INSURANCE MARKET M - 03

ETHICS IN INSURANCE COMPANY –

IMPORTANCE
Ethics are the moral principles and values that guide individuals and organizations to act fairly,
transparently, and responsibly. In the insurance sector, ethics play a particularly crucial role
because insurance is built on trust, long-term commitments, and the promise of financial
protection in uncertain times. Since policyholders depend on insurance companies to safeguard
their interests during emergencies, ethical conduct is not just desirable but essential. Below is a
detailed explanation of why ethics are important in insurance:

1. Timely Service to Customers

Customers approach insurance companies in moments of need, whether for life, health, or
property protection. Ethical behavior ensures that companies provide prompt and efficient
service without unnecessary delays. Quick responses in policy issuance, claim settlement, and
grievance handling help in building customer satisfaction and loyalty. A delay in services,
especially during a crisis, can cause immense stress to the policyholder, which is why timely
service is a key ethical obligation.

2. Avoid Delay in Claim Settlement

The primary reason people purchase insurance is for security during unforeseen circumstances.
If claims are delayed intentionally or due to bureaucratic hurdles, it can destroy customer trust
and damage the company’s reputation. Ethical companies strive to process claims fairly and
within the promised timelines. This assures customers that the insurer genuinely cares about
their well-being rather than merely collecting premiums.

3. Disclosure of All Terms and Conditions

Transparency is a fundamental ethical principle. Insurance contracts often involve complex

terms and exclusions. If companies hide or misrepresent information, customers may feel
cheated when they discover limitations during claim settlement. Ethical practice demands that
insurers clearly disclose all terms, conditions, risks covered, exclusions, and costs upfront,
enabling customers to make informed decisions.

4. Proper Claim Settlement Procedures

Ethical insurance companies follow fair, transparent, and standardized claim settlement
procedures. They ensure claims are investigated objectively, without bias or favoritism, and avoid
unnecessary harassment of policyholders. A proper system enhances credibility and prevents
disputes, safeguarding the company’s long-term reputation.

5. Avoid Exaggerated Benefits Under the Policy

Misleading advertisements or false promises about high returns and unrealistic benefits are
unethical. Insurance is primarily a protection tool, not a speculative product. Ethical insurers
provide accurate, realistic, and balanced information about benefits so customers know exactly
what they are buying.

6. Maintain Secrecy of Customer Information

Insurance companies handle highly sensitive personal and financial information of clients.
Ethical standards require companies to protect this information from misuse, unauthorized
disclosure, or fraud. Maintaining confidentiality builds trust and ensures customers feel secure
while sharing their details.

7. Proper Pricing of Insurance Plans (Reasonable Premiums)

Fair pricing is another ethical obligation. Overpricing premiums exploits customers, while
underpricing can make the company financially unstable and unable to pay claims. Ethical
insurers strike a balance by charging reasonable premiums that reflect the actual risk, ensuring
sustainability and fairness to both the insurer and policyholder.

8. Do Not Take Signatures on Blank Documents

Forcing or misleading customers into signing blank forms or incomplete documents is unethical
and exploitative. Such practices can later be misused to deny claims or alter agreements. Ethical
insurers always ensure that documents are fully explained, completed, and signed with the
customer’s full knowledge and consent.

9. Maintain Consistency in Declared Benefits

Ethics demand that the benefits promised at the time of policy issuance remain consistent
throughout the policy term. Sudden changes or hidden reductions in benefits can lead to
mistrust. By ensuring consistency, insurers reinforce reliability and stability in customer
relationships.

10. Avoid Hidden Charges and Fees

Transparency in cost is vital. If insurers impose hidden charges, administrative costs, or
penalties that were not disclosed initially, customers feel deceived. Ethical insurers clearly list all
fees and charges upfront so that customers are not burdened unexpectedly.

11. Acting as Trustee of Customers’ Funds

Insurance companies collect large amounts of money from policyholders in the form of
premiums. Ethically, insurers must act as trustees of these funds, ensuring they are invested
wisely, safely, and in accordance with regulations. Misuse of these funds for risky ventures or
personal gain is unethical and can damage the company’s solvency as well as customer trust.

INSURANCE SPECIALIST – FUNCTIONS

An Insurance Specialist is a professional who plays a vital role in bridging the gap between
insurance companies and customers. Their primary responsibility is to ensure that individuals
and businesses can choose, purchase, and manage insurance policies effectively. With their
specialized training and knowledge, they not only guide customers but also help insurance
companies provide efficient services. Below is a detailed explanation of their major functions:

1. Expert in Interpreting Insurance Policies

Insurance policies are often written in complex legal and financial terms. Most customers find it
difficult to understand exclusions, limitations, or specific clauses. An insurance specialist uses
their expertise to interpret policy documents in simple language, ensuring customers fully
understand their rights, obligations, and benefits. This helps avoid confusion and disputes at the
time of claims.

2. Specialized Training

Insurance specialists undergo professional training programs and certifications to gain in-depth
knowledge about different types of insurance, laws, and procedures. This specialized training
equips them to handle technical questions, assess risk factors, and give reliable advice to
clients.

3. Perform Administrative Functions

Apart from advisory roles, insurance specialists also carry out important administrative tasks
such as maintaining records, processing applications, handling policy renewals, and updating
client details. These functions ensure smooth day-to-day operations and regulatory compliance
within the insurance company.

4. Helpful in Finding the Right Insurance

Every customer has unique needs – some may need health coverage, while others prioritize life
insurance, property insurance, or retirement plans. An insurance specialist assesses the
customer’s personal or business situation and matches them with the most suitable insurance
product. This ensures that the customer receives maximum value for their premium.

5. Provide Guidelines

Insurance specialists act as guides and advisors by educating customers about policy terms,
claim procedures, and legal requirements. They also inform clients about government
regulations, tax benefits, and risk coverage so that customers can make informed decisions.

6. Link Between Clients and Insurance Company

One of the most important functions of an insurance specialist is to serve as a bridge between
the customer and the insurer. They communicate customer concerns to the insurance company
and clarify the company’s policies to customers. This role helps in building trust, resolving
disputes, and ensuring smooth transactions.

7. Efficient in Collecting Data

Accurate data collection is essential in the insurance sector. Specialists collect detailed
customer information such as age, income, health history, and risk profile. This data helps
insurance companies evaluate risks, decide premium amounts, and create suitable insurance
products. Proper data management also helps in future claim settlements.

8. Wide Knowledge About Insurance Areas

An insurance specialist has comprehensive knowledge across different areas of insurance—life,

health, motor, property, marine, liability, and more. This broad knowledge enables them to advise
clients on multiple needs and provide complete risk coverage solutions instead of focusing on a
single product.

9. Experience and Knowledge About Billing

Insurance transactions involve premium billing, payment schedules, renewals, and sometimes
refunds. Specialists with strong billing knowledge ensure that payments are recorded properly,
customers are not overcharged, and companies receive timely premiums. Their accuracy
prevents financial disputes and ensures trust.

10. Understanding the Insurance Policy

A deep understanding of policy structures, coverage limits, riders (add-ons), exclusions, and
settlement processes allows the specialist to answer customer queries confidently and prevent
misunderstandings. They also explain how policies can be customized to suit customer needs.

11. Identifying Customer Needs

Every customer buys insurance for a purpose—financial security, family protection, business risk
coverage, or tax planning. Insurance specialists analyze the client’s financial condition, goals, and
lifestyle to identify their exact insurance needs and recommend policies accordingly.

12. Suggesting Suitable Policies

Based on customer needs, the insurance specialist compares various products available in the
market and suggests the most appropriate policy. This involves balancing premium costs with
the level of coverage so that the client gets the best value without being underinsured or
overinsured.

13. Assisting in Purchasing Procedures

Insurance procedures often require filling out detailed forms, submitting documents, and
complying with legal requirements. Specialists assist customers in completing all formalities
smoothly and ensure that no errors occur that could later lead to claim rejection.

14. Collecting Data for Insurance Companies

Apart from customer information, insurance specialists also collect market data, competitor
product details, and customer feedback. This data helps insurance companies improve their
services, design new products, and adjust premiums based on real market trends.

