has
to give correct to them.
(vii) Insurable Interest: The insured must have an insurable interest in t he
life to be insured if t he policy is to be valid. A person to have an
insurable interest must stand in such a relation to the event insured
against that he would suffer a pecuniary loss if that event actually
happened. Any one, therefore, who has a pecuniary claim against
another or a legal right to support from his has an insurable interest in
t he life of the other. It sufficient, however, that such interest exists
when the policy is taken. But it must be based on value and not on
mere sentimental consideration.
(viii) Sarranty: In life insurance, those representations which are contained
in the policies and expressely or impliedly forming part of the contract
are known as warranties. Representation means any information
which a person furnishes to the insurer during negotiation for effecting
insurance contract.

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 (ix) Informative warreaty: In life insurance informative warranties are
more important. The proposer is expected to reveal all the material
facts to the best of his knowledge and belief.
(x) Promissory Waranty: Waranting relating to the future may only be
statements about his expectation or intention (For example) the
proposer promises that he will not take up any hazardous occupations.
(xi) Proximate cause: If the loss is brought about only by one event, would
be no to decide question of liability. But in actual situations, the loss
may be the result of two or more causes, acting simultaneously or one
after the other. Then it becomes necessary to choose the most
important, the most effective, the most powerful cause which has
brought about the loss. This cause is termed as proximate cause‟, all
other causes being considered as „remote‟ to be applied in life
insurance.

2. What are the various policies offered by LIC for children?

As mentioned earlieas, in the life insurance industry apart from lic

of India several Provate companies are also involved in selling policies to
general public living in different carnors of our country.

(i) Whole life policies: The risk is covered for the entire life of the policy
holder. Which is why they are known as whole life policies. The
policy amount and the bonus are payable only t o the nominee or the
beneficiary upon the death of the policy holder. The policy holder is
not entitle to any money during his or her own life time there is no
survival benefit.
(ii) Endowment policies: Endawment policies are taken for as specified
period where under sum assured is payable on expiry of the specified
period or earlier death. Premiums are normally payable throughout

61
 the term of the policy or till the prior death. Of the life assured. These
policies provide searity to family in case of death and accumulated
savings as succor for old age.
(iii) Children‟s policies: These policies are meant for various needs of
children such as education, marriage and security of life assurance at
an early age. These policies are two types, those:
(a) On the life of child, or
(b) On the life of the parant of the child and for the benefits of the
child

This policy is ideal for parents having less than a year old child. It fulfils
simutaniously short term needs lice family provision in case of poremature
death of the policy holder and long term needs like education and marriage of
children. For example, if t he policy is for 20 years

 At the end 17th year – 25% of sum assured is payable

 At end of 18th year-25% of sum assured is payable
 At the end of 19th year – 25% of sum assured is payable
(iv) Some persons may need a lumpsum amount even before the expiry of
the term of the policy for taking a ling vacation, purchasing a TV or a
fridge or even the marriage of a near and dear one. To meet their
need, lic of India has brought out money back policies, wherein part of
the sum assured is made payable periodically during the term of term
of the policy. Notulithstanding the payments at periodic intervals the
sum assured at risk continues to be the same till the end of the terms of
policies.
(v) Jaint life policy: The LIC of India has brought to light a joint life
policy entitled „Jeevan saathipaln 89‟ Accordingly, a single policy is
issued on two lives such as husband and wife. It product the incomes
of both husband and wife, also grants equivalent benefits to their

62
 survivors in case neither survives the policy term period. IN case
either of the cauple dies during the policy‟s term. Two things happen.
One LIC pays to the surving spouse the full sum assured.
(vi) Women‟s policy: LIC of India has specially designed a policy for
women entitled “Jeevan Sneha – plan No. 128”. This policy
encourages women to save for safety and security. It provides for
fund in times of need like education, marriage, sickness, etc…. All
female lives between the ages 18 years and 50 years covered under
this policy. Wemen also eligible subject to certain conditions.
(vii) Term policies: Under these policies, the sum assured is payable only
in the event of death during the term. In case of survival the contract
comes to an end at the end of term and no payment is made. These
policies are casually non-participating since only death risks is cover,
the premium is low and the contract is simple. These policies provide
coverage for a specific period of time say 5 to 10 years or so on.
(viii) Special policies: LIC of India has brought out some policies to provide
solutions to the problem like risk of major ailments, maintenance of
handi capped dependents, etc., immediate payments of 50% of the
sum assured. Payment of an amount equal to 10% of the sum assured,
every year commencing from the policy anniversary falling on or after
the data of afflication, the data of malurily or the date of death of the
life assured which is earlier.