15. Assisting in Claim Procedures

When a customer faces a loss, the claim process can be stressful. Insurance specialists guide
customers in submitting claim documents, providing evidence, and coordinating with surveyors
and company officials. They ensure the claim is processed quickly and fairly, reducing customer
frustration and maintaining trust.
 WAYS OF CUSTOMER SATISFACTION IN
INSURANCE
Customer satisfaction is the backbone of the insurance industry because insurance is built on
trust, reliability, and long-term relationships. Unlike many products, insurance is not something
customers can “see” or “use” immediately; instead, it is a promise of financial protection in the
future. Therefore, insurers must adopt practices that not only meet but exceed customer
expectations. Below are the major ways of achieving customer satisfaction explained in detail:

1. Suggest Customized Insurance Policy

Every customer has different needs depending on their age, family situation, income, and future
goals. A young professional may require health and life insurance with low premiums, while a
business owner might need property or liability insurance. By offering customized policies,
insurers show that they understand individual needs rather than offering one-size-fits-all
solutions. This personalization builds trust and satisfaction.

2. Provide Personalized Services

Customers value personal attention—such as reminders for premium payments, tailored advice,
and support during claim settlement. Personalized services make customers feel cared for and
respected, improving their overall experience with the company.

3. Minimum Premium

Affordability plays a big role in satisfaction. By offering reasonable and competitive premiums
that match the coverage, insurers make insurance accessible to a wider population. Customers
feel they are getting value for money without being overburdened financially.

4. Timely Issue of Policy

Delays in policy issuance can make customers anxious. Ethical and efficient insurers ensure that
policies are issued promptly after receiving the premium and documents. Quick policy issuance
gives customers a sense of security and confidence in the company.
5. Minimum Documentation of Policy

Lengthy and complicated paperwork often discourages customers. Companies can improve
satisfaction by keeping documentation simple, minimal, and user-friendly, possibly supported by
digital solutions. This reduces time and effort for the customer.

6. Doorstep Services

Many customers prefer convenience. By providing doorstep services such as premium collection,
policy delivery, or assistance with claims, insurers save customers’ time and effort. This gesture
increases loyalty and strengthens customer relationships.

7. Customer Care Support

Strong and reliable customer care support is vital. Whether through call centers, chatbots, or
branch visits, customers should have easy access to help whenever needed. Prompt responses,
polite communication, and effective problem-solving are key to satisfaction.

8. Effective Grievance Handling Mechanism

Disputes and issues are inevitable in insurance. What matters is how they are resolved. A
transparent and efficient grievance redressal system helps customers feel heard and valued.
Quick resolution of complaints prevents frustration and protects the company’s reputation.

9. Good Returns

For certain insurance products like endowment plans, ULIPs, or pension plans, customers expect
fair and competitive returns. When insurers provide attractive returns along with protection,
customers perceive insurance as both a safety net and an investment tool, enhancing
satisfaction.

10. Avoid Lapsation of Policy

Policy lapses due to missed premium payments can cause customers to lose benefits. Insurers
can prevent this by sending timely reminders, offering grace periods, or flexible renewal options.
Helping customers maintain their policies shows care and responsibility, which boosts trust.

11. Flexibility in Premium Payments

Every customer’s financial situation is different. Providing flexibility in premium payment

frequency (monthly, quarterly, yearly) or allowing adjustments during financial difficulties
increases satisfaction. It shows that the company understands and supports the customer’s
needs.

12. Loan Facility on Policy

Many life insurance policies allow customers to borrow against their policy’s cash value. Offering
such a loan facility gives customers liquidity in times of need without losing coverage. This
additional benefit improves the usefulness and attractiveness of insurance.

13. Timely Policy Servicing

Customers expect insurers to provide ongoing servicing like updating nominee details, issuing
duplicate policies, or adjusting coverage. Efficient servicing during the policy term enhances
convenience and builds long-term satisfaction.

14. Bonus on Long-Term Policies

Long-term customers expect to be rewarded for their loyalty. By offering bonuses, loyalty
benefits, or additional coverage on long-term policies, insurers not only encourage customer
retention but also strengthen satisfaction and trust.

DIFFERENT CUSTOMER NEEDS – LIFE

INSURANCE
Life insurance is not just a financial product; it is a security plan for the future. Different
customers purchase life insurance for different reasons depending on their age, family
responsibilities, income, and financial goals. For some, it is a safety net for dependents, while for
others it is a disciplined way of saving or a tool for tax benefits. Below is a detailed explanation
of the various customer needs fulfilled by life insurance:

1. Savings for Old Age

In old age, when income sources reduce or stop altogether, life insurance provides a financial
cushion. Policies like pension plans or endowment plans help individuals save during their
working years and enjoy financial independence during retirement. This ensures that they do not
have to depend on others in their later life.
2. Provision for Dependents

One of the primary purposes of life insurance is to protect the financial security of dependents
(such as children, spouse, or parents) in the event of the policyholder’s death. The insurance
payout ensures that the family can continue their standard of living and meet daily expenses
even after the breadwinner is gone.

3. Best Way of Savings

Life insurance also acts as a disciplined savings tool. Since premiums must be paid regularly,
customers are encouraged to save systematically. Unlike casual savings, insurance creates a
habit of consistent financial planning, which results in a lump sum or annuity in the future.

4. Provides Peace of Mind

Life is uncertain, and unexpected events can create financial hardship for families. Life insurance
gives customers peace of mind, knowing that their loved ones will be financially secure even if
something unfortunate happens. This emotional satisfaction is one of the strongest needs that
life insurance fulfills.

5. Useful for Quick Borrowings

Some life insurance policies acquire a cash value after a few years. Customers can take loans
against these policies in times of emergency without liquidating other assets. This quick
borrowing facility makes insurance not just a protection tool but also a financial backup.

6. Boost as Good Citizens

Life insurance helps individuals contribute to the economic development of society. The
premiums collected are invested by insurance companies in industries, infrastructure, and social
projects, which helps in national progress. By purchasing insurance, customers indirectly help in
building the economy, which boosts their sense of responsibility as good citizens.

7. Provision for Children’s Education

Parents buy life insurance to secure funds for their children’s education. Even if the parent is not
around, the insurance payout ensures that the child’s educational goals are not compromised,
helping them achieve a stable future.

8. Provision for Daughter’s Marriage

In many cultures, marriage expenses can be significant. Life insurance policies allow families to
plan and save systematically for their daughter’s marriage. This ensures that funds are available
at the right time without putting financial strain on the family.

9. Tax Relief

Life insurance policies often provide tax benefits under various sections of income tax laws.
Customers see insurance as a dual benefit: financial protection plus tax savings. These benefits
make life insurance an attractive choice compared to other savings options.

10. Protection Against Creditors

If the policyholder has debts, creditors may claim assets to recover dues. However, certain life
insurance benefits are protected from creditors, ensuring that the family receives financial
support despite liabilities. This adds an extra layer of security for dependents.

11. Provision for Estate Duties

In some cases, when an individual passes away, estate duties or inheritance taxes need to be
paid. Life insurance helps provide funds to meet these expenses, ensuring a smooth transfer of
wealth to the next generation without financial difficulties.

DIFFERENT CUSTOMER NEEDS – OTHER

INSURANCE
Unlike life insurance, which focuses mainly on protection and savings for dependents or
retirement, other types of insurance (such as health, motor, fire, marine, travel, liability, and
property insurance) address risks associated with assets, health, and unforeseen events.
Customers buying these insurances look for trust, fairness, affordability, and adequate financial
protection. Below is a detailed explanation of these needs:

1. Insurable Interest

Customers expect that their ownership or financial stake in the insured subject (such as property,
vehicle, or goods) is protected. Insurable interest ensures that the customer can only insure
something they actually own or have a financial interest in. This prevents misuse of insurance
and assures customers that their genuine interests are safeguarded.

Example: A person can insure their own car, but not a stranger’s car.

2. Full and Fair Contract

Customers need insurance contracts to be transparent, fair, and free from hidden conditions.
Since insurance agreements can be complex, customers expect that insurers disclose all terms,
conditions, and exclusions clearly. A full and fair contract builds trust and prevents disputes at
the time of claim settlement.

Example: A health policy should clearly state what treatments are covered and what are
excluded.

3. Maximum Compensation

The fundamental expectation from general insurance is that the customer will receive fair and
maximum compensation for actual losses. Customers do not buy insurance to profit, but they
expect to be restored to the same financial position they were in before the loss. This principle
reassures them that the insurer will truly support them in times of crisis.

Example: If a fire damages a house worth ₹20 lakhs, the insured expects to receive adequate
compensation to rebuild or repair it.

4. Contract of Indemnity

Unlike life insurance (which pays a fixed sum), most other insurances operate on the principle of
indemnity—restoring the insured to their pre-loss position. Customers need this assurance so
that they neither suffer financial hardship nor unfairly benefit from a claim. This avoids both
under-protection and over-protection.

Example: If a car worth ₹5 lakhs is damaged in an accident, the insurer compensates only the
repair/replacement cost, not more than the car’s actual value.

5. Help of Agents

Many customers may not fully understand the technicalities of insurance products. They need
the guidance and support of trained insurance agents or intermediaries to choose the right
policy, understand procedures, and handle documentation. Ethical and professional agents act
as a bridge between insurers and customers, ensuring smooth service and satisfaction.

Example: An agent can help a customer decide between comprehensive motor insurance and
third-party liability coverage.

6. Reasonable Premium

Affordability is a major concern for customers. They expect premiums to be fair, justified, and
proportionate to the risk covered. Very high premiums discourage people from buying insurance,
while very low premiums may raise doubts about reliability. A reasonable premium ensures that
customers get adequate protection without financial strain.

Example: A motor insurance policy priced at ₹10,000 for a car worth ₹5 lakhs feels reasonable to
most customers.

CUSTOMERS’ MINDSETS IN INSURANCE

In today’s competitive insurance market, customers have higher expectations than ever before.
They no longer choose insurance companies solely based on premiums but on the overall
experience, transparency, flexibility, and trustworthiness of the service provider. The mindset of
modern customers is shaped by their need for quick solutions, convenience, security, and value-
added benefits. Below is a detailed explanation of what customers expect from insurance
companies:

1. Quick Service

Customers want fast and efficient service, from policy issuance to claim settlement. They dislike
unnecessary delays, long queues, or repeated follow-ups. Quick service enhances trust and
satisfaction, especially during emergencies when immediate assistance is needed.

2. Use of Technology

Modern customers expect insurers to adopt digital platforms, mobile apps, and online services.
Technology enables features such as online premium payment, policy tracking, e-documentation,
and instant claim filing. This saves time, increases transparency, and appeals to tech-savvy
customers.

3. Full Disclosure of Terms and Conditions

Transparency is at the heart of customer trust. Customers expect complete clarity about policy
inclusions, exclusions, premiums, and charges. Hidden conditions or misleading advertisements
can create dissatisfaction and disputes. Clear disclosure helps customers make informed
decisions.

4. 24 × 7 Claim Settlement

Emergencies don’t follow office hours. Customers expect round-the-clock claim assistance,
whether it’s hospitalization, an accident, or a natural disaster. Insurance companies offering 24 ×
7 claim support win customer trust and loyalty by ensuring help is always available.

5. Proper Claim Valuations

When a loss occurs, customers want fair and accurate valuation of their claims. They expect
insurers to follow standardized procedures and avoid underestimating damages. Ethical and
proper claim valuation prevents disputes and strengthens the insurer’s credibility.

6. Quick Processing and Settlement of Claims

The claim process is the moment of truth for insurance companies. Customers want minimal
delays and simple procedures so they receive their entitled benefits promptly. Quick claim
settlements provide financial relief during crises and boost long-term confidence in the insurer.

7. Personalized Services

Every customer values personal attention. Personalized services include reminders for premium
payments, tailored advice, and assistance during claims. These efforts make customers feel
valued and respected, improving satisfaction and loyalty.

8. Customized Insurance Plans

Customers want policies tailored to their unique lifestyle, risk profile, and financial goals rather
than generic plans. For example, a young professional may prefer health insurance with
maternity cover in the future, while a business owner may need fire and liability insurance.
Customized plans make customers feel understood and supported.

9. Flexibility in Premium

Financial situations vary from customer to customer. They expect flexible premium payment
options—monthly, quarterly, or yearly—as well as the ability to adjust premiums when income
changes. Flexibility ensures affordability and prevents policy lapses.

10. Attractive Returns

For insurance products with an investment component (such as endowment plans, ULIPs, or
pension plans), customers expect competitive returns in addition to protection. Attractive returns
make life insurance appealing not just as a safety net, but also as a savings and investment
option.

11. Minimum Documentation

Customers dislike lengthy paperwork and bureaucratic hurdles. They expect simplified
documentation, supported by digital solutions like e-signatures and online KYC. Minimum
documentation saves time and reduces frustration.

12. Periodic Updates

Customers want to stay informed about their policies through regular updates on premiums,
maturity values, bonuses, and claim status. Periodic communication—via SMS, email, or app
notifications—makes customers feel engaged and secure about their investments.

13. Consultancy on Financial Matters

Customers view insurance companies not just as policy providers but as financial advisors. They
expect guidance on financial planning, tax savings, retirement planning, and investment-linked
insurance. By offering consultancy, insurers build long-term relationships beyond simple policy
sales.

CUSTOMERS’ BEHAVIOUR AT THE PURCHASE

POINT
The purchase of an insurance policy is a critical stage where the customer interacts with the
insurance company or its representative. At this point, the customer is evaluating whether the
insurer is trustworthy, transparent, and supportive. Their behaviour reflects their need for
complete clarity, fairness, and ease of transaction. Since insurance involves long-term financial
commitment, customers are very cautious before signing the contract. Below is a detailed
explanation of customer behaviour at this stage:

1. Demand for Detailed Information of Policies

Customers want comprehensive information about the policy they intend to buy, including its
features, coverage, exclusions, benefits, and risks. They expect the insurer to explain the policy in
simple terms so they can make an informed decision.

2. Interest in Terms and Conditions

Customers carefully examine the terms and conditions of the policy. They want to understand
the obligations, rights, and limitations to avoid unpleasant surprises during claim settlement. Full
disclosure of terms is essential to satisfy customers at this stage.

3. Awareness of Premium

The cost of the policy is a key deciding factor. Customers want clear information on premium
amount, payment frequency, and consequences of non-payment. They also compare premiums
across different insurers to ensure affordability and value for money.

4. Disclosure of Commission

Customers expect transparency in commission disclosure. They want to know how much the
agent or intermediary earns from the sale, as hidden commissions can create suspicion.
Disclosure builds trust and prevents doubts about mis-selling.

5. Clarity on Acceptance and Rejection of Policy

Customers behave cautiously, wanting to know under what conditions a proposal can be
accepted or rejected. They seek clear guidelines on eligibility, medical requirements, and risk
assessments so they can prepare in advance and avoid rejection.

6. Maintaining Secrecy

At the purchase point, customers often share sensitive personal and financial details. They
expect the insurer to maintain confidentiality and use the information only for underwriting and
policy issuance. Any misuse or disclosure would reduce trust.

7. Expectation to Share in Proceeds

Customers want assurance that they will receive their fair share of returns, bonuses, or profits in
participating policies. This expectation reflects their interest in not only protection but also
wealth accumulation.

8. Assistance in Getting Loan

Some customers purchase life insurance as a means of future borrowing. At the purchase stage,
they want to know whether the policy allows a loan facility against its cash value and under what
conditions this facility can be availed.

9. Help in Assignment and Nominations

Customers often need guidance in making nominations (appointing beneficiaries) or

assignments (transferring rights of policy). At the purchase point, they expect the insurer or
agent to provide clear assistance so that their intentions are legally protected.

10. Knowledge of Proposal Form and Other Forms

Customers behave attentively when filling out the proposal form, as it is a legal document
forming the basis of the insurance contract. They expect agents or insurers to explain each
section and ensure that all required information is filled in accurately.

11. Awareness of Rules About Limit of Insurance Amount

Customers want to know the rules and regulations governing the maximum amount of insurance
they can purchase. This is especially relevant in life insurance, where limits may depend on
income, age, and financial background.

12. Interest in Limit of Sum Assured

Closely linked to the above, customers want clarity on the maximum sum assured available
under different policies and how it affects premiums and benefits. This helps them plan coverage
according to their needs.

13. Concern with Revival of Policy

At the purchase stage, customers want to know the revival rules if a policy lapses due to non-
payment of premiums. They seek assurance that they can reinstate their policy later, often by
paying overdue premiums and penalties.
14. Evidence of Respectability

Customers expect the insurer to verify their background through documents like income proof, ID
proof, or medical records. They cooperate in providing evidence of respectability because they
understand it builds the basis of a trustworthy contract.

15. Issue of Cover Note on Time

Customers want immediate proof of coverage after applying and paying the premium. A timely
cover note reassures them that they are protected even before the full policy document is issued.
This timely action gives them confidence in the insurer’s efficiency.

CUSTOMERS’ BEHAVIOUR AT THE CLAIM

SETTLEMENT POINT
The claim settlement stage is the most crucial phase in the relationship between an insurance
company and its customers. While the purchase of a policy is based on trust and promises, the
claim stage is the moment of truth when customers evaluate whether the insurer truly delivers on
its commitments. Customer behaviour at this point reflects their expectations of fairness,
transparency, and speed. Below is a detailed explanation of how customers behave and what
they expect during the claim settlement process:

1. Presentation of Insurance Contract

At the time of claim, customers present their insurance contract/policy document as proof of
coverage. They expect the insurer to honour the promises made in the contract.
Behaviour: Customers carefully check their policy terms, exclusions, and coverage to ensure the
loss is eligible. They may also compare what was explained at purchase with what is written in
the contract.
Implication for insurers: Clear and transparent contracts reduce disputes at this stage.