3. What are the Fundamental principles of fize insurance?

All the essential elements of a valid contract are applicable to fize

insurance contract.

(i) Insurable Interest: The insured should have insurable Interest in the
subject matter of insurance. Such as Interest may arise legally or

63
 equitably in fize insurance. Fize insurance Insurable interest must be
present both at the time of insurance and at the time of loss.
(a) Ownership, (b) possession, (c) contract in the subject matter of
insurance policy.
(ii) Utmost good faith: According to this principles, both insured and
insuer are supposed to disclose all material facts relating to subject
matter of insurance to each other. Any facts open to his observation
are presumed to have been disclosed. T he observance of good faith is
necessary throughout the term of insurance. Any contract behavior by
either of the parties will become a bereach of goodfaith.
(iii) Indemnity: According to this principles, t he insurer agrees to make
good the loss suffered by the insured. The insurer will indemnity the
„actual‟ class suffered by the insured and not be allowed to marce
profit ort of the loss. Hence the insured shall not be paid anything in
excess of less or the amount of the policy.
(iv) Subrogation: The doctrine of subrogation is a corollary t o the
principle of indemnity y. The term subrogation means the right of one
person to stand in place of another. Under this principle, the insurer,
after paying compensation, has got right to takes away the damaged
property, which has some value, from the insured as the latter should
not be compensated twice.
(v) Contribution: The principle of con tribute ion applies when there is
more than one policy covering the same subject matter against the
same peil for the same period and for the same insured. In such cases,
the insurer, after the payment of claim has the right to cover a
proportiate amount form other co-insures who are liable for the same.
(vi) Causa proxima: The maxim „causa proxima not remate specture‟
means that proximate cause and not the remote one is to be taken
notice of at the time of determining the liability of the insuer. The

64
 insurer should to ascertain the nearest cause of damage to the property
which is subject matter of insurance, while paying the claim the
expected dausa proximate cause of fize or not.

4. Explain the various general Insurance corporation?

All insurances, other than life insurance, are categorized as general

insurance. The general insurance is being undertaken by CSIC of India
National Insurance co ltd. New India Assurance [Link] d oriental insurance [Link],
United India Insurance [Link] and private Insurance companies.

(i) General Insurance corporation (CSIC) of India: The CSIC of Indial

was established on Jan-1973. The paid up capital of CSIC is fully
subscribed by the csovt. Of India that of the 4 companies. Insurance
company. New India Assurance company. Oriental Insurance
company and united India Insurance company and CSIC is responsible
for superintending, controlling and carrying on the business on all
India basis. It however acts as the National Reinsurance. It has
Insurance arrangements with the 4 companies. To CSIC with the
government of India.
(ii) National Insurance (NIC) company ltd: The NIC was incorporated in
1906 and has been carrying on general insurance business under
private management till its natinalisation in 1972. In the same year, 22
foreign and 11 Indian Insurance companies were amalgamated with
NIC ltd as a subdiary company of CSIC of India Later in 2002. With
the passage of Insurance Amendment Bill. NIC has been delinked
from CSIC and has been Independent Company.
(iii) The New Indial Assurance (NIA) Company ltd: The NIA was
corporate on 23rd July 1919. In 1972 the year of I ts nationalization
govt, of India took over the management of a company along with all

65
 other non-life insuranes in the country. NIA was subsequently
reconslituted taking over 23 companies under the scheme of merger
following the nationalization of general Insurance Business in 1973.
In Undertakes fire marine and miscellaneous Insurance.
(iv) Oriental Insurance Company (OIC) ltd: The OIC is one of the aldest
insurance companies and is celebrating its 50the year of its
incorporation, this year, “The oriental fire & general Insurance
company ltd as known earlies, was corport at Bombay on 12th 1947.
The Company was a wholly own subsidiary of the oriendal
government security life assurance company [Link] and was formed to
carry on general Insurance business. ON nationalization of general
Insurance business in India. Later on in 2002, with the passage of
Insurance Amentment Bill (2002) the OIC has been Independent
company.
(v) United India Insurance VIII company ltd: The VII- one of the four
subsidiary of CSIC of India – with its chead quarts at Chennai, is the
second largest insurer by size of premium and market share of the
entire general insurance business transacted throughout India.
(vi) Bajaj Allianz General Insurance Company ltd: This company is a joint
venture between alliang Acs and Bajaj auto ltd. Incorporated in Sep.
2000. Bajaj Allianz general Insurance received the certificate of
registration from the IRDA in may 2001 to conduct non-life insurance
business in India. The India auto major holds 74% while Allianz
holds 26% in the joint venture, which has an authourised paid up
capital of Rs. 1.1 billion. The company is headquarted in pane.
(vii) Cholamandalam general insurance company lt d: This company is a
collaboration between cholamandalam, Investment & Finance co ltd.
And mit sual marine Insurance company ltd. Of Japan. The company