2. Discharge Form

After processing the claim, customers are required to sign a discharge form (also called claim
release form) before receiving payment. This form acknowledges that the insurer has settled the
claim.
Behaviour: Customers usually read the discharge form carefully, ensuring the settlement amount
is correct before signing. They may also seek clarifications if they feel the amount is less than
expected.
Implication for insurers: Explain the discharge form clearly and ensure customers understand it
is a final settlement.

3. Payment of Claim

Customers’ main expectation is timely and full payment of their claim amount. At this stage, they
evaluate whether the insurer is living up to its promise of financial support.
Behaviour: Customers are anxious, often impatient, and follow up actively until the payment is
credited. Any delay or partial settlement can cause dissatisfaction and mistrust.
Implication for insurers: Prompt and fair claim payment builds loyalty and improves reputation.

4. Certificate of Identity

To prevent fraud, insurers often require proof of identity of the claimant (such as Aadhaar card,
PAN, driving license, etc.).
Behaviour: Customers cooperate by providing valid documents but may become frustrated if
asked for unnecessary or repeated paperwork. They expect a smooth verification process
without harassment.
Implication for insurers: Ask only for essential documents, accept digital IDs where possible, and
simplify verification through technology.

5. Verification of Evidence of Loss

The insurer usually requires evidence of the loss (e.g., hospital bills, FIR for theft, medical reports,
death certificate, repair invoices).
Behaviour: Customers gather and submit documents carefully, but they may feel burdened if the
list is too long. They expect fairness and transparency in the verification process.
Implication for insurers: Provide a clear checklist of required documents, accept scanned copies
where possible, and avoid unnecessary paperwork.

6. Inspection of Loss

In many cases (like motor accidents, fire, or property insurance), insurers send a surveyor or loss
assessor to inspect and verify the extent of damage.
Behaviour: Customers generally cooperate with inspections but expect the surveyor to be
impartial, respectful, and efficient. They may become defensive if they feel the loss is
undervalued.
Implication for insurers: Ensure surveyors act ethically, explain findings transparently, and finalize
inspections quickly.
 OPERATIONS OF INSURANCE COMPANY AND
INTERMEDIARIES – BROKER
An insurance broker is an independent professional intermediary who connects clients with
insurers. Unlike agents, who typically represent a particular insurer, brokers represent the
interests of the customer and provide a wide range of services, from policy selection to claim
assistance. Their operations are broad and cover advisory, administrative, technical, and
relationship-based roles. Below is a detailed explanation:

1. Detailed Information of Business

Brokers must gather complete details about the client’s business, personal requirements, risks
involved, and financial situation. This information allows them to recommend the most suitable
insurance coverage tailored to the client’s needs.

2. Familiarizing Himself

Before advising, a broker must familiarize himself with the client’s operations, assets, liabilities,
and risk exposure. For instance, in a manufacturing firm, he should understand fire, machinery
breakdown, employee safety, and liability risks. This builds trust and ensures the advice is
practical.

3. Rendering Advice

The primary role of the broker is to advise customers impartially about the best insurance
products, coverage limits, exclusions, and premiums. They guide clients on how much coverage
is adequate, which insurers offer the best terms, and how to avoid under- or over-insurance.

4. Knowledge of Valuable Insurance

Brokers must possess wide knowledge about various types of insurance policies—life, health,
motor, fire, marine, liability, and specialized commercial policies. This expertise helps them
match the right product to the customer’s needs.

5. Submitting of Quotations

Brokers collect and submit quotations from different insurers so that clients can compare
coverage, premiums, and terms. This competitive approach helps customers get the best value
for their money.
6. Underwriting Information

Brokers act as a bridge between insurers and clients by supplying underwriting information. They
help insurers understand the risk profile of the client by providing accurate data, reports, and risk
assessments, which assists in fair premium determination.

7. Written Acknowledgement

For professionalism and record-keeping, brokers provide clients with written acknowledgements
for every premium received, document submitted, or service rendered. This enhances trust and
ensures transparency.

8. Assist in Applying Premium

Brokers help clients with premium payments, ensuring timely remittance to insurers and advising
them on installment options, tax implications, and due dates to avoid policy lapses.

9. Quick Service

Speed of service is a major expectation. Brokers ensure timely issuance of policies,

endorsements, and renewals, as well as quick communication with insurers to handle customer
requests without delay.

10. Documentations

Brokers assist clients in preparing, verifying, and submitting proposal forms, KYC documents,
claim forms, and supporting evidence. They ensure documentation is accurate to prevent
rejection or disputes.

11. Survey System

In case of claims, brokers coordinate with surveyor/loss assessors appointed by insurers. They
help arrange surveys, provide necessary data, and represent the client’s interests during loss
assessment.

12. Specialist Service

Some risks are complex, such as aviation, marine cargo, cyber insurance, or liability coverage.
Brokers offer specialized services by advising clients on technical aspects and recommending
advanced policies.
13. Completing of the Proposal

A proposal form is a legal document forming the basis of the insurance contract. Brokers assist
in filling it correctly, ensuring accurate disclosure of facts, which is crucial to avoid claim
disputes later.

14. Relation to Claim by Clients

Brokers act as supporters during claims, helping clients file claims, submit evidence, follow up
with insurers, and negotiate fair settlements. Their advocacy protects the client’s interests.

15. Relation to Receipts of Complaints

If customers face delays, disputes, or unfair treatment, brokers assist in lodging and resolving
complaints with insurers. They may escalate matters to ombudsman or regulator if required.

16. Explanation of Insurance Contract

Insurance contracts are full of technical language and conditions. Brokers explain the terms,
exclusions, warranties, and obligations in simple language, ensuring clients understand what
they are signing up for.

17. Explanation of Renewal of Policies

Brokers remind clients about policy renewals before expiry, explain renewal terms, bonus
eligibility, and changes in premium or coverage. They also suggest switching insurers if better
options are available.

OPERATIONS OF INSURANCE COMPANY AND

INTERMEDIARIES – AGENT
An insurance agent is the representative of an insurance company who acts as a link between
the insurer and the customers. Agents are crucial in promoting insurance awareness, selling
policies, and providing after-sales service. Since they directly interact with customers, their
conduct, knowledge, and operations significantly influence the reputation of the insurance
company. Below is a detailed explanation of their operations and responsibilities.
1. Qualifications of Agents

To be eligible as an insurance agent, a person must meet minimum educational qualifications,

complete mandatory training, and pass the IRDAI licensing examination. They should also
possess good communication skills, knowledge of insurance products, and ethical conduct to
guide customers properly.

2. Disqualification

Certain individuals are barred from becoming agents. These include undischarged insolvents,
people convicted of crimes involving fraud or dishonesty, individuals of unsound mind, or those
already holding conflicting positions. This ensures that only trustworthy people act as
intermediaries in the insurance business.

3. Duration of Licence

The licence to act as an insurance agent is generally valid for a fixed period (e.g., 3 years in
India). After expiry, the agent must renew the licence by fulfilling continuing education or
refresher training requirements.

4. Cancellation of Licence

The regulatory authority (IRDAI) or the insurance company may cancel an agent’s licence if they
are found guilty of misconduct, fraud, misrepresentation, or violation of insurance laws. This
protects customers from unethical practices.

5. Agents Commission

Agents earn their income through commissions paid on the premium collected for policies they
sell. The commission rates are regulated to prevent overcharging and unethical competition.
Commission acts as an incentive for agents to bring in new customers while continuing to
service existing ones.

6. Identify Himself

Every agent must clearly identify himself as an insurance agent when dealing with clients. He
should not mislead customers into thinking he represents the regulator or another company. This
builds transparency and trust.

7. Disclosure of Licence and Commissions

Agents are required to disclose their licence details and the commission they earn from selling
the policy. Customers have a right to know how much of their premium goes toward
commission.

8. Information of Premium

Agents should clearly explain the premium amount, due dates, grace period, and consequences
of non-payment. Transparency in premium communication avoids disputes and policy lapses.

9. Nature and Importance of Information

Agents must understand and communicate the true importance of accurate information in
proposal forms. Insurance is a contract of utmost good faith (uberrimae fidei). Misstatements or
nondisclosure can lead to claim rejections.

10. Obtaining Documents

Agents assist customers in collecting and submitting necessary documents such as identity
proof, income proof, medical reports, and proposal forms. They ensure documents are complete
and valid, avoiding delays in policy issuance.

11. Inducement to Omit Information

Agents must never induce customers to omit or misrepresent facts in the proposal form.
Encouraging false information may initially help in policy approval but leads to claim disputes,
damaging customer trust and the agent’s credibility.

12. Behaviour with Customers

Agents are expected to behave with courtesy, honesty, and professionalism. Since they are the
face of the insurance company, their behaviour directly impacts the company’s goodwill.
Misconduct can lead to complaints and loss of business.

13. Interference

Agents should not interfere in matters beyond their role. For example, they should not manipulate
underwriting decisions, influence claim assessments, or alter policy documents. Their role is to
guide and assist, not to interfere with official procedures.
14. Forcing to Cancel Current Policy

Agents must avoid unethical practices like persuading customers to cancel their existing policy
just to sell a new one (known as twisting or churning). This practice is prohibited as it harms
customers and disrupts the stability of insurance contracts.

15. Getting Signature on Blank Paper

It is strictly prohibited for agents to obtain a customer’s signature on blank proposal forms or
documents. This can lead to fraud, misrepresentation, and legal complications. Every form
should be filled in completely and explained before signing.

16. Assist in Getting Loan

Agents help policyholders in obtaining loans against their insurance policies. They guide them
through the process, required documentation, and eligibility criteria, thus acting as service
facilitators even after the sale of the policy.

17. Knowledge of Proposal Forms

Agents must have thorough knowledge of the proposal forms, which are the foundation of the
insurance contract. They must guide clients in filling them accurately and ensure all required
information is disclosed.

18. Agents Confidential Report

Before issuing certain policies (especially high-value life insurance), insurers may require an
Agent’s Confidential Report (ACR). This includes the agent’s observations about the customer’s
health, financial standing, occupation, and moral character. The ACR helps insurers assess risk
more effectively.

OPERATIONS OF INSURANCE COMPANY AND

INTERMEDIARIES – SURVEYORS / LOSS
ASSESSORS
A surveyor or loss assessor is a specialized intermediary in the insurance sector who evaluates
claims on behalf of the insurer and sometimes assists the insured. They act as experts in
assessing risk, loss, and policy compliance, ensuring claims are settled fairly, promptly, and
transparently. Their operations cover inspections, investigations, documentation, reporting, and
ethical compliance.

1. Conducting Inspections

Surveyors visit the site of loss — such as damaged property, vehicles, or machinery — to inspect
the damage firsthand. They observe the extent of the damage, take measurements, and
document the situation with photographs or diagrams. Customers expect professional and
thorough inspections, which form the basis for claim assessment.

2. Investigations

Surveyors conduct investigations to determine the cause, circumstances, and validity of the
claim. This may include reviewing incident reports, speaking with witnesses, checking police
reports, or verifying repair estimates. Investigations ensure that the claim is genuine and protect
insurers from fraudulent claims.

3. Behave Ethically

Surveyors must maintain high ethical standards, avoiding conflicts of interest, bias, or
inducements from any party. They must act honestly, truthfully report findings, and never
manipulate assessments to favor either insurer or insured.

4. Act Impartially

Impartiality is critical. Surveyors assess claims objectively, without favoring the insurer or
policyholder. This ensures fairness in the settlement process and builds trust between all parties
involved.

5. Cannot Work Without License

Surveyors must have a valid license issued by the regulatory authority to operate legally. Working
without a license is illegal and can lead to penalties for both the surveyor and the insurer.
Licensing ensures that the surveyor is qualified and meets professional standards.

6. Carry Out Professional Work

Surveyors are expected to apply technical expertise, professional standards, and established
methodologies in their assessments. This includes evaluating damages accurately, estimating
costs, and considering policy terms in their recommendations.

7. Keep Himself Updated

Insurance policies, regulations, and industry practices evolve continuously. Surveyors must stay
updated on changes in rules, standards of loss assessment, claim procedures, and technology
for accurate evaluation and reporting.

8. Proper Record

Surveyors must maintain accurate, complete, and organized records of all inspections,
investigations, communications, and assessments. Proper documentation is essential for audit,
regulatory compliance, and dispute resolution.

9. Encourages His Colleagues

Surveyors are often part of a professional team. They should support and guide colleagues,
share knowledge, and encourage best practices, enhancing the overall efficiency and credibility
of their profession.

10. Maintain Register / Survey Book

A formal register or survey book is maintained to record all inspections, assessments, dates,
outcomes, and recommendations. This register provides accountability, traceability, and
transparency in claim handling.
11. Disclosure to All Parties

Surveyors should communicate relevant information to all involved parties (insurer, insured, and
other stakeholders) where necessary, ensuring that the process is transparent.

12. Not to Disclose Any Information to Others

Confidentiality is critical. Surveyors must not disclose sensitive information about the insured,
the insurer, or claim details to unauthorized persons. Breach of confidentiality can result in
penalties and loss of trust.

13. Examination of Policies

Surveyors review the insurance policy documents thoroughly to understand coverage, exclusions,
limits, deductibles, and special conditions. This ensures that their assessment is consistent with
the policy terms and the insurer’s obligations.

14. Inspections of the Scene of Loss

Surveyors personally inspect the location or items involved in the claim. This could include fire-
damaged property, a vehicle after an accident, or stolen goods. Observing the scene helps them
determine cause, extent, and legitimacy of the loss.

15. Assessment of Loss

Surveyors calculate the financial impact of the loss, considering repair costs, replacement value,
depreciation, and applicable deductibles. The goal is to provide a fair and accurate estimate that
allows appropriate claim settlement.

16. Final Survey Report

After completing inspections, investigations, and assessments, the surveyor prepares a final
survey report. This document includes:

• Details of the incident

• Evidence collected (photos, documents, witness statements)

• Assessment of damages / losses

• Recommended claim amount

• Any observations on policy coverage or exclusions

This report forms the official basis for claim settlement by the insurer.

OPERATIONS OF INSURANCE COMPANY AND

INTERMEDIARIES – TPA

A Third Party Administrator (TPA) is an intermediary in the insurance sector, primarily in health
insurance, who provides administrative services to insurers and policyholders. TPAs act as a link
between insurance companies and insured individuals, managing claims, authorizations, and
customer service efficiently. Below is a detailed explanation of their operations:

1. Company with Share Capital

TPAs are required to be registered companies with a defined share capital. This ensures financial
stability and credibility in handling clients’ claims and administrative functions.

2. Carry on Business of TPA

The company must legally operate as a TPA, providing administrative services such as claim
processing, cashless services, record maintenance, and assistance to policyholders. TPAs
cannot act as insurers; they only facilitate insurance operations.

3. Minimum Paid-Up Capital

• A TPA must have a minimum paid-up capital, usually specified by the regulator (IRDA in India) to
ensure solvency.

• For example, regulations may allow capital less than 1 crore INR but sufficient to cover
operational liabilities and ensure financial stability.

4. At Least One Director

• The company must have at least one qualified director on its board to oversee management
and compliance.

• The director ensures proper governance and adherence to statutory requirements.

5. Aggregate Holding Equity Capital Not Exceeding 26%

• To prevent concentration of ownership or conflicts of interest, shareholding by individuals or

entities in aggregate should not exceed 26% of paid-up capital.

• This ensures that control is not monopolized and promotes transparency and impartiality.

6. Transfer of Shares Exceeding 5% Requires IRDA Approval

• Any transfer of shares exceeding 5% of paid-up capital must be reported to IRDA (Insurance
Regulatory and Development Authority) and require approval.

• This is to monitor ownership changes and prevent unauthorized control by unrelated parties.

7. IRDA Issues Licence

• TPAs cannot operate without a valid licence issued by IRDA.

• Licensing ensures that TPAs meet regulatory, financial, and operational standards before
serving policyholders.

8. Licence Fees

• TPAs must pay a specified sum to IRDA as licence fees. For instance, Rs. 30,000 is a common
regulatory requirement.

• Fees contribute to regulatory oversight and licensing administration.

9. Applications Rejected by IRDA

• If an application for a TPA licence is rejected, the company cannot reapply for a period of 2
years.

• This ensures that only compliant and qualified applicants operate in the sector.

10. Modifications of Agreement

• TPAs must modify service agreements with insurers or clients if required by regulatory changes
or operational needs.

• Proper agreements clarify responsibilities, scope of services, and compliance obligations.

11. Professional Manners

• TPAs are expected to maintain professional conduct while interacting with clients, insurers, and
hospitals.

• Ethics, honesty, and efficiency are key to maintaining credibility.