66
 is capitalized at 10.5 billion with 75% being held by Tube Investment
a Murugappa group company.
(viii) HDFC Chubb general Insurance Company ltd: The company set up
with capital of 1.01 billion is a jaint venture between HDFC, with
holds 74% stake and the US-based chubb corporation which holds a
26% stake. This company commenced its operations in oct 2002.
(ix) IFFCO-Tokio general Insurance Company ltd: This company is a jaint
venture promoted by the India Farmer‟s Fertilizers co-operative.
Tokio Marine & Fize Insurance company, Japan the fifth dargest
insurance company in the world, Krishak Bharathis cooperative ltd
(KKIBHCO) and Indian potash. Equity capital is 49%, 26%, 20% and
5% respectively. “sankat haran policy” with the corporate office in
gurgaocen and operating offices in about 20 citties the major cities in
India.
(x) ICICI Lombard general Insurance company ltd: The company has a
holding of 74% from ICICI, while the candion insurer Lombard holds
26% in the startup capital of Rs. 1 billion. In offers an wide range of
retail and corporate general insurance customized products it claims to
have over 100 relationship manager and 850 insurance advisors
working from 20 locations across t he country.
(xi) Reliance general Insurance company ltd: The Reliance group has
entered the Indian insurance sector in the general insurance business.
With an equity of Rs. 2 billion through its financial arm, Reliance
capital ltd. The Relience group will be the lead investor for this
initative and is fuist Indian company without a forign insurane tie-up.
(xii) Royal Sundaram General insurance Company ltd: This company is a
joint vent ure between Royal & sun Alliance insurance and Sundaram
finance ltd. Stared its operation from Mar 2001. The venture aimed
[Link].120 crores in revence during first of its operations and was

67
 confident of breaking even by birth year. International Insurance
companies in the world.
(xiii) Tata AICs general Insurance company ltd: This company has a start
up cap ital of Rs. 1.25 billion of which 74% has been contributed by
Tata sons and the remaining 26% by the America partner. Besides
other normal products, t he company plants to be the first Indian
Insurance company to offer a comprehensive policy to cover rises in
the IT sector.
(xiv) Export Credit guarantee corporation of India ltd: It was established in
the year 1957 by the government of India to strengthen the export
promotion drive by covering the risk of exporting on credit. Being
essentially an export promotion organization. It function under the
administrative control of the ministry of commerce, government of
India.

5. Discuss the Existence of Insurable Interest?

The rules in regard to the presence of Insurable interest in respect

of life, fire and marine insurance differs widely.

(i) Life Insurance: The insurable interest must be present in the person
insured at the time when the policy is taken. It may or may not be in
existence at the time of death of the insured. T he person who has
been assigned a life policy need not have insurable interest in it
because when the policy was taken, insurable interest was present.
(ii) Fire insurance: In fire and miscellaneous insurance, insurable interest
must be present both at the time of taking the policy and at the time of
loss for example if the property isured uner a fire policy is sold and
there is a loss after the sale, the insure cannot recove the loss as he has
no insurable interest at the time of occurance of loss.

68
(iii) Marine Insurance: In marine cargo insurance insurable Interest is
required at the time of loss. It may not be present at the time of
effecting insurance. An importer of goods may insure the goods under
a marine policy. Although insurable interest in not required at the
time of issue of t he policy the importer must have a genuine
expectation of acquiring insurable interest. If the arrived good
damaged at destination and if the importer has paid for the goods, he
can recover the lossas he has insurable interest at the time of loss and
also has a policy.
(a) A person has an unlimited insurable interest on his own life.
(b) A husband has an insurable interest in the life of his wife and voice
versa.
(c) A creditor stands to lose money if a debtor dies before repaying the
loan and therefore has insurable interest to the extent of the loan
plus interest.
(d) Business partness can insure each others. Lives upto the livmit of
their financial involvement. Because they would stand to lose on
the death of any one of them.
(e) Where a principal has insurable interest, his agent can effect
insurance on his behalf.
(f) Administrators, executors and trustee holding those offices are
responsible for the property under their charge and therefore have
and insurable interest.
(g) A mortages has an insurable interest in respect of any sum likely to
become due under the contract of mortage.
(h) A bailee has insurable interest in the properties or articles bailed.
(i) Owner of the ship has an insurable interest in his ship and freight
as he is likely to suffer financial loss in case of and accident or loss
of ship.

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