12. Establish Identity to the Public

• TPAs must establish a clear identity so that policyholders know they are authorized
intermediaries.

• This includes displaying the TPA name, logo, licence number, and contact details on
correspondence and communications.

13. Disclose Its Licence

• Transparency requires TPAs to disclose their licence number and authority whenever interacting
with policyholders.

• This reassures clients about the legitimacy and regulatory compliance of the TPA.

14. Details of Service

• TPAs must provide comprehensive details of services offered, such as cashless hospitalization,
claim settlement timelines, documentation requirements, and customer support channels.

• Clear communication helps policyholders understand the TPA’s role and avoid confusion.

15. Notice to Insurance Company

• TPAs are required to inform insurers promptly about claim submissions, approvals, rejections,
or disputes.

• Timely communication ensures smooth coordination and quicker claim settlements.

16. Requisite Documents

• TPAs handle and verify all required documents for claims, including policy documents, hospital
bills, medical records, discharge summaries, and identification proof.

• Proper document management ensures accurate, fast, and error-free processing.

17. Advice to Policyholders

• TPAs guide policyholders on claim procedures, required documentation, claim status, and
policy terms.

• They act as a customer support channel, helping insured individuals understand their rights,
responsibilities, and entitlements.

CONSTITUENTS OF INSURANCE MARKET - RE -

INSURANCE
•Reinsurance companies, also known as reinsurers, are companies that provide insurance to
insurance companies. In other words, reinsurance companies are companies that receive
insurance liabilities from insurance companies.

•It is important to realize that, similar to any other businesses, insurance companies require
protection against risk. Insurance companies manage their risk through a reinsurance company.
•A primary insurer (the insurance company) transfers policies (insurance liabilities) to a reinsurer
(the reinsurance company through a process called cession. Cession simply refers to the portion
of the insurance liabilities transferred to a reinsurer.

•Similar to the way individuals pay insurance premiums to insurance companies, insurance
companies pay insurance premiums to reinsurers for the transfer of insurance liabilities

[Link] risk
Insurance companies can issue policies with higher limits due to some of the risk being offset to
the reinsurers.

[Link] income
• The income of insurance companies can be more predictable by transferring highly risky
insurance liabilities to reinsurers to absorb potentially large losses.

3. Keep less capital at hand

• By offsetting the risk of loss in insurance liabilities, insurance companies do not need to keep
as much capital on hand to cover potential losses. Thus, they can invest the capital elsewhere to
increase their revenues.

4. Underwrite more policies

Reinsurance enables insurance companies to underwrite more policies, due to a portion of their
liabilities being transferred to reinsurers. This enables insurance companies to take on more risk.

5. Lower claimant payout during natural disasters

Natural disasters such as earthquakes and hurricanes can cause claims to be abnormally high.
In such cases, an insurance company can potentially go bankrupt by having to issue out
payments to all the claimants. By shifting part of the insurance liabilities to reinsurers, insurance
companies are able to remain afloat in such extreme events

[Link] arbitrage opportunities

Insurance companies can potentially purchase reinsurance coverage from reinsurers at a rate
lower than what they charge their clients. Reinsurers use their own models to evaluate the
riskiness of policies. Therefore, reinsurers may accept a lower insurance premium from the
insurance company if they deem it as less risky.

CONSTITUENTS OF INSURANCE MARKET –

INSURANCE OMBUDSMAN
An Insurance Ombudsman is a quasi-judicial authority appointed to resolve disputes between
policyholders and insurance companies in a cost-effective, transparent, and timely manner. The
role of the Ombudsman is crucial for consumer protection, providing a neutral platform for
grievance redressal without resorting to courts.

1. High Court Judge / Experienced Authority

• The Insurance Ombudsman is typically a retired High Court judge or a person with equivalent
judicial experience.

• In some cases, officials with extensive experience in the insurance industry, civil services, or
administration may be appointed.

• The objective is to ensure that the Ombudsman has expertise in legal matters, insurance
practices, and dispute resolution.

2. Age Limit

• The maximum age for appointment is generally 65 years.

• Age criteria ensure that the Ombudsman is experienced, yet capable of handling the
responsibilities effectively.

3. Types of Disputes Handled

The Ombudsman primarily addresses the following complaints from policyholders:

1. Disputes regarding premium – including refunds, overcharging, or premium allocation issues.

2. Disputes on legal constructions – e.g., interpretation of policy clauses, coverage limits, and
exclusions.

3. Delay in claim settlements – when insurers are slow in processing claims or denying valid
claims.

4. Mutual agreements between insured and insurer – when attempts to settle disputes amicably
fail.

The focus is on consumer protection and fairness, not penal action against insurers.
4. Final Decision

• The Ombudsman has the authority to provide a binding recommendation or award after
reviewing the complaint.

• While the decision is final for amounts up to a certain limit (as per regulatory guidelines),
higher-value disputes may still require legal recourse if the insurer or policyholder disagrees.

5. Complaints Should Be in Writing

• Policyholders must submit their complaints in writing, providing details of the policy, insurer,
issue, and supporting documents.

• Written complaints ensure clarity, traceability, and proper documentation for fair adjudication.

6. Recommendations Timeline

• The Ombudsman must make recommendations within 1 month of receiving the complaint.

• Prompt action helps reduce delays and maintains public trust in the insurance system.

7. Communication of Complaints

• Copies of the complaint must be sent to the insurer, ensuring that they are aware and can
respond.

• Insurers are required to accept or respond to the recommendations within 15 days of receiving
the complaint.

• A copy of acceptance is sent to the complainant within 15 days of receiving the acceptance
letter.

This structured communication ensures transparency, accountability, and timely resolution.

8. Familiarization and Information Gathering

• The Ombudsman must familiarize themselves with the client’s business, policy, and prior
correspondence.

• Understanding the context is crucial for impartial and informed recommendations.

• Gathering relevant documents, previous communication, and policy details ensures accuracy
and fairness.
9. Rendering Advice

• In addition to resolving disputes, the Ombudsman may advise policyholders on corrective

measures, clarifications, and procedural guidance.

• The aim is to prevent future disputes by educating both the insured and insurers.

10. Maintaining Information

• The Ombudsman maintains records of complaints, recommendations, acceptance, and

correspondence for audit, regulatory compliance, and reference.

• Proper record-keeping ensures transparency and helps identify systemic issues in the insurance
sector.

11. Submitting Quotes / Recommendations

• After reviewing the dispute, the Ombudsman submits written recommendations or “quotes” to
both parties.

• These recommendations summarize findings, clarify legal interpretations, and suggest

compensation or corrective actions.

CONSTITUENTS OF INSURANCE MARKET –

LOK ADALATS

Lok Adalats are an informal, alternative dispute resolution mechanism in India, designed to
provide speedy, amicable settlement of insurance disputes, particularly related to motor
accidents. They operate under the Legal Services Authorities Act, 1987, and are recognized as a
voluntary forum where disputes can be resolved without lengthy litigation.

1. Pending Cases of Motor Accidents

• Lok Adalats primarily handle pending motor accident claims, including:

• Compensation claims under Motor Vehicle Act

• Third-party liability claims

• Disputes regarding insurance coverage and premiums

• These cases often involve accident victims or third parties claiming compensation from
insurers or vehicle owners.

Significance: By settling motor accident disputes, Lok Adalats reduce court backlog and ensure
faster compensation to victims.

2. Voluntary Nature – Lok Nayayalay

• Participation in Lok Adalats is voluntary; both the insured and the insurance company must
agree to refer the dispute.

• This encourages mutual consent and cooperation for dispute resolution.

• The voluntary nature ensures flexibility, as parties are not compelled to accept decisions unless
they agree.

3. Settlement Between Two Parties

• Lok Adalats focus on mutually agreeable settlements between parties, such as:

• Insurer and insured

• Insurer and third-party claimant

• The process encourages compromise, negotiation, and dialogue to reach a settlement

satisfactory to both sides.

Significance: Reduces adversarial conflict and builds goodwill between insurers and
policyholders.

4. Organized Regularly

• Lok Adalats are organized regularly at local, district, and state levels.

• They can be permanent or sessional (conducted on specific dates) and are often coordinated
by:

• Legal Services Authorities

• Insurance companies in collaboration with government bodies

• Regular scheduling ensures continuous support for policyholders and injured parties.

5. Participating Insurance Companies

Major insurance companies participate in Lok Adalats, including:

• United India Insurance

• New India Assurance

• Bhartiya Ural Insurance

• Oriental Insurance

These companies send representatives authorized to negotiate and settle claims, ensuring that
decisions reached are binding and executable.

6. Settlement of Third Parties

• Lok Adalats handle third-party claims arising from accidents, which often involve compensation
for injury, death, or property damage.

• The Lok Adalat ensures:

• Prompt settlement of claims

• Fair compensation based on the nature of loss

• Reduction in legal hassles for both insurers and claimants

Example: If a motor accident causes injury to a pedestrian, the third-party claim can be settled
quickly through the Lok Adalat, avoiding long court proceedings.

Key Advantages of Lok Adalats

1. Speedy Resolution: Cases settled within hours or days rather than years in courts.

2. Cost-effective: Minimal legal fees; no extensive litigation costs.

3. Amicable Settlement: Encourages compromise, reducing hostility between parties.

4. Binding Award: Decisions are legally enforceable once both parties agree.

5. Reduces Burden on Courts: Helps in clearing pending motor accident and insurance claims.

CONSTITUENTS OF INSURANCE MARKET –

ARBITRATOR

An Arbitrator is an independent and neutral person appointed to resolve disputes between the
insured and the insurer regarding claims, particularly when there is a difference in opinion over
the amount of loss. Arbitration is a formal alternative dispute resolution (ADR) mechanism,
governed by the Arbitration Act, 1940 in India, ensuring legally recognized decisions outside
traditional courts.

1. Difference About Amount of Loss

• Disputes often arise when the insured and insurer disagree on the value of the claim, e.g.,
property damage, motor accident repair costs, or asset valuation.

• Instead of going to court, the matter can be referred to an arbitrator for expert assessment and
resolution.

2. Referred as Arbitrator

• The person appointed to adjudicate such disputes is formally called an Arbitrator.

• The arbitrator’s role is to review evidence, inspect damages if needed, interpret policy terms,
and recommend a fair settlement.

3. Arbitration Act 1940

• Arbitration proceedings are conducted under the Arbitration Act, 1940, which provides a legal
framework for appointment, procedures, and enforcement of awards.

• The Act ensures that arbitration awards are legally binding and enforceable in civil courts if
necessary.
4. Each Party Can Appoint an Arbitrator

• Both the insured (claimant) and the insurer (defendant) are entitled to appoint their own
arbitrator.

• This ensures balance and fairness, as each side can choose a qualified, trusted individual to
represent their interests.

5. Appointment of Umpire

• If the two arbitrators fail to agree on the settlement, a third neutral party, called the Umpire, is
appointed.

• The Umpire meets with the two arbitrators and makes the final decision, ensuring that
deadlocks are resolved efficiently.

6. Umpire Meetings with Arbitrators

• The Umpire conducts meetings, reviews the evidence, claims, and assessments submitted by
both arbitrators, and facilitates discussion to reach a consensus.

• If consensus is not possible, the Umpire makes a binding determination on the disputed
amount.

7. Final Decision

• The decision of the arbitrator (or umpire, if appointed) is final and binding on both parties.

• The award can be enforced legally if either party fails to comply voluntarily.

• This finality provides certainty and closure in disputes without going through lengthy court
proceedings.

8. Advantages of Arbitration

1. Settlement in Short Time: Arbitration is faster than court litigation, allowing claims to be
resolved in weeks or months instead of years.

2. Less Expensive: Arbitration avoids court fees, lengthy procedures, and multiple legal
representations, reducing costs for both insured and insurer.

3. Expertise: Arbitrators are usually experts in insurance, claims, or relevant technical areas,
leading to more accurate and fair settlements.
4. Flexibility: Procedures can be tailored to suit the specific claim, unlike rigid court processes.

9. Disadvantages / Limitations

• Although faster than courts, arbitration can still be time-consuming, especially in complex
claims.

• Arbitration awards are usually final with limited scope for appeal, which may disadvantage
parties who later find new evidence or legal arguments.

CONSTITUENTS OF INSURANCE MARKET –

IRDA (Insurance Regulatory and Development
Authority)

The Insurance Regulatory and Development Authority (IRDA) is the apex regulatory body for the
insurance sector in India. It was established under the IRDA Act, 1999 with the purpose of
protecting policyholders’ interests, promoting fair practices, and ensuring the stability and growth
of the insurance industry. IRDA regulates both life and non-life insurers, as well as intermediaries
like agents, brokers, TPAs, and surveyors.

1. To Regulate and Promote

• IRDA regulates insurance companies, intermediaries, and policies to ensure ethical, efficient,
and transparent functioning.

• It also promotes insurance penetration across the country, encouraging awareness,

accessibility, and innovation in insurance products.

2. Issue a Certificate of Registration

• No company can carry on insurance business in India without IRDA registration.

• IRDA issues a Certificate of Registration to insurers, brokers, TPAs, and other intermediaries
after verifying financial, managerial, and professional compliance.
3. Prepare a Code of Conduct

• IRDA formulates a code of conduct for insurance companies and intermediaries.

• This ensures ethical behavior, transparency, and accountability in interactions with

policyholders.

• Codes of conduct cover areas like disclosure, claim settlement, advertising, and professional
ethics.

4. To Perform All Functions

• IRDA is empowered to perform all regulatory functions, including licensing, monitoring,

supervising, and controlling insurers and intermediaries.

• It ensures that policies, premiums, investments, and claims adhere to regulatory standards.

5. To Promote Efficiency

• IRDA encourages efficient operations in the insurance sector, including faster claim settlement,
proper risk assessment, and customer service.

• Efficiency is also promoted by encouraging technology adoption, streamlined operations, and

professional training for intermediaries.

6. Professional Organization

• IRDA ensures that insurance companies and intermediaries operate as professional

organizations, adhering to proper corporate governance, ethical business practices, and financial
discipline.

7. Inspections

• IRDA conducts periodic inspections and audits of insurers and intermediaries to ensure
compliance with rules, policies, and financial regulations.

• These inspections cover accounts, claims, solvency, documentation, and adherence to IRDA
guidelines.

8. To Control and Regulate the Rates

• IRDA regulates premium rates, commissions, and tariffs in certain insurance lines to prevent
unfair pricing and ensure affordability.
• While private insurers may offer flexible premiums in competitive segments, IRDA ensures fair
practices and avoids exploitation of policyholders.

9. Statements of Accounts

• Insurance companies are required to submit regular financial statements and reports to IRDA.

• These include balance sheets, profit & loss statements, claim settlements, investments, and
premium collections.

• IRDA monitors these statements to ensure financial transparency and solvency.

10. Investments of Funds

• IRDA regulates investment of insurance funds to ensure safety, liquidity, and reasonable returns.

• This includes guidelines on the percentage of funds invested in government securities,

corporate bonds, equities, and other approved instruments.

11. Margin of Solvency

• Insurers must maintain a minimum margin of solvency, i.e., surplus funds over liabilities, to
ensure they can meet future claims.

• IRDA monitors solvency ratios to maintain financial stability and protect policyholders from
insolvency risks.

12. Solve Disputes

• IRDA acts as a regulatory mediator in disputes between insurers, intermediaries, and

policyholders.

• It may also refer cases to Ombudsmen, Lok Adalats, or arbitration mechanisms to ensure fair
resolutions.

13. Specify the Percentage of Life Insurance

• IRDA may regulate the minimum or maximum proportion of life insurance business in relation
to total insurance operations, ensuring balanced growth between life and non-life sectors.

14. Specify Percentage of Premium

• IRDA regulates premium allocations, including commission limits for agents/brokers, claim
settlement reserves, and solvency margin requirements.

• This prevents misuse of funds and ensures that policyholder premiums are used responsibly.

SPECIALIST INSURANCE COMPANIES -

HEALTH INSURANCE
•Apollo Munich Insurance Company Limited -
Founded in 2007, Apollo Munich Insurance Company (previously known as Apollo Munich Health
Insurance. Company Limited) is a private sector health insurance company. Apollo Munich is
dedicated towards offering health insurance policies to individuals, senior citizen, family, and
corporate other than products in accident insurance and travel insurance.

•ManipalCigna -
A joint venture between Cigna and Manipal Group, ManipalCigna has been catering to the health
insurance requirements of Indians to a tee. Be it health insurance plans for individual or family,
ManipalCigna is a standalone health insurance company that provides all.

•Bajaj Allianz General Insurance Co Ltd-

A private general insurance company in India, Bajaj Allianz General Insurance Co Ltd has been
serving the health insurance needs of people since 2001. Having a pan-India presence in around
800 towns and cities, Bajaj Allianz General Insurance Co Ltd is a joint venture between Bajaj
Finserv Limited and Allianz SE, a German financial services company.

•Aditya Birla Health Insurance -

Founded in 2015, Aditya Birla Health Insurance is a popular name in the field of health insurance.
Protecting Indians from unexpected medical emergencies, Aditya Birla Health Insurance is the
joint venture between Aditya Birla Group and MMI Holding Ltd. By providing people with its
comprehensive health cover, this insurance company helps them lead healthier and happier lives.

•Future Generali India Insurance Company Ltd -

Future Generali India Insurance Company Ltd is a private general insurance company in India. A
joint venture between the Future Group and Assicurazioni Generali, Future Generali India
Insurance Company Ltd is known for offering unmatched health insurance plans for both,
individual and family since 2006.

•Star Health and Allied insurance Co Ltd -

Having its headquarters in Chennal, Star Health and Allied insurance Co Ltd is the first private
standalone insurance company that started its operations in 2006. Dealing in personal accident,
travel and mediclaim insurance, the company is popular for its trouble-free and customer-friendly
direct claim settlement.

•The New India Assurance Co Ltd -

Based in Mumbai, The New India Assurance Co Ltd is a public sector general insurance
company. The largest general insurance company of India based on gross premium collection
inclusive of foreign operations, The New India Assurance Co Ltd operates both in India and
foreign countries.

•IFFCO TOKIO General Insurance Co Ltd -

Headquartered in Gurugram, Iffco Tokio General Insurance Co Ltd was founded in the year 2000.
Helping Indians ensure financial stability in medical emergencies, the company offers plans such
as Senior Citizen Health Insurance, Family Health Plan, Individual Health Insurance Plan, Critical
Illness Insurance, Personal Accident Insurance, and others.

•National Insurance Co Ltd -

National Insurance Co Ltd is a government controlled undertaking. It is one of the largest and
oldest insurance companies offering custom and comprehensive insurance plans. With
insurance products in not only health, but also motor, personal and fire insurance, National
Insurance Co Ltd has been in the insurance sector since 2002.

• United India Insurance Co Ltd -

Headquartered in Chennai, United India Insurance Co Ltd has been catering to the health
insurance needs of Indians since 1938. A reliable health insurance source, United India Insurance
Co Ltd is the ultimate preference of people.
With over 1 crore policyholders, this company has gained massive growth in terms of expansion
as well as revenue.

•Reliance General Insurance Co Ltd -

A popular Indian private Insurance company, Reliance General Insurance Co Ltd was founded in
the year 2009. Offering both, individual and family floater plans, the company helps Indians fight
the skyrocketing inflation and prepare them for medical emergencies.

• The Oriental Insurance Co. Ltd

Headquartered in New Delhi, The Oriental Insurance Co. Ltd was incorporated in the year 1947. A
public sector general insurance company of India, The Oriental Insurance Co. Ltd has 31 regional
offices and more than 1800 active branches across the country.

•Tata AIG General Insurance Co. Ltd. -

A joint venture between Tata Group and American International Group, Tata AIG General
Insurance Co. Ltd was founded in the year 2001. Helping people cope with the rising medical
costs of diagnostic tests, surgeon's fees, and others, Tata AIG General Insurance Co. Ltd offers
multiple health insurance plans to safeguard people and their families in medical emergencies.

• Royal Sundaram Alliance Insurance Co Ltd -

A joint venture between Sundaram Finance and RSA, Royal Sundaram Alliance
Insurance is the first insurer that introduced the concept of cashless mode of settlement for
health claims in India. The first private general insurance Indian company to be licensed, Royal
Sundaram Alliance Insurance protects families against financial emergencies with its TheLifeline
Plan.

•HDFC ERGO General Insurance Co Ltd -

The company is a joint venture between HDFC Ltd. and ERGO International
AG. Covering 101 Indian cities with over 117 branches and 2,000 plus staff members, HDFC
ERGO General Insurance Co Ltd offers health insurance plans that cover individual, family,
parents, senior citizen, critical illnesses, etc.

•MAX Bupa Health Insurance Company Ltd -

A joint venture between Max India Limited and Bupa Finance plc UK, MAX Bupa Health Insurance
Company Ltd is a popular and reliable name. Offering health insurance plans for individuals and
family, this joint venture provides the perfect amalgamation of both local knowledge and global
expertise in health care and insurance.

• Bharti AXA General Insurance Co Ltd -

Bhartı AXA General Insurance Co Ltd was founded in 2008. With headquarters in Mumbai, the
company is a joint venture between Bharti Enterprises and AXA business Group. The two prime
health insurance plans offered by the company are Smart Super Health Insurance Policy and
Smart Health Insurance Policy that come with their respective features.

SPECIALIST INSURANCE COMPANIES - LIFE

INSURANCE
•Aditya Birla Sun Life
Insurance Company - With a 2.5 million of customer base the Aditya Birla Sun Life Insurance is
one of the leading

•Future Generali India

Life
Insurance Company
Established in year 2007, Future Generali Life Insurance India is a joint

• Kotak Mahindra Life Insurance Company

Headquartered in Mumbai the J.V between Kotak Mahindra Group and Old Mutual Fund is Kotak
Mahindra Life Insurance. It is one of the fastest growing insurance companies in India that has a
4 million trusted policyholder nationwide. Keeping their customers in high priority the company
provides a much affordable range of term plan, ULIP plan, child plan, saving plan, investment
plan, protection plan and retirement plan.
The company has much gained name in the market for delivering outstanding value to its
customer through customized products and excellent service.

SPECIALIST INSURANCE COMPANIES -

GENERAL INSURANCE

•Bajaj Allianz General Insurance

Bajaj Allianz General Insurance Company Limited is a joint venture between the world's foremost
insurance company Allianz SEandBajaj Finserv Limited, with has an authorized and paid up
capital of Rs. 110 crore. Bajaj Finserv Limited holds 74% and 26% is held by Allianz, SE. They
started their operations in 2001 and now with the range of products catering to individual and
corporate. It has received iAAA rating from ICRA for 10th consecutive years.

•Bharti Axa General Insurance Co. Ltd

Bharti AXA General Insurance Company Ltd was formed in the year 2008 as a joint venture
between one of India Leading Business House - The Bharti Enterprises & the
AXA business Group. The Bharti group owns 51% stake in the joint venture whereas AXA Group
owns 49% of the stake. In a short stint of just 09 years, the Bharti - AXA General Insurance
Company has expanded its horizons in both Life Insurance Category & General Insurance
Products. Bharti AXA has a vast network and national footprint of insurance distributors who are
trained & equipped to provide quality financial service and insurance solutions to the each and
every type of customer base.

•Cholamandalam MS General Insurance Co. Ltd

Chola MS General Insurance Co. Ltd. (IRDA Reg. No 123) headquartered in Chennai, is a leading
insurance company in India. Cholamandalam was established about 10 years ago, in 2005, their
values truth, transparency, and technology forming the foundation of the multi-faceted company.
Chola MS has a number of products such as different kinds of insurance, business protection
solutions, etc. Cholamandalam health insurance is very popular amongst their customer base
due to their high level of customer satisfaction through optimized operational processes and
innovative vision.
Cholamandalam Health Insurance has over 90 centers PAN-India and an agent network that is
7000 strong.

• DHFL General Insurance

DHFL is backed by Wadhawan Global Capital under the leadership of Mr. Kapil Wadhawan.
Wadhawan Global Capital (WC) is a leading financial services group in India. WGC manages US$
18.6 billion (€ 14.5 billion) of assets through its lending. investment and insurance platforms. WC
is the parent company to some of the most prominent brands in India such as Dewan Housing
Finance Corporation Limited (DHPL) which is a market leader with three decades of experience
in financing affordable housing, Aadhar Housing Finance, Avanse Financial Services, DHFL
Pramerica Life Insurance. DHFL Pramerica Asset Managers and DHFL General
•Liberty General Insurance Co. Ltd
Liberty General Insurance Co. Ltd is a collaboration of Liberty Citystate Holdings PTE Ltd which
is a US based Group Company named Liberty Mutual Group, a leading global property and
casualty group, Enam Securities, a privately owned and managed firm that makes long-term
investments in listed companies, as well as backs entrepreneurs building valuable private
companies and DP Jindal Group, an industrial conglomerate. This company started its
operations in the year 2013.

•Reliance General Insurance Co. Ltd

Reliance General Insurance [Link] is a fundamental part of Reliance Capital. Reliance Capital
has diversified business in insurance of all kinds, asset management, mutual funds, commercial
finance and other financial services. Reliance Life has a huge variety of life insurance plans that
offers tailor-made plans as per the customer's requirements.

•SBI General Insurance Co. Ltd

SBI General Insurance Co. Ltd is a collaboration of State Bank of India and BNP Paribas Cardif
S.A. This company was founded in the year 2001. They offer products as per customers
requirements. This company is famous for its versatile products.